Commission Interpretative Communication - Freedom to provide services and the general good in the insurance sector
Date: 2000-02-16
Institutions: European Commission
Subjects: freedom to provide services, insurance company, right of establishment

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COMMISSION INTERPRETATIVE COMMUNICATION

Freedom to provide services and the general good in the insurance sector

(2000/C 43/03)

the single market

The Third Council Directives 92/49/EEC and 92/96/EEC (1)
completed the establishment of
in the
insurance sector. They introduced a single system for the auth-
orisation and financial supervision of insurance undertakings
by the Member State in which they have their head office (the
home Member State). Such authorisation issued by the home
Member State enables an insurance undertaking to carry on its
insurance business anywhere in the European Community,
either on the rules on establishment, i.e. by opening agencies
or branches in all the Member States, or under the rules on the
freedom to provide services. Where it carries on business in
another Member State, the insurance undertaking must comply
with the conditions in which, for reasons of the general good,
such business must be conducted in the host Member State.
Under the system set up by the Directives, the financial super-
vision of the business carried on by the insurance undertaking,
including business carried on under the rules on establishment
or on the freedom to provide services, is always a matter only
for that insurance undertaking’s home Member State.

June 1998,
in interpretation of

In its communication to the Council of 28 October 1998 on
financial services (2) which was drawn up at the request of the
the Commission
Cardiff European Council of
the Community
identified differences
rules and the resulting legal uncertainty as one of the factors
preventing the single market in financial services from func-
tioning properly. At its meeting in Cologne on 4 June 1999,
the European Council endorsed the Action Plan (3) including
the proposals and priorities contained in it, which was
presented by the Commission following discussions within a
group of personal representatives of
the finance ministers
which it chaired. This Action Plan includes the adoption of a
Commission interpretative communication on freedom to
provide services and the general good in the insurance sector
among the priority objectives for helping to ensure that the
single markt operates effectively.

In the course of its contacts with umerous economic agents,
the Commission has come to realise that uncertainty surrounds
the interpretation of the scope of the Treaty rules and of the
provisions of the Insurance Directives, in particular the basic
concepts of freedom to provide services and the general good.
In many cases this results in the application by the supervisory
authorities of measures or penalties in respect of insurance
undertakings wishing to do business in the single market or
in the imposititon by them of certain constraints or conditions
regarding the conduct of business on their
territory. The
situation in which insurance undertakings find themselves is
far from clear and they thus face considerable legal uncertainty,
both as regards the arrangements applicable to them in the
different Member States and as regards the content of
the
products they wish to offer. The differences of interpretation
seriously undermine the workings of the machinery set up by
the Third Directives and are thus likely to deter certain
insurance undertakings from exercising the freedoms created
by the Treaty which the Third Directives set out to promote
and, hence, to restrict the free movement of insurance services
in the European Union. These differences are also preventing
those seeking insurance from having access to insurance under-
takings elsewhere in the Community and to the range of
insurance products available within the single market
in
order to select the one that best fits their needs in terms of
cover and cost.

(1) Directives 92/49/EEC (OJ L 228, 11.8.1992, p. 1) and 92/96/EEC
(OJ L 360, 9.12.1992, p. 1), as last amended by Directive 95/26/EEC
of
(OJ L 168,
18.7.1995, p. 7).

the European Parliament and of

the Council

interpretative

This
the Commission’s
communication is
contribution to the discussions it has held on the problems
associated in the insurance industry with the freedom to
provide services (Part One) and the general good (Part Two),
particularly in the light of
the third Council Directive on
insurance (92/49/EEC and 92/96/EEC).

The Member States (particularly within the framework of the
insurance committee and the sub-group on the interpretation
of
the European
Parliament and the Economic and Social Committee have
been involved in these discussions.

insurance directives), private operators,

Before adopting the Action Plan, the Commission published in
the European Communities a draft
the Official

Journal of

(2) (cid:145)Financial services: building af

framework for action(cid:146)

(COM(98)

625).

(3) (cid:145)Implementing the framework for financial markets: Action Plan(cid:146)

(COM(1999) 232, 11.5.1999).

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communication (4) which marked the beginning of a wide-
ranging consultation process. Following publication of
that
communication,
it received numerous contributions form all
the groups concerned (Member States, professional associations
representing insurers and intermediaries, insurance companies,
consumer organisations,
It also organised
hearings with interested parties.

law firms, etc.).

that can arise in the functioning of the single insurance market,
but merely the most frequent or most likely.

The Commission deems it desirable to draw attention to and to
systematise the principles governing the right of establishment
and the freedom to provide services, as elucidated by the Court
of
Justice, and to consider how they apply to the Third
Insurance Directives (5). This interpretation is based on the
community
provisions of
the
Insurance Directives and on the decisions of
the Court of
Justice, which has
set out a large number of principles
essential to the observance of the right of establishment and
the freedom to provide services (6).

the Treaty,

texts of

the

this

publishing

communication,

In
the
interpretative
Commission is seeking to make transparent and to clarify the
common rules which it is its task to see are observed. It is
supplying all
those concerned (cid:151) national administrations,
economic agents and consumers (cid:151) with a reference tool
wich explains the Commission’s opinion with regard to the
legal framework in which insurance business may be carried
on.

The interpretations and ideas set out in the present communi-
cation, which concern only the specific problems of
the
insurance sector (7) do not claim to cover all possible situations

(4) OJ C 365, 3.12.1997.
(5) See in this connection the Commission interpretative communi-
cation concerning the free movement of services across frontiers
(OJ C 334, 9.12.1993, p. 3).

(6) Where different

interpretations of

the Insurance Directives are
in the
possible, this document follows the interpretation which,
opinion of the Commission, is closest to the Treaty. It sould be
noted in this respect that,
in accordance with the Court’s case
law, where a text of secondary legislation can be interpreted differ-
ently, preference should be given to the interpretation which would
align it with the Treaty, rather than one which would render it
incompatible (see Case 205/84 Commission v Germany [1986]
ECR 3755)

(7) As regards the banking sector, the Commission has publsihed an
interpretative communiction on the freedom to provide service and
the general good in the Second Banking Directive (SEC(97) 1193
final, 20.6.1997).

commerce (8).

It should be pointed out straight away that the interpretations
given in the present communication do not necessarily
represent the often very divergent views put forward by the
Member States and should not, in themselves, impose any new
obligation on them. Neither do the interpretations prejudge the
Commssion’s subsequent interpretations of the principles of
establishment and freedom to provide services with regard to
the development of communication technology and its use in
the insurance business. European Community policy on the
information society and electronic commerce is designed to
information society services and
promote the expansion of
their movement between the Member States, especially elec-
tronic
electronic
commerce in the insurance and financial business should
become very important and should eventually change the
the
machinery
European Community. The current legal framework for the
single market
in insurance is based on machinery where
consideration has not been given to how to use this new tech-
nology for carrying out insurance business in the single market,
and further work may possibly have to be carried out in the
area.
for a European
Parliament and Council Directive concerning the distance
marketing of consumer financial services (9) will provide a
proper harmonised legal framework for distance transactions
carried out with consumers,
thereby contributing to the
growing use of new remote communication techniques, such
as the Internet.

the proposal

development

connection,

distributing

insurance

products

In this

The

for

of

in

It goes without saying that the Commission’s interpretations do
not prejudge the interpretation that the Court of Justice of the
European Communities, which is
responsible in the final
instance for interpreting the Treaty and secondary legislation,
might place on the matters at issue.

(8) Council

for

concerning

resolution on the new priorities

information society services and proposal

the
information society, adopted on 8 October 1996; Commission
communication to the European Council entitled (cid:145)Putting services
to work(cid:146) (CSE(96) final, 27.11.1996); Commission communication to
the European Parliament, the Council and the Economic and Social
Committee concerning regulatory transparency in the internal
for a
market
European Parliament and Council Directive amending for
the
third time Directive 83/189/EEC laying down a procedure for the
provision of information in the field of technical standards and
regulations
for a
European Parliament and Council directive on certain legal
aspects of electronic commerce in the internal market (COM(98)
586 final, 18.11.1998) and amended proposal
(COM(1999) 427
for a European Parliament and
final, 17.8.1999); and proposal
Council directive on a common framework for electronic signatures
(COM(98) 297 final, 13.5.1998) and amended proposal COM(1999)
195, 29.4.1999).

(COM(96) 392 final, 30.8.1996); proposal

(9) COM(98) 468 final, 14.10.1998, and, for the amended proposal,

COM(1999) 385 final, 23.7.1999.

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I. FREEDOM TO PROVIDE SERVICES AND RIGHT OF ESTAB-
LISHMENT IN THE INSURANCE DIRECTIVES

A. DEMARCATION BETWEEN THE RIGHT OF ESTABLISHMENT
AND THE FREEDOM TO PROVIDE SERVICES (10)

1. Freedom to provide services

(a) Temporary nature

Article 49 et seq. of the Treaty establish the principle of the
free movement of services. The principle acquired direct,
the transitional
unconditional effect on the expiry of
period (11).
It confers on the parties concerned rights
which the national authorities are required to observe
and uphold, by refraining from applying any conflicting
law, whether legislative or adminis-
provision of national
individual administrative deci-
trative,
sions (12).

including specific,

the provision of services(cid:146),

(cid:145)business carried on under

(10) For the purposes of this communication, the terms (cid:145)Member States
of
the
freedom to provide services(cid:146), (cid:145)Member State where the risk is situ-
ated(cid:146), (cid:145)home Member State(cid:146), (cid:145)Member State of the branch(cid:146), etc. are
used in accordance with the definitions given in Directives
88/357/EEC, 90/619/EEC, 92/49/EEC and 92/96/EEC.
Member State of the provision of services: the Member State where the
risk is situated pursuant to Article 2(d) of Directive 88/357/EEC in
cases where it is covered by an insurance undertaking or branch
situated in another Member State, or the Member State of the
commitment pursuant to Article 2(e) of Directive 90/619/EEC in
cases where the commitment is covered by an insurance under-
taking or branch situated in antoher Member State (Article 1(e) of
Directive 92/49/EEC and Article 1(f) of Directive 92/96/EEC).
Business carried on under the freedom to provide services: the cover by
an insurance undertaking operating from one Member State of a
risk or commitment situated pursuant to Article 2(d) of Directive
88/357/EEC or Article 2(e) of Directive 90/619/EEC in another
Member State.
Home Member State: the Member State in which the head office of
the insurance undertkaing covering the risk or the commitment is
situated (Article 1(c) of Directive 92/49/EEC and Article 1(d) of
Directive 92/96/EEC).
Member State of the branch: the Member State in which the branch
is situated (Article 1(d) of
covering the risk or commitment
Directive 92/49/EEC and Article 1(e) of Directive 92/96/EEC).
Branch: any agency or branch of an insurance undertaking. Any
permanent presence of an undertaking in the territory of a
Member State is treated in the same way as an agency or
branch, even if that presence does not take the form of a branch
or agency but consists merely of an office managed by the under-
taking’s own staff or by a person who is independent but has
permanent authority to act
for the undertaking as an agency
would (Articles 1(b) of Directive 92/49/EEC and Directive
92/96/EEC,
and Articles 3 of Directives 88/357/EEC and
90/619/EEC).

(11) 1 January 1970 (Case 205/84 Commission v Germany [1986] ECR
3755) or the date of accession in the case of new Member States
(judgment of 29 April 1999 in Case C-224/97, Ciola [1999] ECR
I-2517.

(12) See footnote II Case C-224/97 Ciola.

Justice,

the provider;

It should be noted that, according to the decisions of the
Court of
the freedom to provide services may
involve the movement of the provider of the service, as
envisaged in the third paragraph of Article 50 of
the
Treaty, or the movement of the recipient of the service to
the Member State of
the service may,
however, also be carried out without any movement,
either of
In other
words, Article 49 et seq. of the Treaty apply in all cases
where a person providing services offers those services in a
Member State other than that in which he is established,
wherever the recipients of those services may be estab-
lished.
It is only when all the relevant elements of the
activity in question are confined within a single Member
the Treaty on freedom to
State that
provide services do not apply (14).

the supplier or of

the provisions of

the recipient (13).

