62003CC0028_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
I – Introduction
1. In the present case the Simvoulio tis Epikratias (the Greek Council of State) has referred to the Court a preliminary question on the compatibility with the Community insurance directives (2) of national legislation providing for the preferential treatment of employees’ claims on an insurance company in a state of insolvency above the claims of insured persons on such a company. Although this issue was addressed in a specific directive in 2001, (3) it does not appear to have been brought to the attention of the referring court, probably because the facts underlying the case in the main proceedings predated the adoption of that directive.
II – Legal framework
A – Community law
2. The internal market for insurance services was progressively established by three generations of directives concerning direct insurance not relating to life assurance on the one hand and life assurance on the other hand. The regulation of both branches of insurance is governed by the same basic principles. The first of these is the principle of the single licence which itself consists of two aspects: (1) the provision of insurance services on the internal market is subject to authorisation by a Member State and (2) such authorisation is sufficient to be able to provide these services throughout the whole of the Community. The second principle is that of home country control, meaning that any provider of insurance services is subject to the supervision of the Member State where its head office is established only.
3. The provisions of the insurance directives which are relevant to the present case are those which are aimed at guaranteeing the financial stability of insurance companies: Articles 15, 16 and 22 of Directive 73/239, as amended by Directive 92/49, and the parallel provisions, Articles 17, 18 and 26, of Directive 79/267, as amended by Directive 92/96. As the provisions in the non-life insurance and life assurance directives are drafted in almost identical terms and the answer to the preliminary question does not depend on the precise wording, I will confine myself to citing the provisions of the former.
4. Articles 15(1) and 16(1) of Directive 73/239 at the material time were drafted in almost identical terms and state that the home Member State shall require every insurance undertaking to establish adequate technical provisions and an adequate solvency margin respectively in respect of its entire business.
5. According to Article 22(1) the authorisation granted by the competent authority of the Member State in whose territory the head office is situated may be withdrawn in certain circumstances. In that case the supervisory authority of the head‑office country shall, inter alia, take all necessary measures to safeguard the interests of the insured and, in particular, shall restrict the free disposal of the assets of the undertaking.
6. Although it was not mentioned by the Simvoulio tis Epikratias, reference should also be made to Directive 2001/17 as it constitutes an important element in providing an answer to the preliminary question. Articles 10 and 11 of this Directive provide as follows:
Article 10 (Treatment of insurance claims)
‘1. Member States shall ensure that insurance claims take precedence over other claims on the insurance undertaking according to one or both of the following methods:
(a) insurance claims shall, with respect to assets representing the technical provisions, take absolute precedence over any other claim on the insurance undertaking;
(b) insurance claims shall, with respect to the whole of the insurance undertaking’s assets, take precedence over any other claim on the insurance undertaking with the only possible exception of:
(i) claims by employees arising from employment contracts and employment relationships,
(ii) …
2. Without prejudice to paragraph 1, Member States may provide that the whole or a part of the expenses arising from the winding-up procedure, as defined by their national legislation, shall take precedence over insurance claims.
3. …
Article 11 (Subrogation to a guarantee scheme)
The home Member State may provide that, where the rights of insurance creditors have been subrogated to a guarantee scheme established in that Member State, claims by that scheme shall not benefit from the provisions of Article 10(1)’.
B – Greek law
7. The insurance directives were incorporated in Greek law by presidential decrees 118/1985 and 252/1996 amending legislative decree 400/1970 concerning private insurance business.
8. Article 3 of the legislative decree contains the requirement that the operation of an insurance undertaking in Greece is subject to authorisation granted by decision of the Minister for Trade. It also provides for the circumstances under which authorisation may be withdrawn. According to the seventh paragraph of this provision ‘definitive withdrawal of operating authorisation for an insurance undertaking shall entail the automatic withdrawal of its authorisation of establishment and the dissolution of the undertaking’.
9. Article 7 of the legislative decree requires ‘insurance undertakings whose head office is in Greece … to establish adequate technical provisions in respect of all insurance effected both in Greece and in other Member States by means of branches or under the freedom to provide services’. Those technical provisions must be covered by assets of equivalent value or expressed in the same currency.
10. In addition, Article 8(1) of the legislative decree obliges insurance undertakings whose head office is in Greece to establish a guarantee fund to which assets are allocated, in Greece or in any other Member State of the European Union and of the European Economic Area, for the purpose of safeguarding the interests of persons entitled to any benefit under a contract of insurance. The guarantee fund shall include the assets which cover the technical provisions referred to in Article 7 of the legislative decree and the assets which cover a quarter of the minimum level as referred to in Article 20(2)(A)(e) of the legislative decree.
