Opinion of the European Central Bank of 8 December 2023 on the obligation for enterprises to accept payment in cash from consumers (CON/2023/40)

OPINION OF THE EUROPEAN CENTRAL BANK of 8 December 2023 on the obligation for enterprises to accept payment in cash from consumers (CON/2023/40) Introduction and legal basis

On 9 November 2023 the European Central Bank (ECB) received a request from the Belgian Vice Prime Minister and Minister of Economy and Labour for an opinion on a draft programme-law amending the Belgian Code of Economic Law by introducing, inter alia, the obligation for enterprises to accept payment in cash (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first and second indents of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to (1) currency matters and (2) means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The draft law introduces in the Code of Economic Law the obligation for enterprises to accept payments in cash from consumers when the payment takes place in the simultaneous physical presence of the consumer and the enterprise . The draft law further provides that, by way of derogation from the above, an enterprise may (1) temporarily refuse cash payments for duly justified security reasons and (2) limit the denomination of the banknotes it accepts if the face value of such denomination is disproportionate to the amount usually paid by consumers . In both cases, the enterprise must inform the consumer in a clear, understandable and visible manner at the entrance of its commercial premises and at the cash register .

1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

2 Code de droit économique du 28 février 2013/Wetboek van economisch recht van 28 februari 2013, tel que modifié/zoals nader gewijzigd, Moniteur belge/Belgisch Staatsblad, 29.03.2013, p. 19975.

3 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 1 in the Code of Economic Law.

4 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2, section 1 in the Code of Economic Law.

5 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2, section 2 in the Code of Economic Law.

6 The ECB notes that there is a discrepancy between the French and the Dutch versions of the draft law whereby the Dutch version does not provide that the information should be provided in a ‘visible’ manner.

7 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2, section 3 in the Code of Economic Law. 1.2 Furthermore, the draft law provides for the imposition of a criminal fine ranging from a minimum of EUR 26 to a maximum of EUR 5 000 (to be multiplied by the additional decimals ) or 4 % of the total annual turnover for the last closed financial year, whichever is higher, in case of breach of this obligation . Such sanction may only be imposed (1) insofar as the facts that may constitute a breach have been established at least twice by the officials competent to investigate and establish breaches of the Code of Economic Law and (2) no appropriate action has been taken in response to a warning issued by such officers to the offenders giving them formal notice to put an end to the offence, when the breach was first established . 1.3 According to the explanatory memorandum of the draft law, the draft law reiterates an essential principle that derives from the legal tender status of cash. The explanatory memorandum indeed notes that the obligation to provide electronic means of payment does not allow enterprises to refuse payment in cash, i.e. payments made with euro banknotes and coins. The aim of the draft law is therefore to allow all consumers to pay for their purchases in cash. The explanatory memorandum states that the ECB stresses that while it has a generally positive attitude towards innovations and developments in the field of electronic payment instruments and their ongoing spread in society, this should not be at the expense of cash payments in those Member States that have adopted the euro as their currency. 1.4 The explanatory memorandum further refers to the judgment of the Court of Justice of the European Union in Joined Cases C-422/19 and C-423/19 (hereinafter the ‘judgment in Joined Cases C- 422/19 and C-423/19’) and states that the Court stressed that only reasons of public interest relating to security or to the fight against crime, or of public interest in ensuring the efficient organisation of payment systems in society, can justify a derogation by a Member State from the principle that payment may be made in cash in discharge of a payment obligation, to the extent that those restrictions are proportionate to the objective pursued. Accordingly, only the limitation on cash payments in accordance with Book III of the Law on the prevention of money laundering and terrorist financing and on the restriction of the use of cash constitutes an explicit limitation on the obligation for an enterprise to accept a cash payment from a consumer. 1.5 The explanatory memorandum, however, underlines that the obligation to pay with cash and, conversely, the prohibition on enterprises refusing cash may be nuanced. The explanatory memorandum justifies the two exceptions provided in the draft law as follows. On the one hand, enterprises should be able to temporarily refuse payments in cash for security reasons (e.g. where an enterprise was the victim, over a limited period of time, of several burglaries or of aggression, or where time is needed to temporarily repair defective security equipment). Denying payments in cash

8 Additional decimals (décimes additionels/opdeciemen) are a coefficient by which any amount of criminal or administrative fines mentioned in the laws and codes needs to be multiplied to determine the actual amount of the relevant fine. It is currently set at 8.

