WRITTEN QUESTION E-0423/99

by Ernesto Caccavale (UPE) to the Commission

(1 March 1999)

Subject: The illegal withdrawal from the Greek company, Themis, of authorisation to pursue the business of insurance in Italy

The Themis S.A. General Insurance Company is a Greek insurance company based in Athens which is legally authorised to pursue the business of insurance on Italian territory, under the freedom to provide services. On 20 November 1997, on the basis of a report by ISVAP (the Italian body which controls and monitors private insurance), the Greek Prime Minister withdrew that authorisation on the grounds of alleged fiscal irregularities, which not only have never been confirmed or documented, but are also in stark contrast to statements by the Italian Financial Police to the effect that its activities are entirely lawful.

Given the way in which this withdrawal of authorisation was effected and justified, it is in clear breach of the provisions of Article 40 of EEC Directive 92/49(1), transposed into Italian law in the form of Legislative Decree 175 of 1995, which states that the Member State's monitoring body must provide the company exercising the freedom to provide services with advance notice of any irregularities brought to light by its investigations, where such investigations have been conducted.

Given the above, would the Commission:

1. initiate a thorough and general investigation of the bodies which monitor insurance companies operating both in Italy and in Greece;

2. establish whether ISVAP did fail to meet the obligation to inform the company concerned during the investigation procedure, as specifically provided for in the aforementioned European directive;

3. determine whether, given that the alleged irregularities have not been duly established, the withdrawal requested by ISVAP constitutes an unlawful attempt to prevent foreign insurance companies from entering the Italian market, in clear breach of European legislation regarding the internal market and free competition in providing services, with the aim of favouring some insurance companies and enabling them to maintain their oligopolistic policies.

Answer given by Mr Monti on behalf of the Commission

(23 April 1999)

Some particulars should first be provided as regards the application by the national supervisory bodies for insurance companies of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life insurance and amending Directives 73/239/EEC and 88/357/EEC (third non-life insurance Directive).

By virtue of the principle of the single licence (authorisation) introduced by that Directive, any company authorised in a Member State may carry on business throughout the territory of the Community under the right of establishment or the freedom to provide services while being essentially subject to supervision by, and the laws of, the Member State in which its head office is established (home Member State) (Articles 4 and 5). That Member State alone is competent to grant authorisation to, or withdraw authorisation from, the insurance company. If the latter does not comply with the rules applicable to its activities, the remedial measures and the power to impose penalties (including withdrawal of authorisation) are the sole responsibility of the supervisory authority in the home Member State (Articles 13 and 14). If the authorisation is withdrawn, the supervisory authority in the home Member State must notify the supervisory authorities in the other Member States, including that in which the services were provided.

It transpires from Article 40, to which the Honourable Member also refers, that, where the provision of services is concerned, the undertaking must submit to the supervisory authority of the Member State in which those services are provided all documents requested of it with a view to verifying the conformity of its activities with the rules applicable. If that authority finds that a company carrying on business under the freedom to provide services within its territory is not complying with the rules applicable under national law, it will require the company to remedy that irregular situation. If the company fails to take the necessary action, the supervisory authority in that Member State must inform its counterpart in the home Member State, which will take all appropriate measures with regard to the company. In cases of urgency or if the measures taken by the home Member State prove inadequate, the supervisory authority in the Member State in which the services were provided may take appropriate measures while informing the supervisory authority in the home Member State accordingly.

As regards the technical and financial aspects, the home Member State has sole responsibility for the rules relating to technical provisions, the investment of representative assets, the solvency margin and the guarantee funds for business also transacted under the freedom to provide services. Turning to the tax aspects, the tax and accounting legislation in the home Member State applies where direct taxation is concerned. Responsibility for indirect taxation lies with the Member State in which the risk is situated, this normally being the Member State in which the services are provided. Insurance contracts underwritten under the freedom to provide services are subject to the indirect taxes and parafiscal charges imposed on insurance premiums in the Member State in which the risk is situated (Article 46). The company is required to comply with the measures taken in the Member State in which the risk is situated to ensure collection of such taxes and charges.

In the case in point, the Greek supervisory authority, which is the home-country authority, has sole responsibility for granting and withdrawing the authorisation and for monitoring the prudential and financial solidity of the company, which has its head office in Greece. Similarly, the Italian supervisory authority, being the authority in the Member State in which the services are provided, may seek the intervention of the Greek authority in the event of any infringement of the rules making up the prudential and financial framework and as regards the tax arrangements.

In its capacity as guardian of the Treaties, the Commission may, under Article 169 of the EC Treaty, institute infringement proceedings against Member States that violate Community law but it does not possess any general power to monitor national administrations.

In cases where a directive has not been properly transposed or applied, the scope for Commission action is clearly defined: if transposal is in keeping with the directive but the national legislation has not been properly applied by the national authorities, the infringement relates not to the directive but to the national legislation; the resulting dispute must, in principle, be resolved before the national courts. It is only in the case of prolonged administrative practice, that is to say continuous improper application of the national legislation, which is preventing the directive from being fully effective despite the existence of a proper national instrument of transposal, the Commission could intervene. However, the particulars provided by the Honourable Member do not indicate any continuous, improper behaviour on the part of the Greek authorities but suggest that, if anything, this is an isolated case.

The Commission has examined the legislation transposing the Directive in Greece and Italy and has not discovered any irregularities, at least as regards the problems referred to by the Honourable Member. Furthermore, Article 56 of Directive 92/49/EEC requires Member States to ensure that decisions taken in respect of an insurance company under laws, regulations and administrative provisions adopted in accordance with that Directive may be subject to the right to apply to the courts.

In the event, the company concerned has doubts as to the conformity of the procedure that has been followed, particularly by the Italian authorities, in its case but also as regards withdrawal of its authorisation. Any matter relating to this case would have to be the subject of an appeal before the relevant Greek and Italian administrative or judicial authorities and on the basis of Greek and Italian law.

(1) OJ L 228, 11.8.1992, p. 1.