11. If an insurance undertaking does not comply with the aforementioned Articles 7 and 8 concerning technical provisions, under Article 9(1) of the legislative decree the Minister for Trade may, by decision published in the Official Gazette and after having communicated his intention to the supervisory authorities of any Member States where the undertaking operates with branches or under the freedom to provide services, allocate part or all of its free assets to a guarantee fund, prohibit the free disposal of part or all of its assets, withdraw temporarily or definitively operating authorisation for some or all of the classes undertaken by it and take any other appropriate measure with the objective of safeguarding the interests of persons insured and any other person entitled to an insurance payment.
12. The provision which is at issue in the main proceedings is Article 10(1) of the legislative decree, as amended by Article 35(9) of Law 2496/1997:
‘Persons entitled to an insurance payment and successors to all or certain of their rights shall have a priority as regards the guarantee fund which takes precedence over any other general or specific priority, apart from the priority under Article 12a(8) and the priority in respect of claims arising from an employment relationship, with the exception of claims of persons exercising the right to manage and administer the insurance undertaking’.
Article 12a(8) provides for priority for the remuneration and expenses of the supervisor of a liquidation or insolvency and of the liquidator.
13. Finally, it should be noted that in 1996 the power to supervise insurance companies was transferred from the Minister for Trade to the Minister for Development.
III – Facts, main proceedings and preliminary question
14. Epikouriko Kefalaio is a legal person established under Greek private law which operates under the supervision and control of the Greek Minister for Trade. Its objective is to pay insurance monies in respect of civil liability arising from motor vehicle accidents where there is no insurance cover, inter alia when the insurer has become the subject of insolvency proceedings or authorisation for the operation of an insurance undertaking has been withdrawn for infringement of the law. Once Epikouriko Kefalaio has paid the insurance monies it acquires by subrogation all the rights arising from the accident enjoyed by the person who has suffered harm as against the person liable to make the payment or his insurer.
15. In 1995 the Greek Minister for Trade withdrew definitively the authorisation for the establishment and operation of the insurance company Intercontinental A.E. and blocked its movable and immovable assets in a guarantee fund. Subsequently, in November 1998, the Greek Minister for Development released from the assets of that company, inter alia, a sum of GRD 28 967 185 ‘to meet preferentially the claims arising from an employment relationship’, in accordance with Article 10(1) of legislative decree 400/1970, as amended by Article 35(9) of Law 2496/1997.
16. In the proceedings before the Simvoulio tis Epikratias, Epikouriko Kefalaio seeks the annulment of this latter decision. It submits that the release from the company’s guarantee fund of the sum of GRD 28 967 185 to meet preferentially the claims arising from the employment relationships of the company’s employees reduces the assets available for meeting its own claims against Intercontinental A.E. In its view this goes against the objective of the insurance directives to protect the interests of insured persons.
17. The Simvoulio tis Epikratias did reach a conclusion on the compatibility of Article 35(9) of Law 2496/1997 with the insurance directives. In its judgment it emphasised that the effective protection of insured persons constitutes a fundamental objective of the Community legislation and the national legislation transposing it into domestic law, and that the obligation to establish technical reserves constitutes the most important guarantee safeguarding the rights of such persons. It therefore took the view that Article 35(9) of Law 2496/1997, pursuant to which claims arising from an employment relationship with an insurance undertaking are satisfied from the guarantee fund of that undertaking in preference to the claims of persons entitled to an insurance payment and of successors to all or certain of such persons’ rights, is contrary to the relevant provisions of the Community insurance directives and that the contested decision, which was based on Article 35(9), should be annulled. Nevertheless, considering that reasonable doubts may be raised with regard to this interpretation, the Simvoulio tis Epikratias decided to defer a final decision in the case and to refer the following preliminary question to the Court of Justice:
Given the provisions of, in particular, Articles 15 and 16 of First Council Directive 73/239/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance, as supplemented and amended by Second Council Directive 88/357/EEC and Third Council Directive 92/49/EEC, and Articles 17 and 18 of First Council Directive 79/267/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, as amended and supplemented by Second Council Directive 90/619/EEC and Third Council Directive 92/96/EEC, may the national legislature provide that, where an insurance company is the subject of insolvency proceedings, is put into liquidation or is otherwise in a state of insolvency, claims arising from an employment relationship with it are satisfied from the assets which are included in its technical provisions in preference to claims of persons entitled to an insurance payment and of successors to all or certain of their rights?