9 See Article 49 of the draft law introducing a new Article XV.82/1, section 1 in the Code of Economic Law.

10 See Article 49 of the draft law introducing a new Article XV.82/1, section 2 in the Code of Economic Law.

11 See judgment of 26 January 2021, Hessischer Rundfunk, C-422/19 and C-423/19, EU:C:2021:63.

12 Loi du 18 septembre 2017 relative à la prévention du blanchiment de capitaux et du financement du terrorisme et à la limitation de l'utilisation des espèces/ Wet van 18 september 2017 tot voorkoming van het witwassen van geld en de financiering van terrorisme en tot beperking van het gebruik van contanten, telle que modifiée/zoals nader gewijzigd, Moniteur Belge/Belgisch Staatsblad, 06.10.2017, p. 90839. for security reasons should be temporary as, without such a temporal limitation, the motive based on security reasons could be used to circumvent the obligation to accept payments in cash. On the other hand, an enterprise should be able to limit the face value of the denomination of the banknotes it accepts in transactions when such denomination is manifestly disproportionate to the ‘average’ amount of purchases normally paid for in the enterprise, or in relation to the goods and services it proposes.

2. General observations

2.1 The ECB recently adopted an opinion on another draft Belgian law providing for a similar obligation to accept cash payment from consumers . 2.2 Role and importance of cash payments in society 2.2.1 Although electronic payment instruments are increasingly used for retail payments in a number of Member States, cash continues to play an important role in society and is still widely used throughout the entire population. The ability to pay in cash remains particularly important for those who, for various legitimate reasons, prefer to use physical money rather than other payment instruments, or do not have access to the banking system and electronic means of payments. These groups include not only elderly people but also some citizens with disabilities, immigrants, socially vulnerable citizens, minors and others with limited or no access to digital payment services. Cash is generally also useful as a payment instrument because it is widely accepted, fast and facilitates control over the payer’s spending. Moreover, it is currently the only payment instrument that allows citizens to settle a payment transaction in central bank money, which is also settled instantly, while, importantly, ensuring privacy. Furthermore, cash could play an important role in the event of a disturbance in the payment system and it is robust against cyber-crime . 2.2.2 Against this background, the ECB welcomes the fact that the draft law aims to preserve citizens' right to pay in cash. 2.3 Status of euro banknotes and coins as legal tender 2.3.1 The ECB has the exclusive right to authorise the issue of euro banknotes within the Union, and the euro banknotes issued by the ECB and the national central banks of the euro area are the only banknotes with legal tender status within the euro area . The legal tender status of euro coins is provided for in secondary Union law . 2.3.2 The concept of legal tender as a means of payment denominated in a currency unit has been considered by the Court of Justice . In particular, the Court clarified that the concept of legal tender signifies that this specific means of payment cannot generally be refused in settlement of a debt denominated in the same currency unit, at its full face value, with the effect of discharging the debt.

13 See Opinion CON/2023/33. All ECB Opinions are available on EUR-Lex.

14 See paragraph 2.1.1 of Opinion CON/2023/33.

15 First and third sentences of Article 128(1) of the Treaty and first and third sentence of Article 16 of the Statute of the European System of Central Banks and of the European Central Bank.