Where business is carried on under the freedom to provide
services with the provider present on the territory of the
Member State of provision, the concept of the provision of
services is basically distinguished from that of establishment
by its temporary character, while the right of establishment
presupposes a lasting presence in the host country (15). The
distinction stems from the Treaty itself, where the third
paragraph of Article 50 stipulates that, in cases involving
movement by the service provider to another Member
State, the person providing the service may,
in order to
do so,
(cid:145)temporarily(cid:146) pursue his activity in the State where
the service is provided. According to the case law of the
Court of Justice, the temporary nature of the provision of
services is to be assessed in the light of its duration, regu-
larity, periodicity and continuity. The fact that the provision
of sercices is temporary does not mean that the provider of
services may not equip himself with some form of infra-
structure in the host Member State in so far as such infra-
structure is necessary for the purpose of performing the
services in question (16).

The Court has also stated that an activity which consists in
services
providing on a lasting basis
from the home
involve movement by the
Member State and does not

(13) Joined Cases 286/82 and 26/83, Luisi and Carbone [1984] ECR
377; Case C-76/90 S(cid:228)ger [1991] ECR I-195; Case C-384/93 Alpine
[1995] ECR I-1141.

(14) Joined Cases C-225/95, C-226/95 and C-227/95, Kapasakalis
[1998] ECR I-4239;
the Court of 26 February
1991 in three cases concerning tourist guides: C-154/89 [1991]
ECR I-659, C-180/89 [1991] ECR I-709, and C-198/89 [1991]
ECR I-659.

judgments of

(15) Joined Cases 286/82 and 26/83, Luisi und Carbon [1984] ECR
377; Case C-55/94, Gebhard [I-1995] ECR I-4165, paragraphs 25
to 27; Case C-221/89 Factortame [1991] ECR I-3905: (cid:145)the concept
of establishment within the meaning of Article 52 [now Article
43] et seq. of the Treaty involves the actual pursuit of an economic
activity through a fixed establishment in another Member State for
an indefinite period(cid:146) (paragraph 20).

(16) Case 55/94, Gebhard [1995] ECR I-4165, paragraph 27; Case

C-56/96 VT4 [1997] ECR I-3143.

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service provider to the Member State of provision falls
within the scope of the rules on the freedom to provide
services (17).

State comes under the chapter relating to the right of
establsihment and not the chapter relating to services(cid:146) (20).

(b) Prohibition of circumvention of national law

The Court has acknowledged that a host Member State is
entitled to take steps to prevent a service provider whose
activity is entirely or mainly directed towards its territory
(i.e. the host Member State) from improperly exercising the
freedom to provide services enshrined in Article 49 of the
Treaty in order to circumvent
the rules of professional
conduct which would be applicable to him if he were
established in the territory of that host Member State (18).
It adds that such a situation may fall within the ambit of
the chapter on the right of establishment and not of that on
the freedom to provide services (19).

in order

important

frequency is

The criterion of
to
determine whether there may be an attempt at (cid:145)circum-
vention(cid:146) while exercising the freedom to provide services
enshrined in Article 49, but it is not sufficient to define
business as being carried on under the freedom to provide
services (an establishment may also operate on an occa-
sional basis).

The Commission takes the view that a situation where an
insurance undertaking is
frequently being approached
within its own territory (cid:151) for example, via electronic
means of communication (cid:151) by consumers residing in
other Member States could not be regarded as a circum-
vention, unless it were demonstrated that there was an
intention on the part of
to
circumvent the national rules of those other Member States.

the provider of

services

2. Right of establishment

If an undertaking carries on business in a Member State for
an indefinite period via a permanent presence in that
Member State, it is covered in principle by the provisions
of the Treaty on the right of establishment. The Court has
held that:

(cid:145)A national of a Member State who pursues a professional
activity on a stable and continous basis in another Member
from an established
State where he holds himself out
that
professional base to, amongst others, nationals of

In Commission v Germany (21), the Court held that:

(cid:145). . . an insurance undertaking of another Member State
which maintains a permanent presence in the Member
State in question comes within the scope of the provisions
of the Treaty on the right of establishment, even if that
presence does not take the form of a branch or agency,
but consists merely of an office managed by the under-
taking’s own staff or by a person who is independent but
authorised to act on a permanent basis for the undertaking,
as will be the case with an agency.(cid:146)

The Court has therefore acknowledged that an undertaking
which has recourse to an intermediary established on the
territory of another Member State to carry on activities in
that Member State on a stable and continous basis may fall
within the scope of the rules on the right of establishment.
The Court sought in that judgment to avoid the freedom to
provide services being misused in order to circumvent the
rules that would apply in the host Member State if the
undertaking were established there (22).

Nevertheless, this risk of abuse has been eliminated to a
significant degree in the insurance sector as a result of the
harmonisation achieved since the above judgment by the
Community directives concerning the conditions for taking
up and carrying on insurance activities. The prudential and
supervisory rules for
insurance undertakings have been
largely harmonised, whichever way insurance activities are
carried out: by way of establishment or
through the
provision of services.

Justice recently acknowledged that

The Court of
the
temporary character of the provision of services does not
mean that the provider may not equip himself with some
form of infrastructure (chambers, office, etc.)
in the host
Member State in so far as is necessary for the purposes of
performing the services in question, without coming under
the right of establishment (23). In such cases the temporary
character of the services provided should be assessed by
reference to their duration,
frequency, periodicity and
continuity (24). However, the mere existence of infrastructure
in a Member State does not prove straight away that the
situation falls within the scope of the rules on the right of
establishment.

(17) Case C-56/96, VT4 [1997] ECR I-3143.
(18) Case 205/84 Commission v Germany [1986] ECR 3755 (see
footnote 6); Case 33/74 Van Binsbergen [1974] ECR 1299; Case
C-148/91 Veronica [1993] ECR I-487; Case C-23/93 TV 10 [1994]
ECR I-4795, paragraphs 56 and 68 of the Opinion or Mr Advo-
cate-General Lenz; Case C-56/96 VT4 (see footnote 16). See also
the Opinion of Mr Advocate-General Lenz in Case C-212/97
Centros [1999] ECR I-1459, a case concerning alleged misuse of
the (cid:145)secondary(cid:146) right of establishment. The Court applid its case law
on circumvention developed in the context of
the freedom to
provide services.

(19) Case 205/84 Commission v Germany [1986] ECR 3755 paragraph
22; Case 33/74 Van Binsbergen [1974] ECR 1299, paragraph 13.

(20) Case 55/94 Gebhard [1995] ECR I-4165; Case C-221/89

Factortame [1991] ECR I-3905.

(21) Case 205/84 Commission v Germany [1986] ECR 3755.
(22) Case 205/84,

(see footnote 11, paragraphs 21 and 22; Case
C-148/91 Veronica (see footnote 18); Case C-56/96 VT4 (see
footnote 16) (see Opinion of Mr Advocate-General Lenz).

(23) Case C-55/94, Gebhard (see footnote 15). It should be pointed out
that, in his Opinion on Case 205/84 Commission v Germany (see
footnote 6), the Advocate-General stated that the appointment of
an agent or representative (in the host Member State) did not in
itself necessarily constitute establishment.
(24) Case C-55/94 Gebhard (see footnote 15).

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In the light of the case law of the Court of Justice (25), The
Commission considers
the
provision of
any permanent
presence of the provider of services on its territory as an
to the rules
it
establishment and subject
relating to the right of establishment.

the Member State of

services may not

in any event

treat

that

3. Grey area

It is, however, not always easy to draw the line between the
two concepts of provision of services and establishment.
Some situations are difficult
in particular
to carry on its insurance
in order
where the insurer,
business, uses a permanent infrastructure in the Member
State of provision. This arises in particular in the following
cases:

to classify,

(a) recourse to independent persons established in the host

Member State;

(b) electronic machines carrying on insurance business.

On the strength of the Court’s case law, the Commission
departments propose the following interpretations:

(a) Recourse to indpendent persons established in the host

Member State

The problem is to determine to what extent an insurance
undertaking established in Member State A which has
recourse to an independent person (26) established in
Member State B in order to do insurance business there
could be regarded as itself carrying on an insurance activity
on a permanent basis in Member State B and hence be
treated as an establishment of the insurance undertaking
in the host Member State,
instead of being regarded as
carrying on an insurance activity under the rules on the
freedom to provide services.

In De Bloos (27) the Court held that:

irrespective of

their form or designation.

(25) See, in particular, Gebhard, and VT4, (see footnote 16).
(26) It should be pointed out straightaway that the notion of (cid:145)inde-
pendent person(cid:146) refers to structures (natural or legal persons)
that are legally separate from the insurance undertaking they call
is not used
on,
therefore in the more restrictive sense of Council Directive
77/92/EEC (OJ L 26, 31.1.1977) to distinguish between insurance
agents (who act on behalf and for the account of, or solely on
behalf of, one or more insurance undertakings) and insurance
in
brokers
bringing together persons seeking insurance and insurance under-
takings without being bound in the choice of the latter, with a
view to covering risks to be insured, ans who carry out work
preparatory to the conclusion of policies of insurance and assist
in the administration and performance of
in
particular in the event of a claim).

(whose professional activity consists

such policies,

in particular

It

(27) Case 14/76 [1976] ECr 1497. It should be noted that this judgment
and those cited in footnotes 27, 28 and 29 were delivered in cases
concerning the interpretation of
the concept of a branch in
accordance with the Brussels Convention on juridiction and the
enforcement of judgments in civil and commercial matters.

the essential characteristics of
(cid:145)One of
branch or agency is the fact of being subject
direction and control of the parent body.(cid:146)

the concepts of
to the

In even more precise terms, in Somafer (28) the Court held
that:

(cid:145)The concept of branch, agency or other establishment
implies a place of business which has the appearance of
permanency, such as the extension of a parent body, has a
management and is materially equipped to negotiate
the latter, although
business with third parties, so that
knowing that there will if necessary be a legal
link with
the parent body, the head office of which is abroad, do not
have to deal directly with such a parent body but may
transact business at the place of business constituting the
extension.(cid:146)

It concluded that a sole concessionaire not subject to the
control and direction of a company could not be regarded
as a branch, agency or establishment.

In Blanckart & Willems (29), the Court held that:

(cid:145)An independent commercial agent who merely negotiates
business, inasmuch as his legal status leaves him basically
free to arrange his own work and decide what proportion
of his time to devote to the interestes of the undertaking
which he agrees to represent and whom that undertaking
may not prevent from representing at the same time several
firms competing in the same manufacturing or marketing
sector, and who, moreover, merely transmits orders to the
parent undertaking without being involved in either their
terms or their execution, does not have the character of a
branch, agency or other establishment . . .(cid:146)

Moreover, in his Opinion in Shearson Lehman Hutton (30) Mr
Advocate-General Darmon stated that:

(cid:145)The link of dependence vis-(cid:224)-vis the company established
is not
the determining
in another
criterion here.
that criterion resides in
the fact
the secondary establishment has the power to
enter into contracts with third parties.(cid:146)

signatory State (31)
In our opinion,

(28) Case 33/78 [1978] ECR 2183. See also Case C-439/93, Lloyd’s
Register of Shipping v SociØtØ Campenon Bernard [1995] ECR
I-961.

(29) Case 139/80 [1981] ECR 819.
(30) Case C-89/91 [1992] ECR I-165.
(31) The term (cid:145)signatory State(cid:146) is used here because the case concerned
the Brussels Convention on jrusidiction and the enforcement of
judgments in civil and commercial matters.

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Lastly, in his report on the Brussels Convention, Mr Jenard
notes that there is an agency or branch only (cid:145)where the
foreign company is represented by a person capable of
acting in a manner that is binding on its vis-(cid:224)-vis third
parties(cid:146) (32).

exclusive brief, would be treated as a branch of that
insurance undertaking to the extent
the brief
places intermediary under the direction and control of
that insurer. The other insurers would, on the other
hand, be subject to the rules governing the freedom
to provide services.

that

On the basis of these precedents, the Commission considers
that, for the links between an independent person (cid:151) such
as, for example, an independent intermediary (cid:151) and an
insurance undertaking to be regarded as meaning that the
insurance undertaking falls within the scope of the rules
governing the right of establishment rather than those
applicable to the freedom to provide services, the inde-
pendent person must meet the following three cumulative
conditions:

(i) he must be subject

to the direction and control of

the

insurance undertaking he represents;

(ii) he must be able to commit the insurance undertaking, and

(iii) he must have received a permanent brief.

It is, therefore, only where the independent person acts as a
genuine extension of the insurance undertaking that the
insurance undertaking falls within the scope of the rules
applicable to the establishment of a branch.

(i) The independent person must be subject to the direction and

control of the insurance undertaking he represents

To verify if this criterion is met, a check should be
made in particular to see whether, in the light of the
links establishment between the insurance undertaking
and the independent person, the latter has sufficient
freedom to organise his activities,
to decide how
much time he will devote to the insurance undertaking
and in particular, to represent competitors at the same
time.