18. Written observations have been submitted by Epikouriko Kefalaio, the Greek and United Kingdom Governments and by the Commission. The Greek Government and the Commission were represented at the hearing which took place on 13 May 2004.
IV – Answer to the preliminary question
19. First of all it must be established that the insurance directives do not contain any explicit rules in respect of insurance companies in a state of insolvency. Such rules were only introduced at the level of the Community with the adoption of Directive 2001/17. The second paragraph of the preamble to this directive states explicitly that ‘the insurance directives do not contain coordination rules in the event of winding‑up proceedings’ and that ‘it is in the interest of the proper functioning of the internal market and of the protection of creditors’ that such rules be established. It could, quite simply, be concluded a contrario
from this that the insurance directives do not preclude the adoption and application of national provisions on this matter.
20. Nevertheless, the fact that this subject‑matter was regulated at Community level at a later stage does not exclude the possibility of the insurance directives being interpreted in such a way that they did prevent the Member States from adopting measures such as the one at issue in the main proceedings. Indeed, the referring court reached this very conclusion where it considered that, as the insurance directives are aimed at protecting the interests of insured persons, any national rule which puts the interests of other categories of persons above these interests must be incompatible with these directives.
21. In order to determine whether it is possible to interpret the insurance directives in this way, regard should be had to the objectives of these directives and in particular to the scope of the harmonisation they seek to achieve. It is clear from the first paragraph of the preamble to the insurance directives that their primary objective is to complete the internal insurance market and to make it easier for insurance undertakings established in the Community to cover risks and commitments situated within the Community. Or, as stated by the Court, they are designed ‘to secure freedom to market insurance products … within the Community’. (4) In order to achieve this objective the directives aim at ‘bringing about such harmonisation as is essential, necessary and sufficient to achieve mutual recognition of authorisations and prudential control systems, thereby making it possible to grant a single authorisation valid throughout the Community and apply the principle of supervision by the home Member State’. (5) This suggests that the scope of the harmonisation to be realised by the directives is limited to what is necessary to ensure access to the insurance market throughout the Community and therefore does not cover aspects which have no bearing on market access.
22. One of the main aspects to be harmonised for this purpose was national legislation aimed at guaranteeing the financial and economic stability of insurance companies. As the Court explained in Commission v Germany, (6) in view of the sensitivity of the insurance sector from the point of view of the consumer as a policyholder and an insured person all the Member States had introduced legislation making insurance undertakings subject to mandatory rules both as regards their financial position and the conditions of insurance which they apply, and to permanent supervision to ensure that those rules are complied with. Such rules which could restrict the freedom to provide services could, however, be justified by imperative reasons relating to the public interest, provided the rules of the state of establishment were not adequate in order to achieve the necessary level of protection and the requirements of the state in which the service is provided did not exceed what was necessary in that respect. (7) In this situation the internal market in the insurance sector could only be completed if divergent national measures, which were justified under Community law and thus continued to restrict the freedom to provide services, were brought into line through harmonisation.
23. Whereas differences between national rules aimed at preventing situations of insolvency arising, such as the obligation to establish techn ical reserves and a solvency margin, may have an effect on gaining access to insurance markets of other Member States, divergent national rules governing insolvency or winding‑up situations cannot prima facie be regarded as having such an effect, as was also pointed out by the United Kingdom in its written observations. This in itself is a clear indication that rules on insolvency do not come within the scope ratione materiae
of the insurance directives, so that the Member States retained competence to adopt measures in that respect.
24. The position of the referring court and Epikouriko Kefalaio is based on the argument that, as the establishment of technical reserves is ultimately intended to protect the interests of policyholders and insured persons, where an insurance company is in a situation of insolvency their claims to payment should enjoy a privileged status in respect of the assets covering these technical reserves. Although this position appears to be quite logical and acceptable, the fact remains that it is not supported by either the terms or the purpose of the insurance directives. Whilst the national legislation which was the subject of that harmonisation was indeed aimed at the protection of consumer interests in the insurance sector and the directives, in its wake, also seek to guarantee a sufficient level of protection throughout the Community, the primary function of these directives at that stage of the harmonisation process, I repeat, was to remove obstacles to the provision of insurance services under the freedom of establishment or the freedom to provide services. The legal base of the directives, Articles 57(2) and 66 of the EEC Treaty (now Articles 47(2) and 55 EC), which empowers the Council to issue directives to make it easier to take up and pursue activities as self-employed persons (including legal persons) or in other words to facilitate market access, also points in that direction.