16 See Article 11 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro (OJ L 139, 11.5.1998, p. 1).

17 In its judgment in Joined Cases C-422/19 and C-423/19. In clarifying the concept of legal tender under Union law, the Court took into consideration Commission Recommendation 2010/191/EU , which provides useful guidance for the interpretation of the relevant provisions of Union law. Point 1 of Recommendation 2010/191/EU states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply (a) mandatory acceptance of those banknotes and coins; (b) their acceptance at full face value; and (c) their power to discharge from payment obligations. According to the Court, this shows that the concept of legal tender encompasses, inter alia, an obligation in principle to accept banknotes and coins denominated in euro for payment purposes . As noted by the Court, point 3 of Recommendation 2010/191/EU states that high denomination banknotes should be accepted as means of payment in retail transactions. A refusal thereof should be possible only if grounded on reasons related to the ‘good faith principle’ (for example the face value of the banknote tendered is disproportionate compared to the amount owed to the creditor of the payment) . 2.3.3 The Court has clarified that the concept of ‘legal tender’ is a concept of Union law that must be given an autonomous and uniform interpretation throughout the European Union . Insofar as it allows the Union legislature to lay down the measures necessary for the use of the euro as the single currency, the Court clarified that Article 133 of the Treaty empowers the Union legislature to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro. In this respect, the ECB notes that, on 28 June 2023, the Commission published a proposal for a regulation on the legal tender of euro banknotes and coins (hereinafter the ‘proposed regulation on the legal tender of euro cash’), which would establish rules on the legal tender of euro banknotes and coins in binding Union secondary law. The explanatory memorandum of the proposed regulation on the legal tender of euro cash states that discussions within the Euro Legal Tender Expert Group (ELTEG) confirmed the existence of uncertainty and important differences regarding the practical application of the concept of legal tender across the euro area . These differences would justify establishing rules on the legal tender of euro cash in a regulation adopted under Article 133 of the Treaty. 2.3.4 According to the Court, it is for the Union legislature alone to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro, insofar as that is necessary for the use of the euro as the single currency . However, the Union’s exclusive competence does not prevent a Member State, in the exercise of its own powers, such as the organisation of its public administration, from adopting a measure that obliges that administration to accept cash payments from citizens or introduces, on public interest grounds, a derogation from that obligation for statutorily imposed payments, subject to compliance with certain conditions .

18 Commission Recommendation 2010/191/EU of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins (OJ L 83, 30.3.2010, p. 70).

19 See judgment in Joined Cases C-422/19 and C-423/19, paragraphs 46 to 49.

20 See judgment in Joined Cases C-422/19 and C-423/19, paragraph 8.

21 See judgment in Joined Cases C-422/19 and C-423/19, paragraph 45.

22 COM(2023) 364 final.

23 See section 3, page 4 of the explanatory memorandum of the proposed regulation on the legal tender of euro cash, and ELTEG’s final report of 6 July 2022.

24 See judgment in Joined Cases C-422/19 and C-423/19, paragraphs 50 to 52.

25 See judgment in Joined Cases C-422/19 and C-423/19, paragraph 56. 2.3.5 The conditions established by the Court for restrictions on the legal tender status of euro banknotes in particular require (1) that the legislation does not have the object or effect of establishing legal rules governing the status of legal tender of euro banknotes; (2) that it does not lead, in law or in fact, to the abolition of those banknotes, in particular by calling into question the possibility, as a general rule, of discharging a payment obligation in cash; (3) that it has been adopted for reasons of public interest; (4) that the limitation on payments in cash which the legislation entails is appropriate for attaining the public interest objective pursued; and (5) that it does not go beyond what is necessary in order to achieve that objective . 2.3.6 Regarding the proportionality of a restriction of the legal tender status of euro banknotes, the Court requires not only that the measure is appropriate for achieving the legitimate objective(s) pursued by the legislation at issue but also that the measure does not go beyond what is necessary in order to achieve those objectives . The ECB has provided additional guidance on whether limitations are proportionate in its opinions. In particular, it has noted that the broader and more general a limitation is, the stricter should be the interpretation of the requirement for the limitation to be proportionate to the objective pursued . In addition, when considering whether a limitation is proportionate, the adverse impact of the limitation in question and whether alternative measures could be adopted that would fulfil the relevant objective with a less adverse impact should always be considered .

3. Specific observations

3.1 The explanatory memorandum of the draft law states that the provisions of the draft law providing for the obligation for enterprises to accept payment in cash from consumers and providing that an enterprise may limit the denomination of the banknotes it accepts if such denomination is disproportionate to the amount usually paid by consumers reiterate Union law. According to the explanatory memorandum, this exception aims at confirming in national law the restrictions based on the ‘good faith principle’ set out in Recommendation 2010/191/EU. 3.2 The ECB underlines that the reproduction in a national provision of a Union obligation that is directly applicable in the legal order of the Member State may create uncertainty both as to the legal nature of the applicable obligation and as to the date of its entry into force. This would not align with the uniform application and interpretation of Union law throughout the Union . 3.3 The ECB also underlines that the incorporation of some elements of obligations of Union law into national law is warranted only in exceptional circumstances for the sake of coherence and in order

26 See judgment in Joined Cases C-422/19 and C-423/19, paragraph 78.

27 See judgment in Joined Cases C-422/19 and C-423/19, paragraphs 55 and 56 and 67 to 70.

28 See paragraph 2.7 of Opinion CON/2017/8, paragraph 2.11 of Opinion CON/2021/18 and paragraph 2.8 of Opinion CON/2022/9.