In any event, the remaining two conditions mentioned
should also be satisfied in order for the intermediary to
be treated as a branch of an insurance undertaking in
the host Member State and for the activities of that
insurer to be covered by the rules on establishment
rather than the rules on the provision of services. The
above considerations apply irrespective of whether the
intermediary is a natural person or a legal person.

(ii) The independent person must commit the insurance under-

taking

To determine whether this condition is satisfied, it has
to be examined,
in accordance with the Court’s case
law, whether the acts or decisions of the independent
person can commit the insurance undertaking vis-(cid:224)-vis
third parties, who therefore do not need to deal with
the insurance undertaking itself and may conclude
business with the independent person.

The commitment of the insurance undertaking vis-(cid:224)-vis
the insured results primarily from the brief given to the
independent person to conclude insurance policies with
those seeking insurance on behalf and for the account
of the insurance undertaking not established in the host
Member State. The specific purpose of an agency or a
branch is to conclude policies with third parties on
behalf and for the account of the head office, which
is thus directly committed, since the agency is an
the independent
If
extension of
the
person can,
instance, make on behalf of
the
insurance undertaking an offer containing all
the insurance
the proposed policy, but
essential of
undertaking can still refuse the proposal submitted by
the independent person and signed by the client, the
condition of the ability to commit will not be met.

the head office.
for

intermediary is

An exclusive brief received by an independent inter-
mediary from a single insurer is an indication that
to the direction and
the
subject
control of
is nevertheless not
uncommon in the insurance sector for intermediaries
the same
to represent several competing insurers at
time.
such representation concerns
different classes of insurance for different insurers.

In most cases,

insurer.

that

It

Thus,
in such cases, an intermediary who works for
several insurers, only one of which has given him an

(32) OJ C 59, 5.3.1979, p. 1.

to decide

In some cases, other elements of the brief given by the
insurance undertaking to an independent person may
also show the intention of the insurance undertaking to
be directly committed to the policyholder. For example,
where the insurer has granted the intermediary the
power
claim
submitted to it and the decisions taken by the inter-
mediary bind the insurer vis-(cid:224)-vis third parties. This
function must, however, be distinguished from the
brief given to the intermediary simple to manage files
relating to claims; this may include, where appropriate,
the payment of indemnities pursuant to the instructions
given by the insurer himself.

and settle

to accept

a

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(iii) The independent person must have received a permanent brief

The capacity of an independent person (e.g. an inter-
mediary) established in the host Member State to
commit an insurance undertaking must be based on a
is
long-term, continuous brief and not a brief
instruction. This stable
limited in time or a one-off
and continous quality of
the
insurance undertaking intends to integrate into the
the host Member State the insurance
economy of
activities which it carries on there.

the brief shows that

that

In the Commission’s opinion, where an insurance
in order temporarily and
undertaking has recourse,
occasionally to carry on insurance business in another
Member State, to an intermediary established in that
other Member State,
it falls within the scope of the
rules governing the freedom to provide services (33).

The Commission considers that an insurance under-
taking that decides
insurance business
to transact
under the freedom to provide services must be able
to use certain services either upstream or downstream
of the transaction in the Member State of provision. For
example, an insurance undertaking should be able to
use for its business under the freedom to provide
services:

(cid:151) a local expert to assess the risks to be covered under

the freedom to provide services,

(cid:151) a local expert to assess damage caused under risks
covered by insurance policies negotiated under the
freedom to provide services,

(cid:151) canvassers who do not conclude insurance policies
and whose activity is limited to sending insurance
proposals received from potential policyholders to
the insurance undertaking for acceptance,

(cid:151) local

legal services, medical or actuarial services

established in the Member State of provision,

(cid:151) a permanent structure for collecting the premiums
the
for
freedom to provide services (e.g. a credit institution
or a factoring company),

entered into under

insurance policies

(cid:151) a permanent

structure for

receiving notices of
claims relating to policies concluded under
the
freedom to provide services for transmission to

(33) See Articles 14, 16 and 17 of Directive 88/357/EEC, as amended by
Articles 34, 35 and 36 of Directive 92/49/EEC (non-life insurance),
and Articles 11, 14 and 17 of Directive 88/357/EEC, as amended
by Articles 34, 35 and 36 of Directive 92/96/EEC (life assurance),
for the procedure relating to activities under the freedom to
provide services falling within the scope of these Directives.

the insurance undertaking for a decision to accept
or refuse each claim,

(cid:151) a permanent structure for managing files relating to
the
claims (this may include, where appropriate,
payment of indemnities pursuant to the instructions
given by the insurer himself).

i.e.

the undertaking’s objects,

It should be made clear that the only brief which results
in treating a permanent presence in the same way as a
branch of the insurance undertaking in the Member
State of procvision is one which concerns the activities
that are part of
the
business of insurance. A brief given to persons estab-
lished in another Member State to carry out activities
other than insurance cannot be taken into account
when assessing the arrangements for carrying on the
insurance activity in the host Member State. This
could be the case with a brief given to an investment
company to manange the insurance undertaking’s
securities portfolio or with a company instructed to
manage real estate which the undertaking owns in a
Member State and which it uses as cover for technical
provisions.

Conclusion:

The Commission takes the view that it is only where the
above three conditions are met (i.e. where the independent
person to the direction and control of the insurance under-
taking, is able to commit the insurance undertaking and has
received a permanent brief) that an insurance undertaking,
using independent persons (cid:151) e.g. intermediaries (cid:151) perma-
nently established in the host Member State, must be
treated as if it had a branch in the host Member State,
with all that this implies from the legal point of view.
Accordingly,
to
follow the procedure for opening a branch laid down by
Article 10 of the First Insurance Directives 73/329/EEC and
79/267/EEC, as amended by Article 32 of
the Third
Insurance Directives 92/49/EEC and 92/96/EEC (specifying
that the activities envisaged will be caried on through an
independent
the independent
person’s activities must be carried on with due regard for
the rules on branches adopted in the interest of the general
good by the host State.

insurance undertaking will have

intermediary).

In addition,

the

that

The fact
these conditions may involve making the
insurance undertaking subject to the right of establishment
the independent person himself
does not mean that
constitutes a branch of the insurer. A branch is (cid:145)a place
of business which forms a legally dependent part of an
insurance undertaking(cid:146) (34). Since the person is assumed to
be independent, he cannot be a (cid:145)part(cid:146) of an insurance
is without prejudice to compliance,
undertaking. This
where appropriate, by that independent person with the
conditions governing the taking up and exercise of his
professional activity in the Member State in which he is
established.

(34) See in this respect the concept of a branch given in Article 1(3) of
Second Banking Directive 89/646/EEC (OJ L 386, 30.12.1989) and
Article 1(8) of Directive 93/22/EEC on investment services in the
securities field (OJ L 141, 11.6.1993).

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(b) Electronic machines

This means fixed, ATM-type electronic machines capable of
performing the insurance activities listed in the Annex to
the First Directives (35).

Such machines may be covered by the right of estab-
lishment if they fulfil the criteria laid down by the Court
of Justice (see (a)).

4. Simultaneous exercise of

the freedom to provide

services and the right of establishment

Since 1 July 1994, when the Third Directives 92/49/EEC
and 92/96/EEC entered into force, an insurance undertaking
can simultasneously carry on business in the same country
under the freedom to provide services and through a form
of establishment (branch), even if it is the same activity.
the Second
Those Directives repealed the provisions of
in
Directives which allowed Member States to prohibit
certain cases simultaneous exercise of
the freedom to
provide services and the right of establishment (36).

therefore,

For such a machine to be capable of being treated as an
establishment,
a
management, which is by definition impossible unless the
Court acknowledges that the concept can encompass not
only human management but also electronic management.

it would have

to have

However, such a machine is unlikely to be the only place of
business of an insurance undertaking in a Member State. It
is likely to be attached in the same country to a branch or
an agency. In that event, the machine is not an entity in its
own right as it is covered by the rules governing the estab-
lishment to which it is attached.

If the machine does, however, constitute the only presence
of an insurance undertaking in a Member State for the type
of insurance transaction in question, the Commission takes
the view that it may be possible to treat it as a provision of
services in the territory of that Member State. The presence
in the host country of a person or company responsible
simply for maintaining the machine, equipping it and
deasling with any technical problems encountered by
the insurance
users cannot rank as an establishment of
undertaking and does not prevent
the activity being
deemed to be carried on under the freedom to provide
services.

The Commission cannot rule out the possibility that tech-
nological developments might, in the future, induce it to
review its position. If such developments were to make it
possible for an insurance undertaking to have only a
machine in a given country which could (cid:145)act(cid:146) as a
taking actual decisions which would completely
branch,
obviate the need for the customer to have contact with
the parent company, the Commission would be forced to
consider an appropriate Community legal framework. The
present legal framework in fact rests on mechanisms which
are still based on a (cid:145)human(cid:146) concept of a branch (for
example, the programme of operations must contain the
those responsible for the management of
names of
the
branch).
is therefore not possible, under the existing
It
rules, to consider machines as constituting a branch.

(35) It does not mean individual, mobile data-processing equipment
which can provide or receive distance insurance services, e.g.
through the Internet. Equipment of
this kind is discussed in
point 6.

For the purpose of carrying on its insurance business under
the freedom to provide services, the insurance undertaking
can have recourse to an establishment opened in the
Member State of
the provision of services for support
activities either upstream or downstream of the conclusion
of the insurance policy (e.g. use the risk assessment services
or of local legal or medical services, receipt of notices of
claims relating to policies entered into under the freedom
to provide services, evaluation by local services of damage
information
caused under risks covered by such policies,
service for policyholders). The insurance undertaking must,
however, be able clearly to relate the activity concerned to
one of the methods of carrying on business: either the right
of establishment or the freedom to provide services.

5. Monitoring by the host Member State of

the

conditions for granting the single licence

In the Commission’s view, the Insurance Directives (37) do
not allow the host Member State to carry out checks to
determine whether an insurance undertaking intending to
operate in its territory under
the freedom to provide
services or through a branch meets the standard conditions
under which it was granted the single license in its home
Member State. Such checks may be carried out by the
home Member State alone. It is on the responsibility of
the home Member State that the single licence is granted,
and the host Member State cannot question the granting of
such a licence (38).

If the host Member State has reason to doubt compliance
with the standard conditions, it may recourse to Article 227

(36) Directives 92/49/EEC (Article 37 and recital 28) and 92/96/EEC

(Article 17 and recital 25).

(37) Non-life insurance: Articles 6, 7, 8 and 9 of the First Directive
73/239/EEC, as amended by Articles 4, 5, 6, 7 and 8 of
Directive 92/49/EEC and Article 3 of Directive 95/26/EEC. Life
assurance: Articles 6, 7, 8 and 9 of the First Directive 79/267/EEC,
as amended by Articles 3, 4, 5, 6 and 7 of Directive 92/96/EEC
and Article 3 of Directive 95/26/EEC.

(38) See the judgment delivered by the Court on 10 September 1996 on
a similar issue in Case C-11/95 Commission v Belgium [1996] ECR
I-4115. The Court ruled that the receiving Member State was not
authorised to monitor the application of the law of the originating
Member State applying to television broadcasts and to ensure
compliance with Council Directive 89/552/EEC (known as the
(cid:145)Television without Frontiers(cid:146) Directive (OJ L 298, 17.10.1989, p.
23)).

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of the Treaty or request the Commission to take action
against the home Member State for failing to meet its obli-
gations pursuant to Article 226 of the Treaty.

of establishment of the insurance undertaking covering that
risk or commitment.

6.

Insurance business carried on using remote means of
communication,
electronic
commerce

and in particular via

(a) The use of remote means of communication (telephone,
fax, the press, etc.) and in particular electronic commerce
(e.g. via the Internet)
to conclude insurance policies
covering a risk (or communication) situated in a Member
State other than the Member State of establishment of the
insurer should be regarded as insurance business carried on
under the freedom to provide services wirth no movement
on the part of the contracting parties (39). In addition, most
of the cases involve services provided on a lsting basis (40).
The Member State of establishment of the insurance under-
taking with which a policy is concluded in this way is the
Member State of establishment of the insurer that effec-
tively comes on the insurance activity (head office or
branch) and not the place where the technological means
used for providing the service are located (e.g. the place
where the Internet server is installed) (41).

