FREEDOM TO PROVIDE INSURANCE SERVICES IN THE LIGHT OF THE “COINSURANCE CASES”
| Date | 01 November 1988 |
| DOI | http://doi.org/10.1111/j.1468-2230.1988.tb01782.x |
| Author | K. P. E. Lasok |
| Published date | 01 November 1988 |
FREEDOM TO PROVIDE INSURANCE SERVICES
IN
THE
LIGHT
OF
THE “COINSURANCE CASES”
A.
INTRODUCTION
RECENT cases have raised the question, what are the consequences
in English law
of
a contract
of
insurance (or reinsurance) made by
a person who has not been authorised to carry on insurance
business in the United Kingdom’; but little attention seems to have
been paid to the more fundamental questions, when is it that a
person must be authorised to carry on insurance business in
accordance with United Kingdom legislation and to what extent is
such a person subject to supervisory rules in the United Kingdom.
At first sight, the answer to those questions appears to be found in
the United Kingdom legislation governing the carrying on of
insurance business in the United Kingdom. However, insurers from
other Member States
of
the European Economic Community’ who
enter into contracts
of
insurance with persons in the United
Kingdom benefit from rights, regarding the application to them
of
the British authorisation and supervisory rules, from which insurers
from countries outside the Community do not benefit (United
Kingdom insurers have parallel rights in other Member States
of
the Community). The extent
of
those rights arose for consideration
by the Court
of
Justice of the European Communities3 in the
so-
called “Coinsurance Cases,” which were actions brought by the
Commission
of
the European C~mmunities,~ supported by the
United Kingdom and the Netherlands, against France, Denmark,
Germany and Ireland5 concerning the compatibility with Community
law
of
certain requirements
of
the legislation
of
those Member
States affecting the taking up and pursuit
of
the business
of
insurer.
The judgments
of
the Court in the Coinsurance Cases shed
considerable light on the extent to which Community law affects
national legislation governing insurers; and the principles that the
Court enunciated are equally applicable,
mututis mutundis,
to the
financial services sector in general, as well as to the professions.
This article deals first with the basic rules laid down in the EEC
Treaty, which provide the legal context
of
the judgments, and then
discusses how the key concept of the “establishment”
of
a legal or
natural Derson is to be defined in the light of the judgments and,
’
See
Bedford Insurance Co. Ltd.
v.
Institutio de Ressaguros do BrasilI19851
Q.B.
966,
Stewart
v.
Oriental Fire and Marine Insurance
Co.
Ltd. [1986]
Q.B.
988
and
Phoenix
General Insurance
Co.
v.
Administratia Asigurarilor de Stat [1986]
2
Lloyd’s Rep.
552
(see
also
s.132
of
the Financial Services Act
1986).
Referred
to
as “the Community” or “the EEC.”
Referred
to
as “the Court.”
Referred to as “the Commission.”
Case
220183
Commission
v.
France,
Case
252183
Commission
v.
Denmark,
Case
205184
Commission
v.
Germany,
Case
206184
Commission
v.
Ireland,
December
4,
1986.
706
Nov. 19881
FREEDOM
TO
PROVIDE
INSURANCE
SERVICES
707
lastly, the restrictions which may be imposed on the freedom to
provide insurance services in general.6
B.
RIGHT
OF
ESTABLISHMENT
AND
FREEDOM
TO
PROVIDE SERVICES
The objective of the Common Market7 envisaged in the EEC
Treaty is the optimum allocation of. the factors of production and
the supply of outputs under the most favourable economic
conditions. This is to be achieved by the elimination
of
restrictions
on,
inter
alia,
the right of establishments and the freedom to
provide services9 in the Community. The right
of
establishment is
the right to set up in business in and carry on business in any
Member State of the Community, subject to the rules governing
that business in the Member State in question. The expression
“freedom to provide services” has a special meaning in the context
of
Community law. It means the facility to carry out a transaction
on what is often called a “transnational” or “cross-frontier” basis
without any hindrance. In other words, the transaction is carried
out between persons located in different countries or requires a
performance in a country other than that in which the parties to
the transaction are located.
lo
When taken together, the right of establishment and the freedom
to provide services enable persons who wish to do business in the
Community to select freely the Member State in which they wish
to set up their operations and to offer the fruits
of
their endeavours
to anyone throughout the Community without restriction and
without having to set up operations in every Member State in
which they may have a customer or client, unless there is some
objective economic or commercial consideration for doing
so.
l1
The freedom to offer the product
of
a business activity to
anyone anywhere in the Community clearly gives rise to difficulties
Detailed consideration of the position regarding coinsurance falls outside the scope
of
this article. The Coinsurance Cases have also been discussed by:
C.
J.
Berr and
H.
Groutel, “Droit Europeen des Assurances,” Rev.Trim. de Droit Eur., 1987, p.83; D.
Edward, “Establishment and Services: an Analysis of the Insurance Cases,”
European
Law
Review,
1987, p.231; R.
W.
Hodgin,
Common
Market
Law
Review,
1987, p.273 (a
case-note); and
J.
Usher and
J.
Flynn (1988) 37 I.C.L.Q.
144
and 154.
’
Now commonly referred to as “the internal market.” See Article 8a of the EEC
Treaty. The common market was to have been achieved by
1970.
The Commission’s
objective, which has been supported in principle, at least, by the Member States, is to
achieve an integrated internal market by 1992. The change in phraseology may be
intended to avoid making it too obvious that the target date of 1992 represents a
postponement
of
22 years.
*
Articles 52-58
of
the EEC Treaty.
Articles 59-66
of
the EEC Treaty.
lo
Examples are the insurance of a risk by an insurer carrying on business
in
London
for a policyholder resident in Paris;
or
the carrying out of financial operations by a
financial institution based in London for a foreign client, and
so
forth.
”
In particular, the decision whether
or
not to
do
business through a branch, agency
or
some other form
of
permanent physical presence in the place
(or
Member State)
where the customer
or
client resides should not be forced on businesses by extraneous
considerations, such as the fact that a frontier is crossed in the course of performing the
activity.
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