29 See paragraph 2.7 of Opinion CON/2017/8 and paragraph 2.8 of Opinion CON/2022/9.

30 See Article 17 of the draft law introducing a new Article VI.7/5, paragraphs 1-2, section 1 in the Code of Economic Law.

31 See judgment of the Court of Justice of 7 February 1973, Commission v Italy, C-39/72, EU:C:1973:13, paragraphs 16 and 17; judgment of the Court of Justice of 10 October 1973, Variola, C-34/73, EU:C:1973:101, paragraphs 9 to 11; and judgment of the Court of Justice of 2 February 1977, Amsterdam Bulb, C-50/76, EU:C:1977:13, paragraphs 5 to 8. See also paragraph 12 of Opinion CON/2005/21, paragraph 2.1 of Opinion CON/2006/10, paragraph 2.4 of Opinion CON/2006/29, paragraph 2.1 of Opinion CON/2007/1, paragraph 2.2 of Opinion CON/2007/43, paragraph 2.3 of Opinion CON/2022/15, paragraph 2.3 of Opinion CON/2023/27 and paragraph 2.2.5 of Opinion CON/2023/33. to make them comprehensible to the persons to whom they apply . If such exceptional circumstances do exist, the reproduction of elements of directly applicable obligations of Union law should be done precisely, by incorporation or reference , and only to the extent warranted by the exceptional circumstances. However, such exceptional circumstances do not exist if the directly applicable obligations of Union law are sufficiently coherent and comprehensive, making it unnecessary to repeat or reflect them in national law . 3.4 The ECB understands that the reiteration in national law of the obligation in principle under Union law to accept payments in euro cash aims at bringing this obligation more effectively to the attention of Belgian enterprises and consumers and at providing for a criminal fine under national law for any breach of this obligation. The ECB considers that the reproduction of the obligation of mandatory acceptance of euro cash is warranted as it provides a connection to the introduction of the criminal fine for breach of the obligation. To the extent that that part of the first provision of the draft law necessarily reiterates Union law for the abovementioned reasons, it should do so in an explicit manner. The ECB therefore suggests that, in addition to the explanation provided in the explanatory memorandum, the draft law should be clarified by the addition of a statement that its first provision is in accordance with Union law, including, most importantly, Article 128(1) of the Treaty and Article 11 of Regulation (EC) No 974/98. This clarification would also highlight that the reference to the obligation of mandatory acceptance of euro cash is subject to the exceptions to mandatory acceptance established in Union monetary law. 3.5 The ECB takes the view that the provisions of the draft law under which an enterprise may limit the face value of the denomination of the banknotes it accepts if such denomination is disproportionate to the ‘average’ amount ‘usually’ paid by consumers are not in line with Union law. 3.6 Point 3 of Recommendation 2010/191/EU sets out, as an illustration of the ‘good faith principle’, the situation in which the face value of the banknote tendered is disproportionate compared to the amount owed to the creditor of the payment. In the same way, the proposed regulation on the legal tender of euro cash provides that a payee is entitled to refuse euro banknotes and coins where a refusal is made in good faith and where such refusal is based on legitimate and temporary grounds in line with the principle of proportionality in view of concrete circumstances beyond the control of the payee. On this point, the ECB welcomed the fact that several cumulative conditions have been imposed for the application of the ‘good faith’ exception to set the bar high for a payee relying on this exception to justify a refusal to accept cash . The proposed regulation, which is currently being negotiated by the co-legislators, specifies that such legitimate grounds may include, regarding high denomination banknotes, situations in which the value of the banknote tendered is manifestly disproportionate compared to the value of the amount to be settled . Contrary to the approach taken

32 See paragraph 12 of Opinion CON/2005/21 with reference to the judgment of the Court of Justice of 28 March 1985, Commission v Italian Republic, C-272/83, EU:C:1985:147, paragraph 2.4 of Opinion CON/2022/15 and paragraph 2.2.6 of Opinion CON/2023/33. See a contrario also paragraph 2.2 of Opinion CON/2006/10.

33 See paragraph 2.2 (footnote 6) of Opinion CON/2007/43, paragraph 2.4 of Opinion CON/2022/15 and paragraph 2.2.6 of Opinion CON/2023/33.