In most cases, the initiative for the conclusion of such
insurance policies via the Internet comes from the pros-
to use his own
pective policyholder, who decides
equipment in order to contact, and to seek to conclude
an insurance policy electronically with, an insurance under-
taking willing to do business in this way.

Under the Insurance Directives, the location of the risk (or
commitment) covered by the insurance policy is the key
factor for determining the rules applicable to an insurance
transaction. The location of
the risk or commitment is
furthermore itself determined according to precise criteria
themselves (42).
laid down by the Insurance Directives
Consequently, if an insurance transaction is to be carried
out under the freedom to provide services, the risk or
commitment covered by the insurance policy must be
situated in a Member State other than the Member State

(39) Joined Cases 286/82 and 26/83 Luisi and Carbone (see footnote

13); Case C-23/93 TV10 (see footnote 18).

insurance: Article 2(d) of

(40) See Part I.1 and footnote 17.
(41) See in this connection Article 1(c) of the amended proposal for a
directive on certain legal aspects of electronic commerce in the
internal market, supra; Case C-221/89 Factortame (see footnote
20).
(42) Non-life

Second Directive
88/357/EEC;
life assurance: Article 2(e) of Directive 90/619/EEC.
This is unlike the banking sector, for which the Second Banking
Directive 89/646/EEC does not lay any criteria for locating banking
activities carried on in the single market (see communication on
the banking sector (SEC(97) 1193 final, 20.6.1997), which provides
criteria for
the
freedom to provide services with a view to determining the rules
applicable).

locating banking activities carried on under

the

The Commission takes the view that, in accordance with
the rules as they stand, insurance activities carried on via
electronic commerce (e.g. the Internet) and covering a risk
located in a Member State other than that in which the
insurer covering the risk is established are subject to the
provisions of
relating to the
the Insurance Directives
freedom to provide services. An insurance undertaking
operating from one Member State which is prepared to
conclude via the Internet insurance policies covering risks
or commitments situated in other Member States should
therefore follow the notification procedure for activities
carried on under the freedom to provide services (43).

the

legal

governing

framework

in the single market. For

single
The
existing
insurance market
rets on mechanisms which did not
envisage the use of informaiton technology for carrying
on insurance business
this
reason, the Commission already stated in its communi-
cation to the Council on the Financial Services Action
Plan (44) that it intended to bring out a Green Paper to
examine whether the existing provisions of the directives
in the field of
financial services provied a regulatory
framework that is propitious to the development of elec-
tronic commerce in financial services while ensuring that
the interests of consumers are fully protected.

(b) On the other hand,

information or enhancing awareness of

the use of electronic commerce
methods for the sole purposes of advertising, providing
commercial
the
insurance undertaking cannot be regarded as an insurance
the Insurance
activity. As stated in Section III below,
Directives do not make advertising activities in the host
Member State subject to ther notification procedure, only
the intention to carry on an insurance activity in another
Member State under the freedom to provide services (45).

The Commission considers that it is out of the question to
make such advertising and information activities subject to
laid down by the Third
the notification procedure

(43) See Articles 14, 16 and 17 of Directive 88/357/EEC, as amended by
Articles 34, 35 and 36 of Directive 92/49/EEC (non-life insurance),
and Articles 11, 14 and 17 of Directive 88/357/EEC, as amended
by Articles 34, 35 and 36 of Directive 92/96/EEC (life assurance),
for the procedure relating to activities under the freedom to
provide services falling within the scope of these Directives.

(44) COM(1999) 232, 11.5.1999.
(45) See Commission communication (cid:145)A European initiative in elec-
tronic commerce(cid:146)
(COM(97) 15 final), proposal for a European
Parliament and Council Directive on certain legal aspects of elec-
tronic commerce in the internal market
(COM(98) 586 final,
18.11.1998) and amended proposal (COM(1999) 427 final, 17.8.
1999).

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Directives (Article 34 et seq.), which was designed for
actual
insurance activities carried on under the freedom
to provide services.

7. Miscellaneous

In the Commission’s opinion,
it would very likely be
contrary to Community law for an insurance undertaking
which has carried on its business under freedom to provide
services within the territory of a Member State for a given
length of
time to be forced by that Member State to
become established as a prerequisite for the continued
pursuit of its activities.

B. NATURE OF THE PROCEDURE FOR NOTIFYING THE OPENING
OF A BRANCH OR THE INTENTION TO CARRY ON BUSINESS
UNDER THE FREEDOM TO PROVIDE SERVICES

The Commission considers that the notification procedure laid
down in the Third Insurance Directives (both for branches and
for provision of services) (46) pursues a simple objective of
exchange of information between supervisory authorities and
is not a consumer protection measure. It should not, in the
Commission’s view, be considered a condition affecting the
validity of any insurance policies concluded without
the
procedure having previously been followed.

It should be pointed out here that the expert group responsible
for studying, as part of the third phase of the SLIM project,
possible ways of
simplifying Community legislation on
insurance has recommended that the notification procedure
for carrying on business under
the freedom to provide
services be retained with certain adjustments so as to enable
Community insurers to respond with the necessary speed to
requests they receive for insurance cover under the freedom to
provide services, without any intention to evade the notifi-
cation obligation (47).

The Commission welcomes
recommendation and has
this
undertaken to examine the rules in force with a view to
making the adjustments deemed necessary in order to enable
any insurance undertaking in the Community to respond
rapidly to requests for insurance cover under the freedom to
provide services, particularly in cases where, not having given
prior notification,
is requested on its own territory to
conclude an insurance policy under the freedom to provide
services (48). The Commission will put forward the necessary
proposals to that end.

it

(46) See Article 10 of First Directive 73/239/EEC, as amended by
Article 32 of Directive 92/49/EEC, as regards non-life insurance
and Article 10 of First Directive 79/267/EEC, as amended by
Article 32 of Directive 92/96/EEC, as regards life assurance for
the procedure to be followed for opening a branch. See Articles
14, 16 and 17 of Directive 88/357/EEC, as amended by Articles 34,
35 and 36 of Directive 92/49/EEC, as regards non-life insurance
and Articles 11, 14 and 17 of Directive 88/357/EEC, as amended
by Articles 34, 35 and 36 of Directive 92/96/EEC as regards life
assurance for the procedure relating to activities under the freedom
to provide services falling within the scope of these Directives.

(47) COM(1999) 88 final, 25.2.1999.
(48) COM(1999) 88 final, 25.2.1999.

C. ADVERTISING INSURANCE SERVICES

The Third Insurance Directives lay down that insurance under-
takings with head offices in Member States may advertise their
services, through all available means of communication, in the
the
Member State of
provision of services, subject to any rules governing the form
and content of such advertising adopted in the interest of the
general good (49).

the branch or the Member State of

The Commission believes it is out of the question to make the
to advertise (50) conditional on compliance with the
right
notification procedure laid down in Article 34 et seq. of the
Third Directives for carrying on insurance business under the
freedom to provide services.

Such a link would be artificial since it is not explicitly provided
for by the Third Directives. Article 34 et seq. ot the Third
Insurance Directives make
notification
procedure not advertising activities in the host Member State
but the intention to pursue an insurance activity under the
freedom to provide services.

subject

the

to

Similarly, to link advertising and the notification procedure for
carrying on activities under the freedom to provide services
could lead to anomalous situations where an insurance under-
taking could find itself invited to notify the authorities of all
the Member States in which its advertising could in theory be
received, although the undertaking may not be planning to
pursue its activities in all the Member States where such adver-
tising is received.

The Commission believes, therefore, that, in accordance with
the Third Directives, all
forms of advertising by whatever
means (mail, fax, electronic mail, etc.) should not be subject
to the notification procedure referred to in Article 34 et seq. of
the Third Directives. It is only if the insurance undertaking
plans to carry on insurance activities under the freedom to
provide services and only if it offers insurance products to
potential clients established in another Member State that it
must only comply with the notification procedure.

The above considerations concern only the problem of adver-
tising seen from the formal angle and do not affect the right of
Member States to enforce, on their territory and subject to
current Community law,
their general-good rules on the
content of advertising, pursuant to Article 41 of the Third
Directives.

(49) Article 41 of the Third Non-life Directive (92/49/EEC) and Article

41 of the Third Life Directive (92/96/EEC).

(50) By advertising is meant (cid:145)the making of a representation in any
form in connection with a trade, business, craft or profession in
including
order to promote the supply of goods or services,
immovable property, rights and obligations(cid:146) (Directive 84/450/EEC
of 10 September 1984 on misleading advertising (OJ L 250,
19.9.1984, p. 17)). See also Article 2(e) ((cid:145)commercial communi-
cations(cid:146)) of the amended proposal for a European Parliament and
Council Directive on certain legal aspects of electronic commerce
in the internal market, supra.

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II. THE GENERAL GOOD IN THE THIRD INSURANCE DIREC-
TIVES; APPLICABILITY OF RULES PROMOTING THE GENERAL
GOOD

The Third Insurance Directives reflect the case law of the Court
of Justice and contain several references to the concept of the
general good, providing in particular that an insurance under-
taking operating under a single licence must comply with host-
country rules adopted in the interest of the general good.

establishment

Such compliance is required either in the specific context of
of Directives
freedom of
92/49/EEC and 92/96/EEC) or indiscriminately in connection
with freedom of establishment and freedom to provide services
(Articles 28 and 41 of Directives 92/49/EEC and 92/96/EEC).

(Article 32(4)

1. The concept of the general good in the Third Insurance

Directives

The Third Insurance Directives refer to the general good in
several places:

(a) Under the procedure for setting up a branch establishment,
the host Member State two months from the receipt of the
file sent by the host Member State to indicate to the
insurance undertaking the
for
reasons of
such activities must be
carried on in the Member State of the branch (Article 10
of Directives 73/239/EEC and 79/267/EEC, as amended by
Article 32 of Directives 92/49/EEC and 92/96/EEC).

the general good,

in which,

conditions

the commitment or that

(b) As regards the marketing of insurance policies, the Member
State of
in which the risk is
situated must allow insurance policies (non-life or life) to
be concluded with insurance undertakings authorised in
other Member States, whether under
rules on
branches or under the freedom to provide services, on
condition that such insurance policies do not conflict
with the statutory provisions protecting the general good
in force in the Member State of the commitment or that in
which the risk is
situated (Article 28 of Directives
92/49/EEC and 92/96/EEC).

the

comply with the statutory provisions protecting the general
good in that Member State for that class of insurance. The
Member State may also require prior notification of policy
conditions before such policies are marketed (51).

(d) Lastly, an insurance undertaking authorised in its home
Member State may advertise its services by any means of
communication available in the Member State of the branch
or the provision of services, on condition that it complies
with any general-good rules on the form and content of the
(Article 41 of Directives 92/49/EEC and
advertisement
92/96/EEC).

The main objective of the Insurance Directives is to allow
any insurance undertaking authorised in a Member State to
carry on its insurance activities throughout the European
Union, whether under the rules on branches or under the
freedom to provide services. Their provisions applyto any
insurance undertaking operating in Member States other
than the home Member State under a single licence
issued in the home Member State. This is because the
intend to differentiate
Community legislator did not
between setting up a branch and provision of sevices (52).
The only differences introduced concern the notification
procedure, which is more detailed for the establishment
of a branch (Article 32 of Directives 92/49/EEC and
insurance business
92/96/EEC)
under the freedom to provide services (Articles 34 et seq.
of Directives 92/49/EEC and 92/96/EEC (53). The 19th
recital of Directive 92/49/EEC and the 20th recital of
Directive 92/96/EEC state that the host Member State must:

than for the conduct of

(51) It should be noted here that, where the technique of health
insurance is similar to that in the field of life assurance, Article
54(2) of Directive 92/49/EEC has already established the conditions
that can be applied to insurers exercising such activities.
As
the
regards compulsory insurance for accidents at work,
Member States concerned may require every insurance undertaking
to respect the specific provisions in their national
law for such
insurance, with the exception of provisions concerning financial
supervision, which are the exclusive responsibility of the home
Member State (Article 55 of Directive 92/49/EEC).

