In a widely noted decision, the Administrative Court of Frankfurt am Main addressed the legality of an order issued by the Federal Financial Supervisory Authority (BaFin), which aimed to oblige an internet service provider to implement a DNS-based access block to a specific internet address. The affected internet provider sought a judicial review and has now prevailed. The repercussions of this decision go far beyond the individual case and raise fundamental questions concerning the tension between financial supervision, fundamental rights, and internet regulation.
Legal background of BaFin’s directive
Tasks and powers of BaFin
The Federal Financial Supervisory Authority is tasked in Germany with monitoring and regulating large segments of the financial market. Its responsibilities include, in particular, combatting unauthorized financial services, for example in the field of online gambling or unlicensed investments. To effectively stop violations, BaFin has a range of measures at its disposal, including the possibility of issuing market-related orders.
Measures against internet service providers
Against the backdrop of the ongoing digitalization and migration of financial services to the internet, BaFin is increasingly confronted with the problem of being able to identify illegal offerings but not being able to actually remove them from the market with ease—especially in the case of providers based outside the European Union. In response, BaFin has, in certain cases, instructed internet service providers to implement so-called DNS blocks to prevent access to problematic online services from within Germany.
Key aspects of the decision by the Frankfurt am Main Administrative Court
Facts of the case and judicial assessment
In the legal dispute now decided, BaFin issued an order to an internet service provider requiring that access to a specific website be blocked by means of a DNS block. The provider contested this measure in court, arguing there was no legal basis for the order and that the intervention was disproportionate—and the Administrative Court sided with the provider.
The central issue in the court’s reasoning was whether such a profound restriction of access to information could be based on an explicit statutory empowerment under public law. The judges emphasized that the imposition of a DNS block could not be based on BaFin’s current statutory powers and that the freedom of information for third parties, as protected by the German Basic Law, was also affected.
Fundamental rights and proportionality
Of particular significance in the deliberations was the scope of protection of Article 5 of the Basic Law — freedom of information. The judicial analysis concluded that a network block has the potential to affect the access of uninvolved third parties to legal information. Furthermore, the court considered the measure to be disproportionate, as less intrusive means were available and the intervention was not based on a specific legal basis.
Developments in the area of network blocks and supervisory powers
Network blocks under German and European law
The legal admissibility of network blocks, particularly DNS blocks, is the subject of controversy in Germany and at the European level. While there are specific provisions, for example in copyright law and in the context of child and youth protection, there is as yet no explicit legal framework within financial supervision that enables such measures. The decision of the Administrative Court of Frankfurt am Main underscores the necessity for clear statutory conditions for interventions of this magnitude.
Implications for affected market participants
The ruling has significant implications for various stakeholders: For internet service providers, the judgment provides additional clarity regarding the scope of their duties in relation to supervisory measures. Providers in the financial services sector and in the online segment gain legal certainty about the admissibility of government blocking orders. Consumer protection aspects are also touched upon, as access restrictions often exceed what is necessary and may affect legal content.
Further considerations regarding the regulation of digital markets
The decision of the Frankfurt Administrative Court raises the question of how effective market supervision can be ensured in the digital age without infringing overarching fundamental rights. The legislator is increasingly called upon to strike a balance between the need for effective financial supervision and the protection of communication and information freedoms online.
Further developments remain to be seen, particularly with regard to possible appeals and the evolution of legislative regulations. These are complex matters, and their assessment requires careful consideration of the varied interests of regulatory bodies, the economy, users, and providers.
For companies, investors, and other stakeholders dealing with issues relating to regulation, IT law, and compliance within the context of digital business models and financial services, an individual assessment of the current legal situation and likely future developments can be of great importance. The lawyers at MTR Legal are available to answer any related inquiries.