34 See paragraph 13 of Opinion CON/2005/21, paragraphs 2.2 and 3.2 of Opinion CON/2006/10, paragraph 2.4 of Opinion CON/2022/15 and paragraph 2.2.6 of Opinion CON/2023/33.

35 See paragraph 4.2 of Opinion CON/2023/31. in Recommendation 2010/191/EU and in the proposed regulation, the draft law does not link the possibility to refuse certain denominations of banknotes to the case-by-case assessment of whether the value of the banknote tendered and the actual amount to be settled are manifestly disproportionate to each other. Rather, the draft law provides that high denominations may be refused ex ante and for all cases based on a calculation of the ‘average’ amount which is ‘usually’ paid to the enterprise concerned. 3.7 The ECB therefore considers that this provision in the draft law cannot be seen a reproduction of the ‘good faith principle’, and hence of the concept of legal tender under Union law, of which the ‘good faith principle’ forms part. 3.8 Furthermore, the draft law also provides for an exception to the obligation for enterprises to accept payments in cash , whereby an enterprise may temporarily refuse cash payments for duly justified security reasons. This exception must be assessed against the conditions established by the Court as set out in paragraphs 2.3.5 and 2.3.6 above as a restriction of the possibility of discharging a payment obligation in euro banknotes and coins. 3.9 The ECB considers that the restriction on payments in cash based on security reasons laid down in the draft law does not have the objective or the effect of amending the legal rules governing the legal tender status of euro cash. It does not lead, in law or in fact, to the abolition of banknotes and coins in Belgium and it is based on reasons of public interest. The explanatory memorandum explains that the restriction on payments in cash is aimed at protecting the interests of public order as it allows for the security of businesses when they are in a vulnerable situation. 3.10 However, for a national law measure to limit the possibility of generally discharging a payment obligation in cash that measure must also be proportionate to the public interest objective pursued. The ECB considers that the draft law’s authorisation of an enterprise to temporarily refuse cash payments for duly justified security reasons may, in general, constitute a reason of public interest justifying the limitation on payments in cash. 3.11 At the same time, the restriction on payments in cash set out in the draft law affects a very wide range of transactions, as it involves natural persons and payments of both small and large amounts in various segments of the economy. Therefore, any negative impact of the cash payment limitation must be carefully weighed against the anticipated public benefits . The draft law establishes that the refusal may only be temporary, that it must be duly justified for security reasons, and that the enterprise must communicate this to the consumer in a clear, understandable and visible manner at the entrance of its commercial premises and at the cash register. Despite the establishment of these conditions, the ECB observes that the draft law gives enterprises wide discretion in deciding whether to refuse banknotes and coins based on a cash restriction that pursues public interest objectives. It is for them to determine what ‘temporary’ means, as there are no limits on the total time during which the restriction can remain in place. It is also for enterprises to decide what a ‘duly justified security reason’ is. The ECB notes that the explanatory memorandum only provides examples, such as

37 See Article 17 of the draft law introducing a new Article VI.7/5, paragraph 2 in the Code of Economic Law.

38 See judgment in Joined Cases C-422/19 and C-423/19, paragraph 78.

39 See paragraph 4.6 of Opinion CON/2022/5.

40 See paragraph 2.9 of Opinion CON/2022/9. needing time to repair defective security equipment. Hence, it remains unclear whether the conditions laid down in the draft law for enterprises to rely on this cash restriction are sufficient to ensure its adequate use in practice and, ultimately, its proportionality. 3.12 As a final observation, the ECB welcomes the provision of the draft law which proposes to introduce a criminal fine for breach of the obligation for enterprises with a physical location to accept cash payments from consumers. Such sanction will facilitate enforcement of this obligation of Union law. 3.13 The introduction of a criminal fine to reinforce the legal tender status of banknotes and coins in Belgium is consistent with the proposed regulation on the legal tender of euro cash, which envisages that Member States will lay down the rules on penalties, including financial penalties and non-criminal fines, applicable to infringements of the proposed regulation . As noted in the explanatory memorandum of the proposed regulation, these provisions would ensure that the proposed regulation’s provisions are enforced, while allowing Member States a level of flexibility on the nature of the penalties applicable . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 8 December 2023. [signed] The President of the ECB Christine LAGARDE

41 See Article 12 of the proposed regulation on the legal tender of euro cash.

42 See page 9 (‘Penalties (Article 12)’) of the explanatory memorandum of the proposed regulation on the legal tender of euro cash.