(52) It should be pointed out

that

recognition principle

the uniform application of
the
to both branches and service
mutual
providers was not
time by the Third
introduced for the first
Insurance Directives but appears also in the other directives
the Second Banking Directive
relating to financial
89/646/EEC (OJ L 386, 30.12.1989),
amended by
last
Directive 92/30/EEC (OJ L 110, 28.4.1992, p. 52) and Directive
93/22/EEC on investment services in the securities field (OJ L 141,
11.6.1993, p. 27).

services:

as

(c) In the case of health insurance taken out as an alternative
to the cover provided by a statutory system of social
security Article 54 of
the Third Non-life Directive
(92/49/EEC)
that each Member State in which
health insurance policies can be substituted either wholly
or in part for the sickness cover provided by a statutory
system of social security may require such policies to

states

(53) It should be pointed out that the principle of single authorisation
and supervision by the home Member State does not obstruct the
application of other areas of the national law of the host Member
State, e.g. tax law, social security law or labour law, which may
accord differentiated treatment to Community firms depending on
the way in which they choose to conduct their business, i.e. by
way of
freedom of
movement.
the compatibility of such provisions
with Community law will always be assessed on the basis of
established case law criteria, especially where the general good is
concerned,
i.e. non-discrimination, non-duplication, necessity,
proportionality, etc.

freedom to provide services or by way of

In any event,

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(cid:145). . . ensure that there is nothing to prevent the marketing
within its territory of the insurance products offered for
sale in the Community as long as they do not conflict
with the legal provisions protecting the general good in
force in the Member State in which the risk is situated,
and in so far as the general good is not safeguarded by
the rules of the home Member State, provided that such
provisions must be applied without discrimination to all
undertakings operating in that Member State and be objec-
tively necessary and in proportion to the objective pursued(cid:146).

2. The concept of the general good

(a) Case-law principles (57)

The concept of the general good is based in the Court’s
case law. It was developed first in the context of the free
movement of services and goods and was subsequently
applied to the right of establishment (58).

Since the recitals of a directive have legal force as an aid to
interpretation,
the reader on the
intentions of the Community legislator (54).

they shed light

for

The Commission takes the view that an insurance under-
taking operating under the arrangements laid down by the
Insurance Directives could, therefore, be obliged to adapt its
the measures
services to the host-country rules only if
enforced against it servethe general good,
irrespective of
whether it carries on its activities through a branch or
under the freedom to provide services.

This approach is borne out by recent decisions of the Court
Justice, which held that only general-good rules can
of
the two basic freedoms,
restrict or impede exercise of
namely the freedom to provide services (55) and the right
of establishment (56) However, the Insurance Directives do
not contain any definition of
(cid:145)the general good(cid:146). They
simply recall
in their recitals the requirements imposed
by the Court of Justice’s case law on the concept of the
general good. The reason for this is that
is a judicial
construction of an evolutive and open nature devised by
the Court of
It makes it possible to assess the
conformity with Community law of a national measure
is taken in a non-harmonised area at Community
that
level and hinders freedom of establishment and freedom
to provide services. In non-harmonised areas, the level of
what is regarded as the general good depends first on the
assessment made by the Member States and can vary
substantially from one country to another according to
national
the Member
States.
It is necessary, therefore, to refer to the relevant
case law of the Court of Justice.

traditions and the objectives of

Justice.

However, the Court has never given a definition of (cid:145)the
general good(cid:146), preferring to maintain its evolving nature. It
has expressed its opinion in individual cases on the possi-
bility of deeming agiven national measure to be aimed at
achieving an imperative objective serving the general good
and has specified the line of reasoning to be followed in
determining whether such a measure may be enforced by
one Member State against a trader from another Member
State who is operating within the territory of the former.
The Court has though spelt out the strict conditions to be
met by national measures which are aimed at achieving an
imperative objective serving the general good if they are to
be validly enforced against that trader (59).

The Court requires that a national provision must satisfy
the following requirements if it is validly to obstruct or
limit exercise of
the right of establishment and the
freedom to provide services:

(cid:151) it must come within a field which has not been

harmonised,

(cid:151) it must pursue an objective of the general good,

(57) The Commission’s analysis may, of course, be modified to reflect

changes in the Court’s case law.

to an area (access

(58) Case-55/94 Gebhard (see footnote 15). It is interesting to note that
to the
in Gebhard relates
the judgment
profession of
lawyer) in which harmonisation of the conditions
for taking up and carrying on the activity is very limited in
comparison with insurance.
these
conditions have been very extensively harmonised and the possi-
bilities for relying on general-good rules are hence much more
limited.
On the other hand, with regard to the law of insurance policies,
which is a field that has not been harmonised by secondary
the Member States is
Community legislation,
the discretion of
much wider.
the
the test of
general good is likely to be applied.

in this field that

is above all

insurance

In the

sector,

It

(54) See in particular Case 76/72 Michel [1973] ECR 457 and Case

C-238/94 Garcia [1996] ECR I-1673.

(55) Case C-76/90 S(cid:228)ger [1991] ECR I-4221. See the analysis set out in
the Commission interpretative communications concerning the
free movement of services across frontiers (OJ C 334, 9.12.1993,
p. 3) and concerning freedom to provide services and the interest
of the general good in the Second Banking Directive (SEC(97)
1193, 26.6.1997).

(56) Gebhard, footnote 15. See also Cases C-19/92 Kraus [1993] ECR

I-1663 and C-212/97 Centros (see footnote 18).

(59) See Gebhard (see footnote 15), where the Court held that (cid:145). . .
national measures liable to hinder or make less attractive the
exercise of fundamental freedoms guaranteed by the Treaty must
fulfil four conditions: they must be applied in a non-discriminatory
manner; they must be justified by imperative requirements in the
general interest; they must be suitable for securing the attainment
of the objective which they pursue; and they must not go beyond
what is necessary in order to attain it.(cid:146)
This was subsequently confirmed by the Court in its judgments in
Cases C-415/93 Bosman [1995]
I-4921 and C-250/95 Futura
[1997] I-2471.

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(cid:151) it must be non-discriminatory,

(cid:151) it must by objectively necessary,

(cid:151) it must be proportionate to the objective pursued,

(cid:151) it is also necessary for the general-good objective not
to be safeguarded by rules to which the provider of
services is already subject in the Member State where
he is established.

These conditions are cumulative. A national measure
which is claimed to be compatible with the principle of
the freedom of movement must satisfy all the conditions.
If a national measure does not meet one or other
condition, it is not compatible with Community law.

The concept of general good is an exception to the funda-
the Treaty with regard to free
mental principles of
therefore, be interpreted in a
movement and must,
restrictive fashion so as to ensure that recourse is not
had to it
In the
event of a dispute,
the Member State imposing the
restriction has anyway to show that the measure meets
the aforementioned conditions.

in an excessive or abusive manner.

(b) Analysis of the requirements of the concept of the

general good

(a) The measure must come within a field which has not been

harmonised

The harmonisation directives define the minimum level
of the general good within the Community. Measures
relating, for example, to the calculation of technical
provisions and the solvency margin,
the conditions
for taking up insurance business, and financial and
prudential supervision may no longer be covered by
the general good of a Member State.

is

this

Where these harmonised rules constitute minimum
provisions, a Member State is free to impose on its
own insurance undertakings stricter rules than those
laid down in the Directives (60). As
regards
the
Insurance Directives,
case with the
provisions relating to investment rules and to the
representing
rules on the diversification of assets
technical provisions.
the Third
reason,
Insurance Directives stipulate that, in so far as certain
of their provisions define minimum standards, (cid:145)a home
Member State may lay down stricter rules for insurance
undertakings authorised by its own competent auth-
orities.(cid:146) (61)

this

For

the

(60) The RTI

judgment of 12 December 1996 in Joined Cases
C-320/94, C-328/94, C-329/94, C-337/94, C-338/94
and
C-339/94 [1996] ECR I-6471, making the use of minimum
provisions conditional upon compliance with the Treaty.

(61) Third Directive 92/49/EEC,

recital 8,

and Third Directive

92/96/EEC, recital 9.

Should a Member State impose, for reasons which it
deems to be in the interest of the general good, a level
of consumer protection stricter than the one set by a
minimal Community provision on a Community
insurance undertaking carrying on insurance business
on its territory, the proportionality test would have to
be satisfied for it to comply with Community law.

(b) The measure must pursue an objetive of the general good

The Court has so far acknowledged that, in the absence
of harmonisation, the following areas could fall within
the scope of the interest of the general good (62):

(cid:151) the professional

rules designed to protect

the

recipient of services (63),

(cid:151) protection of workers (64), including social protec-

tion (65),

(cid:151) consumer protection (66),

(cid:151) preservation of the good reputation of the national

financial sector (67),

(cid:151) prevention of fraud (68),

(cid:151) social order (69),

(cid:151) protection of intellectual property (70),

(cid:151) preservation of the national historical and artistic

heritage (71),

(cid:151) cultural policy and protection of cultural diversity

in the audiovisual sector (72),

(cid:151) cohesion of the tax system (73),

(62) To this list must be added a fortiori the provisions of Article 46,

namely public policy, public security and public health.

(63) Joined Cases 110/78 and 111/78 Van Wesemael [1979] ECR 35.
(64) Case 279/80 Webb [1981] ECR 3305.
(65) Case 272/94 Guiot [1996] ECR I-1905.
(66) Case 205/84 Commission v Germany (see footnote 6).
(67) Case C-384/93 Alpine Investments BV (see footnote 13).
(68) Case C-275/92 Schindler [1994] ECR I-1039.
(69) Ibid.
(70) Case 62/79 Coditel [1980] ECR 881.
(71) Case C-180/89 Commission v Italy [1991] ECR 709.
(72) Cases C-288/89 Collectieve Antennevoorziening Gouda [1991]
ECR I-4007, C-353/89 Commission v Netherlands [1991] ECR
I-4069 and C-148/91 Veronica Omroep Organisatie [1993] ECR
I-487.

(73) Case C-204/90 Bachmann [1992] ECR 249.

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(cid:151) road safety (74),

(d) The measure must be objectively necessary

(cid:151) protection of creditors (75),

(cid:151) fairness of commercial transactions (76),

(cid:151) protection
justice (77).

of

the

proper

administration

of

This list is not definitive and the Court reserves the
right to add to it at any time.

(c) The measure must be non-discriminatory

Where the restriction in question is discriminatory, i.e.
a Member State imposes on a Community insurance
undertaking measures which it does not impose or
imposes more advantageously on its own insurance
undertakings, it can be justified only on the grounds
set out in Article 46 of the Treaty (public policy, public
security and public health (78), economic grounds not
this
forming part of
concept must be interpreted in a very strict fashion.

latter (79). Furthermore,

the

In that case there is no reason to invoke the general
good as justification that
this national measure is
compatible with the Community legal order.

is difficult

It
to see what measures in the field of
insurance could satisfy this condition of a serious
threat to society. It is reasonable to believe, therefore,
that discriminatory measures are unlikely to be justified
in the insurance sector.

(74) Case C-55/93 van Schaik [1994] ECR I-4837.
(75) Judgment of 12 December 1996 in Case C-3/95 Reiseb(cid:252)ro Broede

[1996] ECR I-6511.

(76) Alpine

Investments BV (see

footnote 13); Case C-288/89

Collectieve Antennevoorziening Gouda, supra.

(77) Ibid.
(78) See Case C-17/92 Federaci(cid:243)n de Distribuidores CinematogrÆficos
[1993] ECR I-2239,
the
in which the Court
protection of cultural policy is not a justification featuring
among those provided for in Article 46 of the Treaty. See Case
C-224/97 Ciola (see footnote 11), paragraphs 16 and 17.

indicated that

(79) Case 352/85 [1988] ECR 2085; Case C-17/92 [1993] ECR I-2239;
Case C-484/93 Svesson [1995] ECR I-3955. For the Court, this
concept presupposes the existence, in addition to the perturbation
to the social order which any infringement of the law involves, of
a genuine and sufficiently serious threat affecting one of the funda-
mental
interests of society (Case 30/77 Bouchereau [1977] ECR
1999); Case C-114/97 Commission v Spain [1998] ECR I-6717.

Even if a measure is presented by a host Member State
as defending an objective conducive to the general
good, one may ask whether it is really necessary in
order to protect that interest.

rule

Justice has held in a number of
The Court of
judgments
that was
a given national
that
justified by the host country as pursuing an objective
conducive to the general good, in the event consumer
protection, went beyond what was necessary to protect
that interest (80). It checks whether certain measures,
under cover of pursuit of an objective concerned
with the protection of
the service,
e.g. consumers, are not actually aimed at other
objectives
the
national market.

connected with the protection of

the recipient of

(e) The measure must be proportionate to the objective pursued

the

achieving

Finally, it is necessary to ask whether there are not less
restrictive means of
general-good
objective pursued. The Court systematically examines
whether the Member State did not have at its disposal
measures with a less restrictive effect on trade (81). In
it may deduce
the context of such an examination,
from a comparative analysis of the legislation of the
other Member States that
less restrictive consumer
protection measures exist (82). However, the Court has
also ruled that (cid:145)the fact that one Member State imposes
less strict rules than another Member State does not
mean that the latter’s rules are disproportionate and
hence incompatible with Community law(cid:146) (83).