25. The Greek Government submits that the insurance directives are intended to protect insured persons, but only during the period in which the insurance company operates normally. I do not believe that this is correct. The obligation for an insurance company to establish adequate technical reserves and a solvency margin obviously is a precautionary measure to protect the interests of, inter alia, insured persons in such an insurance company, most particularly when this company reaches a situation where it is unable to fulfil its obligations. This function, however, has no bearing on the classification of the claims of various categories of creditors. Even though the protection of consumer interests in this field is an underlying objective of the insurance directives, this does not exclude the interests of other categories of creditors being protected when a situation of insolvency arises.
26. The adoption of Directive 2001/17 confirms this point of view. Not only does this directive lay down explicit provisions in Article 10 on the classification of claims on insurance companies in winding‑up situations, in its preamble it states explicitly that the insurance directives ‘do not contain coordination rules in the event of winding‑up proceedings’. (8) This unequivocal statement by the Community legislator concerning the scope of the insurance directives leads to the inescapable conclusion that prior to the adoption of Directive 2001/17 the regulation of this subject‑matter belonged to the preserve of the Member States.
27. I would add to this that, where I observed above that rules on the insolvency of insurance undertakings do not affect market access, Directive 2001/17 does not pursue this aim as such. Rather it is presented as a measure in the interest of the ‘proper functioning’ of the internal market. (9) In other words, I do not believe that the adoption of this directive contradicts the observation I made in paragraph 23 of this Opinion.
28. As regards the presumed predominance of claims of policyholders and insured persons, it is significant that Directive 2001/17, in the second paragraph of its preamble, refers to the protection of ‘creditors’ in general and that the two systems of classification prescribed by Article 10 of the directive which are described as being ‘substantially equivalent’ also respect the rights of other categories of creditors, including the employees of the insurance undertaking. Thus, where the first system grants absolute privilege to insurance claims with respect to assets representing the technical provisions only, the second system grants insurance claims a relative privilege in that these take precedence with respect to the whole of the insurance undertaking’s assets with the exception of claims by four other categories of creditors, including claims of the employees of the insurance company.
V – Conclusion
29. I am therefore of the opinion that the answer to be given to the preliminary question referred by the Simvoulio tis Epikratias should be:
Articles 15 and 16 of First Council Directive 73/239/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life assurance, as supplemented and amended by Second Council Directive 88/357/EEC and Third Council Directive 92/49/EEC, and Articles 17 and 18 of First Council Directive 79/267/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, as amended and supplemented by Second Council Directive 90/619/EEC and Third Council Directive 92/96/EEC, must be interpreted as not precluding a national legislature from providing that, where an insurance company is the subject of insolvency proceedings, is put into liquidation or is otherwise in a state of insolvency, claims arising from an employment relationship with it are satisfied from the assets which are included in its technical provisions in preference to claims of persons entitled to an insurance payment and of successors to all or certain of their rights.
(1) .
(2)
–	Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking‑up and pursuit of the business of direct insurance other than life assurance, OJ 1973 L 228, p. 3, as amended by Second Council Directive 88/357/EEC, OJ 1988 L 172, p. 1 and Third Council Directive 92/49/EEC, OJ 1992 L 228, p. 1, and Council Directive 79/267/EEC of 5 March 1979 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, OJ 1979 L 63, p. 1, as amended by Second Council Directive 90/619/EEC, OJ 1990 L 330, p. 50 and Third Council Directive 92/96/EEC, OJ 1992 L 360, p. 1 (hereinafter: ‘the insurance directives’).
(3)
–	Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of insurance undertakings, OJ L 110, p. 28 (hereinafter: ‘Directive 2001/17’).
(4)
–	Case C‑59/01 Commission
v Italy
[2003] ECR I‑1759, paragraph 26.
(5)
–	Paragraph 5 of the preambles to Directives 92/49 and 92/96.
(6)
–	Case 205/84 Commission v Germany
[1986] ECR 3755.
(7)
–	At paragraphs 30 to 33 of the judgment.
(8)
–	Paragraph 2 of the preamble.
(9)
–	Paragraph 2 of the preamble.