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Supervision of financial markets: the Supreme Administrative Court of Lithuania referred to the Court of Justice of the European Union to clarify who should be regarded as a provider of direct debit services and how payment services provided by a payment institution in the case at hand should be qualified.

By judgment of 9 April 2025, the Extended Chamber of Judges of the Supreme Administrative Court of Lithuania (SACL) referred to the Court of Justice of the European Union (CJEU) for a preliminary ruling on the issues relating to the direct debit service and its provider, as well as on the qualification of the services for the handling of payment transactions and the qualification of the services for the initiation of payments.
The present reference concerns a dispute between the applicant, Alternative Payments UAB (the 'Company'), and the defendant, the Bank of Lithuania, concerning a resolution adopted by the latter's Board of Directors cancelling the validity of the Company's payment institution licence. The licence entitled the Company to provide payment services such as money remittances and the issuance of payment instruments and/or the processing of incoming payments.

In its judgment, the Bank of Lithuania found ten infringements that constituted grounds for the revocation of the Company's licence, but the Court is referring to the CJEU for preliminary rulings only in respect of one of them, i.e., the alleged provision of direct debit services without a licence. The Bank of Lithuania considers that such activities violate the requirements of Article 4(1) of the Law on Payment Institutions.
The applicant submits that Single Euro Payments Area (SEPA) direct debit is used in its case only as a technical solution to process payments on behalf of its merchant customers. The Bank of Lithuania disagrees with this interpretation, considering that in this way the applicant initiates a payment order in accordance with the prior consent given by the payers to the Company's customers (merchants, payees of funds) for the automated debiting of the payers' accounts and provides a direct debit service.

In the case, the Supreme Administrative Court of Lithuania analysed whether the Company's activity of transmitting SEPA direct debit instructions as a payee's payment service provider, but not directly carrying out the direct debit operations itself, could be considered as the provision of direct debit services.
The Supreme Administrative Court of Lithuania found that Article 4(23) of Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market ('Directive 2015/2366') and Article 2(2) of Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 laying down technical and commercial requirements for credit transfers and direct debits in euros ('Regulation No 924/2009') do not indicate, for the purposes of the definition of the concept of direct debit, the payment institution which is considered as the provider of the direct debit services.
In the light of the foregoing, the first question referred for a preliminary ruling by the Supreme Administrative Court of Lithuania is whether Article 2(2) of Regulation No 924/2009 and Article 4(23) of Directive 2015/2366, Annex I(3)(a) and Annex I(4)(a) must be interpreted as meaning that only the payer's payment service provider is to be regarded as the provider of the direct debit service, or whether the service is to be provided by the payer's payment service provider as well as the payee's.

By its second question, the Supreme Administrative Court of Lithuania asks whether the provisions of Regulation (EC) No. 1290/2005 of the European Parliament and of the Council on direct debit transactions (OJ 2005 L 145, p. 1) do not preclude the payment of direct debits by means of a direct debit. In the circumstances of the present case, must Article 2(2) of Directive 260/2012 and Article 4(23) of Directive 2015/2366, Annex I(3)(a) and Annex I(4)(a) be interpreted as meaning that a payment institution, as a payee's payment service provider, which transmits direct debit instructions but does not itself carry out the direct debit operations directly, and which collects the funds on the basis of the prior consent of the customers (the payees of the funds) to the payers into accounts of limited functionality, is providing the service of a direct debit service.
The company is licensed to provide payment transaction processing service (processing of incoming payments under the Law on Payments).
If the answer to the first question is in the negative and the answer to the second question is in the negative, the third question is whether Article 4(44) of Directive 2015/2366 and point 5 of Annex I to Directive 2015/2366 must be interpreted, in circumstances such as those of the present case, as meaning that the payment institution must be deemed to be a direct debit provider, as the payee's payment service provider, which transmits direct debit instructions but does not itself carry out direct debit transactions and collects funds on the basis of the prior consent of the payers to its customers (the payees), and subsequently transfers those funds to customers' accounts with other payment service providers, is a service for payment transactions.

According to the facts of the case, it is the Company's (the payment institution's) customer (the merchant), who is the ultimate payee of the funds, who initiates the withdrawal of the funds from the payer's (the merchant's) account, and instructs the Company to execute the payment transaction.
If the answer to the third question is in the negative, the fourth question asks the CJEU to determine whether Article 4(15) of Directive 2015/2366 and point 7 of Annex I to Directive 2015/2366 must be interpreted, in circumstances such as those of the present case, as meaning that a payment institution, as a payee's payment service provider, which initiates a direct debit on the basis of a direct debit instruction by the payee, but which does not itself carry out the direct debits, and which collects the funds on the basis of the payers' prior consent given by the customers (payees), provides a service for the initiation of payments.
The administrative procedure is suspended pending the preliminary ruling of the Court of Justice of the European Union.

Administrative case No. eA-162-629/2025.