Where a host Member State invokes the need to
protect the recipient of the service as justification for
a national measure constituting a restriction on an
insurance undertaking benefiting from mutual recog-
nition, the actual need to protect the recipient should
be questioned.
In Commission v Germany (insurance),
the Court held on 4 December 1986 that (cid:145)there may
be cases where, because of
the risk
insured and of the party seeking insurance, there is
no need to protect the latter by the application of
the mandatory rules of his national law.(cid:146) (84)

the nature of

(80) Case C-410/96 Ambry

Denemeyer
(see
Germany [1986] ECR 3755.

[1998] ECR I-7875; Case C-76/90
footnote 13); Case 205/84 Commission v

(81) See most recently Case C-101/94 Commission v Italy ((cid:145)SIM(cid:146)) [1996]
ECR I-2691. See also Case C-384/93 Alpine Investments (see
footnote 13).

(82) Case C-129/91 Yves Rocher [1993] ECR I-2361.
(83) Case C-384/93 Alpine Investments (see footnote 13).
(84) Case 205/84 Commission v Germany (see footnote 6).

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The Insurance Directives follow this case law and
already take account of the nature and specific circum-
stances of
the party seeking insurance in order to
impose certain provisions designed to ensure his
protection. Take, for instance, the distinction made in
non-life insurance between (cid:145)large risks(cid:146) and (cid:145)mass
risks(cid:146) (85) or the scope of the provisions relating to
the information requirements incumbent on policy-
holders (86) or of the right to cancel a life assurance
policy (87).

that Member
therefore,
The Commission considers,
States should,
in imposing their general-good rules,
make a distinction according to whether or not
services are supplied to circumspect recipients and
take account of
the
persons they are setting out to protect.

the degree of vulnerability of

For example, insurance services involving (cid:145)large risks(cid:146)
or
(e.g.
sophisticated or professional policyholders
professionals in the financial sector) should not be
the subject of particular general-good rules imposed
by the host Member State, at least where the protection
of policyholders is concerned. The proportionality test
would be especially difficult to satisfy in such cases.

(f)

It is also necessary for the general-good objective not to be
safeguarded by rules to which the provider of services is
already subject in the Member State where he is established

It is necessary to examine in this connection whether
the insurance undertaking is not already subject
to
similar or comparable provisions aimed at safeguarding
the same interest under the legislation of its Member
State of origin (88).

Under the Insurance Directives, this criterion could be
important, particularly for the purpose of assessing the
compatibility of
the measures imposed by the host
Member State in exercising its residual powers.

(85) Article 5(d) of Directive 73/239/EEC, as amended by Directives

88/357/EEC and 90/618/EEC.

(86) Non-life insurance:
see Directive 92/49/EEC: Articles 31 (the
information required must be supplied to policy-
precontractual
holders who are natural persons) and 43 (restriction of such
information to (cid:145)mass risks.(cid:146)).

(87) Only a person taking out an individual life assurance policy has the
right to cancel that policy; Member States may not grant this right
to policyholders not requiring such special protection on account
of their status or of the circumstances in which the contract was
concluded (see Article 15 of Directive 90/619/EEC, as amended by
Article 30 of Directive 92/96/EEC).

test

this

the extent

For example, it is necessary to examine in the context
of
to which certain controls
required by the host Member State might already be
carried out in the country of origin, the extent to
which accounting, supervisory, statistical or financial
information might already be communicated to the
competent authority of the country of origin, etc.

(c) Other considerations

The inclusion by some Member States of whole areas of
their national legislation in the list of provisions adopted
the general good could prove to
in the interest of
constitute a misuse of
the concept of general good.
Several of them are tending to treat as rules adopted in
the interest of the general good all their legislation on
consumer protection,
law or
their competition law. The Commission takes the view
that
the principles of necessity, non-duplication and
proportionality mean that Member States should indicate,
when new legislation is adopted or, where appropriate,
laid down in Article 32(4) of
when the conditions
Directives 92/49/EEC and 92/96/EEC are notified,
the
specific provisions which could be in the interest of the
general good.

tax or commercial

their

identical

reasoning is

although the

and the
Lastly,
questions are the same whether the insurance undertaking
operates through a branch or under
the freedom to
provide services, the assessment of the proportionality of
a restriction may, in certain cases, differ depending on the
mode of operation. Since there are differences of kind
between the provision of services and establishment, a
restriction could more
considered to be
proportionate in the case of an operator working perma-
nently within a territory than in the case of the same
operator working only temporarily.

readily be

legal

The Court recognised this difference by imposing a less
framework for
restrictive and more (cid:145)lightweight(cid:146)
provision of services than for establishment (89).
It has
likewise consistently held that it does not follow from
Article 50(3) of the EC Treaty that: (cid:145)all national legislation
applicable to nationals of that State and usually applied to
the permanent
established
therein may be similarly applied in its entirety to the
temporary activities of undertakings which are established
in other Member States.(cid:146) (90)

activities of undertakings

(89) The Court has consistently made the point that a Member State
(cid:145)may not make the provision of services in its territory subject to
compliance with all the conditions required for establishment and
thereby deprive of all practical effectiveness the provisions of the
Treaty whose object is, precisely, to guarantee the freedom to
provide services.(cid:146) Case C-76/90 S(cid:228)ger (see footnote 13). See also
Case C-198/89 Commission v Greece [1991] ECR I-735.

(88) Case 205/84 Commission v Germany (see footnote 6); Case

(90) Case 205/84 Commission v Germany (see footnote 6) and Case

C-76/90 Denemeyer (see footnote 13).

C-76/90 Denemeyer (see footnote 13).

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circumstances,

same
the
depending on the
Thus,
restriction applied in the interest of
the general good
could be judged proportionate in respect of a branch but
disproportionate in respect of a provider of services. The
Commission considers, for example, that a Member State
which imposes certain formalities on insurance under-
takings (controls, registration, costs, communication of
information, etc.) for reasons that purport to be in the
general good should take account of
the mode of
operation chosen by the insurance undertaking carrying
on activities within its territory under mutual-recognition
arrangements.

However, this distinction cannot be applied to consumer-
protection rules
they have
(provided, of course,
satisfied the other tests). The level of consumer protection
required must be identical, whether the service is supplied
under the freedom to provide services or by way of estab-
lishment.

that

3. Application of these principles to the insurance sector

Having identified the main characteristics of the general
good, the Commission regards it as appropriate to state
its interpretation of the concept as it applies to insurance,
giving a few examples of measures that a trader might
encounter in exercising his right of establishment or his
right
should be
explained that this interpretation does not prejudge that
which the Court of
in the final
analysis for interpreting the Treaty and secondary legis-
lation, could be asked to give of
the questions raised.
Such measures may concern, for instance:

services. Once again it

Justice, competent

to provide

(a) prior notification of policy conditions;

(b)

capital redemption operations of insurance under-
takings;

(c) uniform no-claims bonus systems;

(d)

language of the insurance policy;

(e) professional codes of conduct;

(k) arrangements introduced by the host Member State
for charging indirect taxes on insurance premiums for
policies concluded under
the freedom to provide
services: appointment of a tax representative of the
insurer.

(a) Prior notification of policy conditions

expressly forbid any prior or
The Third Directives
insurance policies and
systematic substantive control of
policy documents (91),
irrespective of the name given by
the national authorities to the system used, whether it
the prior approval of policies and scales of
involves
premiums or
their simple, systematic notification with
tacit approval or with the deposit of documents before
is hence-
they can be used. Prior or systematic approval
forward authorised only in those cases explicitly provided
for in the Community directives. Such is the case with
compulsory insurance (e.g. compulsory third-party motor
insurance (92) or health insurance which is a substitute for
a statutory system of social security (93), where Member
States may require that
that
insurance be communicated before use but, under no
circumstances,
the
Member State of origin may require systematic notification
of
the technical bases used for calculating scales of
premiums and technical provisions (94).

the general conditions of

approved. As

assurance,

life

for

These specific cases apart, the Member States may use only
systems of ex post, non-systematic control of
insurance
in any event, such a requirement
conditions (cid:151) without,
constituting a condition which an insurance undertaking
must satisfy before carrying on its business (cid:151) in order
their general-good provisions concerning
to ensure that
insurance
complied with by policies
marketed on their territory. Since the Community legislator
has already determined the systems of substantive control
that may be applied by the Member States and their
conditions of application, this is an area which is already
the subject of harmonisation at Community level.

conditions

are

(f) maximum technical interest rates for life assurance;

(g)

imposition of standard clauses or minimum insurance
conditions;

(h)

clauses
insurance policies;

imposing mandatory levels of excess

in

(i)

compulsory stipulation of a surrender value in life
assurance policies;

(j)

prohibition of cold calling;

these particulars.

Nevertheless, certain Member States continue to require
prior notification of
In most cases, a
sheet describing the insurance policy conditions has to be
submitted. They argue that this is necessary to protect their
consumers,
the products
to guarantee transparency of
available on their national markets and to facilitate
substantive control of
insurance products by the super-
visory authorities.

(91) Articles 6(3), 29 and 39 of Directive 92/49/EEC and Articles 5(3),

29 and 39 of Directive 92/96/EEC.
(92) Article 30(2) of Directive 92/49/EEC.
(93) Article 54(1) of Directive 92/49/EEC.
(94) Article 29 of Directive 92/96/EEC and Article 5(3) of Directive

79/267/EEC.

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The Commission takes the view that, leaving aside the cases
expressly provided for by the Third Directives, maintaining
such systems of prior or systematic control of insurance
policies is not consistent with the relevant provisions of the
Third Insurance Directives. It also considers that Member
States may not justify such requirements on grounds of the
general good since the conditions set by the Court of
Justice have not been met, in as much as this is an area
which is
subject of harmonisation at
Community level.

already

the

(b) Capital redemption operations of insurance undertakings

(cid:145)Capital redemption operations based on actuarial calcu-
lations, whereby,
single or periodic
in return for
payments agreed in advance, commitments of specified
duration and amount are undertaken(cid:146)
figure among the
activities covered by the insurance undertaking’s single
licence where such operations are the result of a contract
and are subject to supervision by the insurance monitoring
authority in the home Member State. Such activities, like
any other activity falling within the scope of the Life Direc-
tives, may be carried on anywhere in the Community,
including in a Member State in which they are not auth-
orised for local life assurance undertakings on the grounds,
for instance, that in the host Member State such operations
are regarded as banking operations and are therefore
reserved for credit institutions.

that

therefore,

the conditions of

there is no
The Commission considers,
the marketing of capital redemption
reason to prohibit
products which fulfil
the First Life
Directive 79/267/EEC, as amended by Directive 92/96/EEC,
and which are marketed in a Member State by an insurer
authorised in its home Member State to pursue such activ-
ities. The fact that in the host Member State such activities
are not
insurance activities and are not
therefore permitted for insurers which have their head
office there does not prevent insurers from other Member
States from pursuing those activities which, having been the
subject of mutual recognition between the Member States,
benefit from the single licence system introduced by the
Third Life Directive 92/96/EEC (95).

regarded as

In this connection, capital redemption products proposed in
the host Member State by a life assurance undertaking will,
as in any other life assurance activity, have to comply with
the provisions in force in that Member State which are
the general good and relate in
justified by reasons of
particular to the tax arrangements applicable to this type
of product or the conditions governing advertising.

for

third-party motor
when calculating the premiums
insurance. The instruments prescribe, inter alia, coefficients
for the reduction/increase of premiums (no-claims bonus
system). The method laid down consists in determining a
compulsory scale for calculating the annual premium. The
scale applies at the time the third-party motor insurance
policy is concluded and/or when subsequent movements up
or down the scale occur, depending on the frequency with
which the insured submits a claim. As a result, the increase
liberalised; on the
the premium is not
or reduction of
contrary, it must comply with specific criteria laid down
in the Member State’s
legislation. From the technical
insurance perspective, such systems are tariff measures.

The main argument advanced in favour of such mandatory
systems is that they contribute to preventing road accidents.
Drivers who face an increased premium in the event of an
accident will drive more carefully. It should also be pointed
out that such mandatory systems foster transparency in that
they allow those seeking insurance to compare and choose
insurance products, thereby facilitating
between different
the mobility of such persons.

It should, however, be pointed out that the Third Non-life
Directive 92/49/EEC introduced not only freedom as
regards scales of premiums and the abolition of prior or
systematic approval of scales and policies; it also introduced
the concept of home-country control
in the field of
insurance undertakings (96). The
financial supervision of
maintenance of a mandatory tariff measure is, therefore,
contrary to the letter and spirit of the Third Directives.
Under the circumstances,
it is expedient to ask whether
other less restrictive means could not achieve the same
result while
tariff
freedom for
laid down in the
Third Non-life Directive. The same applies to market trans-
this
parency. The Commission also takes the view that
objective can be met without
tariff
freedom being jeopardised, by providing for systems that
do not include any tariff elements. For instance, no-claims
bonus scales which dispense with coefficients for the reduc-
tion/increase of premiums and for which insurers are free
to determine premium levels make it possible to guarantee
market
those seeking
insurance.

complying with the principle of
insurance undertakings

transparency and the mobility of

the principle of

(c) Uniform no-claims bonus systems

In some Member States detailed national
legislative
instruments establish the criteria to be taken into account

(95) The same conclusion applies mutatis mutandis to the other oper-
ations referred to in Article 1(2) of
the First Life Directive
79/267/EEC and contained in points V (tontines) and VII (man-
agement of group pension funds) of
the Annex to the First
Directive.

Nevertheless, if a Member State were to take the view that
such mandatory systems were to be regarded as contractual
clauses governing an insurance policy,
it would in any
event have to ask whether, with a view to achieving the
possible objectives pursued by such a clause, there were not
other less restrictive and less binding means of achieving
the desired result.

(96) Articles 6(3), 29 and 39 of Directive 92/49/EEC and Articles 5(3),

29 and 39 of Directive 92/96/EEC.

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systems were tariff provisions,

in so far as mandatory
The Commission considers that,
no-claims bonus
they
would be contrary to the Third Directive. In the circum-
stances, it takes the view that the Member States cannot
therefore invoke the general good in order to preserve the
mandatory character of these systems since they concern
rules which have already been coordinated at Community
level.

the Commission would point out

If a mechanism for reducing/increasing premiums is not a
State measure but an agreement between professionals, its
conformity with Community law would have to be assessed
in particular in the light of Article 81 of the EC Treaty. In
that
this connection,
Regulation (EEC) No 3932/92 of 21 December 1992 on
the application of Article 85(3) (now Article 81(3)) of the
Treaty to certain categories of agreements, decisions and
concerted practices in the insurance sector (97) authorises
agreements which have as their object the establishment
and distribution of standard policy conditions for direct
insurance only if certain requirements are met (Title III of
the Regulation). The exemption thus applies, inter alia, only
if the standard conditions are established and distributed
with an explicit statement that they are purely illustrative
and if they mention the possibility that different conditions
may be agreed. It does not apply to undertakings or associ-
ations of undertakings which concert or agree among
to apply
themselves, or oblige other undertakings, not
different conditions. Moreover, the Title of the Regulation
relating to cooperation in calculating the premium (Title II)
may not constitute a legal basis for a mechanism for reduc-
ing/increasing premiums.

(d) Language of the insurance policy

Some Member States require insurance policies taken out or
performed on their territory to be drafted exclusively in
their official
languae(s). Other languages, Community or
otherwise, may be used only for simple translations, even
if the contracting parties would have liked to use such
languages for the original policy.

It should be pointed out that the Commission is not calling
into question the linguistic sovereignty of each Member
State (98).

risks.

The Commission considers in this respect that a distinction
should be drawn between large industrial and commercial
risks and mass
In the former case, consumer
protection is not a valid concern. As regards mass risks
and individual
life assurance, provisions governing the
language of an insurance policy should also take account
of certain circumstances. Thus, the first thing to take into
consideration is policies with an international dimension,
i.e. those where the law applicable to the insurance policy
is not the law of the Member State where the risk/com-
mitment
is situated. For instance, exemptions from the
principle that a policy must be drawn up in the official
the Member State where the risk/com-
language(s) of
mitment is situated should be provided for in those cases
where the insured person is of foreign origin. In all, five
million citizens of the European Union live in a Member
State which is not their own. Such persons would probably
be better protected if they could take out policies in their
own language instead of
the Member State of
residence or location of the risk they seek to cover.

that of

(e) Professional codes of conduct

Professional codes of conduct valid on the territory of a
Member State of the European Union are, in principle, also
valid with regard to foreign insurers;
failure to observe
them often incurs a penalty, especially of a commercial
nature. Compliance with codes of conduct is justified by
the signatory parties on grounds of consumer protection or
contribution to market discipline.

In any event, where such codes of conduct result from
agreements between undertakings or from decisions by
associations of undertakings, they must comply with the
competition rules laid down in Article 81 et seq. In this
respect, the Commission clearly could not authorise under
the competition rules agreements or decisions by associ-
ations of undertakings that would have the same effects
as state measures contravening the basic freedoms spelt
out in Articles 39, 43 and 49 of the Treaty.

This absolute and unconditional requirement is justified by
the linguistic sovereignty of the Member States, by a desire
to protect consumers and by the need for any proceedings
brought before local courts to be properly conducted.

(97) OJ L 398, 31.12.1992, p. 7.

(f) Maximum technical interest rates for life assurance

The Third Life Directive 92/96/EEC coordinated the
actuarial principles governing the calculation of math-
ematical provisions.

(98) See point 2 of the Commission communication to the Council and
the European Parliament
in the
information of consumers in the Community (COM(93) 456
final, 10.11.1993).

concerning language use

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it

technical

interest rates,

it
As regards the definition of
provides (99), firstly, that the home Member State may set
interest rate which the insurance
a maximum technical
undertakings
to
apply
technical provisions and,
calculate the bases
secondly,
the home Member State may require
insurance undertakings with their head office on its
territory to notify systematically the technical bases used
to calculate scales of premiums and technical provisions.

supervises must

in order

their

that

for

that,

in view of

the
The Commission would point out
provisions of the Third Directive and the rules on super-
vision, which give exclusive competence for financial super-
vision to the insurance undertaking’s home Member State,
the branches of insurance undertakings and the insurers
operating under the freedom to provide services are not
bound by the provisions of
the host Member State on
maximum technical interest rates. Since the host Member
State has no competence as regards financial supervision of
an insurance undertaking duly authorised in its home
Member State, it follows that it cannot impose compliance
with its own prudential principles or
such
compliance through substantive control of premium scales.

check

(g) Imposition of standard clauses or minimum insurance

conditions

insurance policies give as

Member States which have rules laying down compulsory
clauses
justification the
for
the weaker party in the contractual
concern to protect
relationship and to preserve the balance in the latter by
imposing a given content for the rights and obligations
of
third-party
victims in the event of an accident.

the parties and by a desire to protect

As mentioned above, standard clauses may also result not
from State measures but
from agreements between
professionals. The Commission would refer here to the
observations in point (iii) above concerning application of
exemption Regulation (EEC) No 3932/92 (100).

The Commission believes that, in any event, protection of
the weaker party should be imposed only in those cases
where it is objectively necessary, e.g. in insurance policies
where the policyholder, by virtue of his nature or size, has
a particular need of protection,
in order to preserve the
contractual balance. It will also be necessary to consider the

(99) See Article 17(1)(B) of the First Directive 79/267/EEC, as amended

by Article 18 of the Third Directive 92/96/EEC.

(100) OJ L 398, 31.12.1992, p. 7.

proportionality of such measures and to analyse whether
the inclusion in insurance policies of standard clauses laid
down by the rules of a host Member State is a more
difficult condition in practice for insurance undertakings
than for insurance
from other Member States to fulfil
undertakings from the host Member State. This would be
the case in particular if those insurance undertakings were
deterred from prospecting a new market because they
would be forced to create an entirely new insurance
it on the market concerned
product
instead of using an insurance product already used in
their home Member State.

in order

to sell

Similarly, the obligation to comply with standard clauses or
minimum insurance conditions should not mean either that
insurance policies cannot be worded differently.

(h) Clauses imposing mandatory levels of excess in insurance

policies

One argument advanced in favour of retaining compulsory
excesses is that they are supposed to protect the interest of
the consumer, enabling him to take out insurance at a
reasonable price. It is also argued that, without this mech-
anism, which obliges the insured to bear part of the cost of
the claim, premiums would increase in a completely
unreasonable manner because the insurer would have to
act in the case of claims with a low economic cost. Yet
the compulsory
another argument put
excess makes
insurance fraud,
which would otherwise be very frequent in the case of
is
small
designed to safeguard the profits of the insurer faced with
a multitude of small claims.

forward is that
it possible to combat

the mandatory rule

In such cases,

claims.

the

arguments

show that

introduction of

These
a
compulsory excess meets a need to discipline the market
so as to avoid undue competition over premiums charged
by insurance undertakings. It may also be asked whether
the aim of a compulsory excess is not to preserve the
profits of
the insurer faced with a multitude of small
claims rather than to safeguard the interests of the policy-
holder or uphold public morality. It should be pointed out,
however, that Community law excludes from reasons of the
general good any consideration based on strictly economic
grounds.

a

in insurance policies,

In addition, as with the imposition of standard clauses or
minimum conditions
rigid
application of such rules by the host Member State may
have
effect on insurance undertakings
operating under the rules on establishment or under the
freedom to provide services since they would be prevented
from marketing insurance policies already correctly used in
their home Member State without such excesses.

restrictive

the

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Lastly, while it could be admitted that the introduction of
excesses reflects the choice of management method by the
insurance undertaking, it still has to be examined whether
the imposition of compulsory excesses through binding
the Third
rules
Insurance Directives as
regards policies and scales of
premiums.

is consistent with the objectives of

If the introduction of an excess or a level of excess was
covered by an agreement between professionals,
it could
not benefit
from an exemption under Regulation (EEC)
No 3932/92 (101), which explicitly excludes any exemption
for standard insurance conditions containing clauses that
specify amounts of guarantee or excess.

human life (e.g. assurance on death and insurance on the
amount outstanding). Such insurance policies do not take
account of the savings element in calculating the math-
ematical provision. In such cases, the insured person does
not have the right to surrender the mathematical provision
life assurance
established. Each of
corresponds to the differing objective needs of
insured
persons as to cover. In addition, the cost of each category
reflects the different types of risk assumed by the insurer in
the insurance policy.

these categories of

The requirement to provide for a surrender value in any life
assurance policy designed solely to cover the risk of death
would necessitate inclusion in the policy of a savings
element and payment of a higher insurance premium for
acceptance of the risk. It could be asked whether this meets
the needs of insured persons, many of whom are interested
only in products covering the risk of death alone.

Insurance undertakings should therefore be free to assess
the advisability of including an excess in the policies which
they market. Where an insurance undertaking satisfies the
solvency requirements laid down by its home Member
State, which has given its approval and is responsible for
it should be free to decide to
its financial supervision,
market
in
the host Member State, clearly indicating to customers
that
is doing so, without being forced into this by
binding national rules.

insurance policies, with or without excesses,

it

(i) Compulsory stipulation of a surrender value in life

assurance policies

The main argument for justifying the compatibility of this
requirement with the concept of the general good is that
the obligation to fix a surrender value in a life assurance
policy meets the interests of consumers, who would thus
have the flexibility and liberty necessary in such policies,
which are more often than not long-term policies, and
would be able to mobilise their savings. As for the rules
making it compulsory to provide in life assurance policies
for the insured to receive a bonus, these are also justified by
a desire to protect the economic interests of the insured.

A distinction should be made here between two main
categories of life assurance. First, there are life assurance
policies that contain a savings element (e.g. endowment
assurance, assurance on survival to a stipulated age and
annuity assurance). This element is taken into consideration
in calculating the amount of the mathematical provisions
which the insurer must establish. The person insured under
such policies has the right to surrender the mathematical
there are life assurance
provision established. Second,
policies that do not comprise any savings element since
they are designed to cover only the risk associated with

that

it should be pointed out

Although the situation in each Member State must be
the
assessed separately,
Third Life Directive 92/96/EEC lays down, as part of the
actuarial principles which the home Member State imposes
on insurance undertakings for the establishment of their
mathematical provisions, specific rules for policies with a
guaranteed surrender value and rules for policies with
bonuses. Annex II
to the Third Life Directive specifies
among the information to be provided in a clear and
accurate manner and in writing to policyholders before
the
the contract
contract (cid:145)the indication of surrender and paid-up values
and the extent
to which they are guaranteed, and the
means of calculation and distribution of bonuses(cid:146). This
information is designed to allow policyholders to become
aware of, and to understand, the essential characteristics of
insurance products in order that they can select the product
best suited to their specific needs.

is concluded or during the term of

There are grounds for wondering,
therefore, whether a
national rule of the host Member State which imposes in
a general and absolute manner the obligation to provide for
a surrender value or a bonus in life assurance policies
territory is objectively necesary and
marketed on its
proportionate to the objective of protecting the economic
interests of policyholders or, on the contrary, whether this
objective cannot be achieved by other less restrictive means,
the obligation to give detailed information to the
e.g.
policyholder prior to the conclusion of a policy.

(j) Prohibition of cold calling

The Court has already recognised the right to prohibit this
marketing practice in the case of other financial products
after examining a provision of Dutch law which was
designed to protect the good reputation and reliability of
in the Netherlands (102). Consumer
the financial market
protection is also an argument that is often put forward

(101) OJ L 398, 31.12.1992, p. 7.

(102) Case C-384/93 Alpine Investment (see footnote 13).

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in support of banning this marketing method. The
reasoning followed by the Court in the Dutch case can
also be
applied to insurance products. Nevertheless,
pending harmonisation in this area, one should avoid
trying to establish a general rule for the compatibility of
this marketing method as far as insurance products are
concerned, and each case should be assessed individ-
ually (103).

(k) Arrangements introduced by the host Member State for
charging indirect
for
policies concluded under the freedom to provide services:
appointment of a tax representative of the insurer

taxes on insurance premiums

Under the Insurance Directives, policies concluded under
the freedom to provide services are subject
to indirect
taxes and parafiscal charges on insurance premiums in
the host Member State (104). To this end, the host Member
State applies to undertakings doing business under the
freedom to provide
territory the
national provisions for ensuring the charging of such
taxes and charges. In this connection, it may require, for
example,
submission of an exhaustive list of policies
concluded under the freedom to provide services or the
appointment of a tax representative of the insurance under-
taking domiciled within its territory (105).

services within its

to appoint a tax representative of

the
The requirement
insurer doing business under
the freedom to provide
services pursues an objective that is justified in the light
of Community law, namely to guarantee the home Member
State that its own legislation will be complied with and that
the above taxes and charges will be charged. This measure
impede the way in which freedom to
might, however,
provide services is exercised. An insurer wishing to avail
himself of the right to provide services faces substantial
administrative and financial costs in connection with the
appointment of a tax representative established in the host
the practical arrangements
Member State. Nevertheless,
whereby the host Member State implements this measure
must comply with the criteria laid down by the Court, and
in particular the requirements of necessity and propor-
tionality.

Secondly, in the light of the foregoing considerations, the
Commission takes the view that, where the host Member
taxes or parafiscal
State does not charge any indirect
charges on insurance policies (106), it may not legitimately
require insurers wishing to operate under the freedom to

(103) See amended proposal for a Directive concerning the distance
marketing of consumer financial services (COM(1999) 375 final,
23.7.1999). Article 10(2) of the amended proposal provides for
special arrangements concerning communications not solicited by
consumers.

(104) Article 46 of the Third Non-life Directive 92/49/EEC and Article

44 of the Third Life Directive 92/96/EEC.

(105) Statements entered in the record of the Council meeting at which

the Third Directives were approved.

(106) This reasoning is also valid where insurance policies are zero-

rated.

provide services in areas of insurance not subject to indirect
taxation to appoint a tax representative.

Thirdly, the requirement to appoint a tax representative is
not one of the particulars that must be notified under the
procedure laid down by the Insurance Directives in order to
exercise freedom to provide services (107). Accordingly, the
Commission takes the view that the host Member State may
not reject any notification made by the home Member State
under the procedure for freedom to provide services on the
grounds that no tax representative has been appointed in
the host Member State and, in so doing, prevent access to
freedom to provide services and the commencement of that
activity. The tax representative should be appointed only
the freedom to
once the activities carried on under
provide services have effectively begun,
the time
i.e. at
insurance policy under the
the insurer writes his first
freedom to provide services and charging the insurance
premium corresponding to that activity (108).

rules

indirect

governing

The Commission takes the view that, where the host
Member State, with a view to ensuring compliance with
taxation in respect of
its
insurance policies and the charging of such taxes, requires
any insurer wishing to do business under the freedom to
provide services to appoint a tax reprsentative established
on its territory, the practical arrangements for applying this
measure must comply with the requirements laid down in
the case law of the Court of Justice, and in particular the
requirements of proportionality and necessity, in order that
such measures do not constitute a restriction that is incom-
patible with the conduct of insurance business under the
freedom to provide services within its territory.

4. Rules relating to the law applicable to insurance

contracts and the concept of the general good

The Insurance Directives (109)
lay down specific rules for
determining the law applicable to insurance contract
situated within the European Economic
covering risks

(107) See Articles 14, 16 and 17 of Directive 88/357/EEC, as amended
by Articles 34, 35 and 36 of Directive 92/49/EEC, as regards
non-life assurance and Articles 11, 14 and 17 of Directive
88/357/EEC, as amended by Articles 34, 35 and 36 of Directive
92/96/EEC, as regards life assurance.

(108) Frequently, a considerable amount of time, sometimes running
into years, elapses between notification of the intention to do
business under the freedom to provide services and the conclusion
of the first insurance policy under that freedom. The requirement
to appoint a tax representative before business has effectively
begun appears disproportionate in that
it obliges an insurer
wishing to do business under the freedom to provide services
to set up such a structure and thereby to incur such large costs
that it might be deterred from availing itself of that freedom.
(109) As regards non-life assurance, see Articles 7 and 8 of the Second
Directive 88/357/EEC, as amended by the Third Directive
92/49/EEC; as regards life assurance, see Article 4 of the Second
Directive 90/619/EEC.

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Area (110). They make it possible to define what substantive
law will govern the contract. The rules apply both to
insurance activities carried on under the rules on estab-
lishment and to those carried on under the freedom to
provide services. The Directives also lay down provisions
relating to application of the mandatory rules of the forum
and of the Member State of the risk/commitment and to
the public policy rules (111).

Consequently, as has already been stated above, it is not
sufficient that the host Member State’s entire legislation on
insurance contracts be immediately declared mandatory for
the authorities to think that it must be observed in full (116).
Such provisions must also satisfy the requirements of the
general good if the host Member State is to be able to
require
compliance with them by insurers operating
through a branch or by way of freedom to provide services.

The application, under the rules on the conflict of laws laid
down by the Insurance Directives, by a Member State of its
own mandatory substantive provisions and its public policy
results in a
rules to insurance policies is likely,
restriction,
the
general good. The concept of the general good acts as a
filter of national legislation. It obliges the authorities of the
Member States to analyse their legislation for compliance
with the Treaty’s principles of free movement.

to be examined from the viewpoint of

it

if

the consumer,

Since these are rules which were adopted in order to
protect
there is a strong possibility that
such rules of substantive law will pass the general-good
test. The Court has recognised that consumer protection
the general good which justifies
is an objective of
cannot be
restrictions of
presumed, however, that the test will be passed.
It was
laws adopted with the declared
seen above that national
aim of protecting the consumer can be subjected to the
control of the Court and, where appropriate, (cid:145)disqualified(cid:146),
e.g. if they are not necessary or are disproportionate.

fundamental

freedoms.

It

It is essential that any rule of national law, whatever the
field it relates to, should be compatible with Community
law. Thus, in a judgment dated 21 March 1972, the Court
held that: (cid:145)The effectiveness of Community law cannot vary
according to the various spheres of national law which it
may affect.(cid:146) (112)

This additional level of reasoning is therefore essential, in
the context of a single market, in order to verify whether,
in the absence of harmonisation, national measures are not,
under the pretext of consumer protection, being maintained
simply to restrict or prevent the entry of insurance services
which are different or unknown on the national territory.

Community law takes precedence therefore,
over national rules in the sphere of private law.

if necessary,

If a Member State could invoke non-conformity with its
own legislation in the case of an insurance product
marketed in another Member State in order to restrict the
marketing thereof on its territory,
it would be hindering
competition between insurance undertakings.

In particular,
to verify the
it has fallen to the Court
compatibility with Community law of national rules of
law (113), civil procedure (114) and even of criminal
civil
law (115).

5. What action is to be taken when faced with national
rules regarded as being in the general good by the host
Member State?

(110) It should be pointed out that the Rome Convention on the law
applicable to contractual obligations (OJ L 266, 9.10.1980, p. 1)
excludes from its scope insurance contracts covering risks situated
in the territories of the Member States (Article 1(3)).

(111) Non-life insurance: Article 7(1)(h) of Second Directive 88/35/EEC;
life assurance: Article 4(4) of Second Directive 90/619/EEC.
(112) Case C-82/71 SAIL [1972] ECR 119. See also Case C-20/92

Hubbard [1993] ECR I-3777.

(113) Case C-168/91 Konstantinidis [1993] ECR I-1191; Case C-399/89
Alsthom Atlantique [1991] ECR I-107; Case C-93/92 Motorrad-
center [1993] ECR I-5009.

(114) See in this respect Case C-398/92 Mund & Fester [1994] ECR
I-467; Case C-43/95 Data Delecta [1996] ECR I-4661; Case
C-177/94 Perfili [1996] ECR I-161. See also Hubbard (footnote
112).

When faced with a national rule which, in his view, is an
unjustified restriction of the freedom of establishment or
the freedom to provide services, an economic agent
intermediary or policyholder)
(insurance undertaking,
must normally resort
inform the
Commission, e.g. by lodging a complaint.

courts or

to the

if,

for

In practice,
instance, an insurance undertaking
the rules of a Member State where it
believes
proposes to carry on business contains restrictions that
cannot satisfy the tests of the general good (e.g. binding

that

(115) Case C-348/96 [1999] ECR I-11.

(116) See point IV(3).

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provisions which are to be included in any policy and
which are unknown, or different to those,
in its home
Member State), various possibilities are open to it:

To avoid any potential conflict, it may of course adapt its
services in all respects to the rules of the host country;

If, all the same,
it offers insurance products that do not
comply exactly with the binding provisions of the host
country, it may well be prosecuted by the national auth-
orities or by one of its clients. The insurance undertaking
will have to assert its Community-law arguments before a
national court or authority in order to establish that the
rule which the Member State intends to invoke against it

does not satisfy the conditions identified by the Court. It is
the national court which will assess the validity of
the
parties’ arguments, having possibly referred the matter to
the Court of Justice for a preliminary ruling pursuant to
Article 234 of the Treaty;

It may, at any moment, inform the Commission, which, if it
thinks the restrictions are unjustified and hence contrary to
Community law, could institute proceedings under Article
226 of the Treaty against the Member State concerned for
failure to fulfil its obligations. In this context, it will be for
the Commission to provide evidence of the alleged failure
to fulfil obligations (117). Where appropriate, it is the Court
of Justice which will decide in the last instance whether the
disputed national measure satisfies the tests of the general
good or not.

(117) Case C-157/91 Commission v Netherlands [1992] ECR I-5899.

List of organisations having received Community funding for environmental purposes

(2000/C 43/04)

In implementation of the provisions set out in the remarks on budget heading B4-3060/1999, the
Commission hereby publishes in the Official Journal of the European Communities the amounts involved
and a list of the organisations having received Community funding.

Results of the call for the submission of proposals under a Community Action Programme
promoting non-governmental organisations primarily active in the field of environmental
protection (OJ C 319, 6.11.1999, p. 14).

Organisation

1. Seas at Risk
(Netherlands)

2. World Wide Fund

European Policy Office
(Belgium)

3. Coalition Clean Baltic

(Sweden)

Amounts granted in
euro

107 410

350 000

112 075

4. Climate Network Europe

138 437

(Belgium)

5. European Forum on Nature

109 690

Conservation and
Pastoralism
(United Kingdom)

Aim of work programme

Coordination of activities and exchange of
information
environmental
on marine
issues

Conservation of nature
processes

and ecological

the

Promotes
the
environment and natural resources of the
Baltic Sea area

protection

of

through

Capacity-building,
the NGO
network, on the problems of and the
solutions to climate change and the coor-
dination of European NGO policy on
climate change

Promoting regional farming systems which
work in harmony with local environmental
conditions

6. Taiga Rescue Network

(Sweden)

55 229

Raising awareness on the importance of
the boreal forest ecosystem