C-191/99

OPINION OF MR JACOBS — CASE C-191/99

OPINION OF ADVOCATE GENERAL JACOBS delivered on 18 January 2001 1

1. This reference from the Hoge Raad 4. The First Non-life Insurance Directive, 3 (Supreme Court), the Netherlands, seeks in 1973, provided for a minimal coordina- guidance from the Court on the interpreta- tion of the criteria which an insurer had to tion of Articles 2(c) and (d) and 3 of the satisfy in order to be able to offer its Second Non-life Insurance Directive. 2 services in the field of direct non-life insurance, either in the Member State of its primary establishment or through a branch or agency established in another Member State. The First Directive was thus limited to promoting freedom of establish- 2. In essence, the issue is the meaning of the ment in that sector. policy-holder's 'establishment' in the fourth indent of Article 2(d) of the Directive and whether the definition of 'establishment' given in Article 2(c) also applies to the term as used in Article 2(d),

5. At the time of adoption of the Second Non-life Insurance Directive in 1988, Arti- cle 6 of the First Non-life Insurance Direc- tive provided:4 The Community legislation

(a) Any undertaking which establishes its 2. A Member State may grant an autho- head office in the territory of such risation if the undertaking fulfils at least the state; following conditions:

(b) Any undertaking whose head office is situated in another Member State and which opens a branch or agency in the territory of the Member State in ques- tion;

(b) It establishes an agency or branch in the territory of such Member State

6. Article 23 of the First Non-life Insurance Directive provides: 7. The Second Non-life Insurance Directive sought in particular to make it easier for insurance undertakings having their head office in the Community to provide services in the Member States, thus making it possible for policy-holders to have recourse not only to insurers established in their own '1. Each Member State shall make access to country but also to insurers which have the business referred to in Article 1 [the their head office in the Community and are

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5 — See the first recital in the preamble. means the head office, agency or 6 — Fourth recital in the preamble. branch of an undertaking, account 7 — Fourth recital in the preamble. being taken of Article 3;

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(d) "Member State where the risk is situ- (e) "Member State of establishment" ated" means: means:

the Member State in which the estab- •— the Member State in which the lishment covering the risk is situated; property is situated, where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are cov- ered by the same insurance policy, (f) "Member State of provision of ser- vices" means:

— the Member State of registration, the Member State in which the risk is where the insurance relates to situated when it is covered by an vehicles of any type, establishment situated in another Member State.'

The facts and the main proceedings 12. The first paragraph of Article 25 of the Directive provides, in so far as is relevant:

14. Kvaerner pic, a company incorporated under the law of England and Wales and 'Without prejudice to any subsequent har- established in the United Kingdom, holds, monisation, every insurance contract con- via John Brown pic, a subsidiary also cluded by way of provision of services shall incorporated in England, all the shares in be subject exclusively to the indirect taxes John Brown Engineers and Constructors and parafiscal charges on insurance pre- BV (JB BV), a limited liability company miums in the Member State in which the incorporated under Netherlands law and risk is situated within the meaning of established in that country. Article 2(d) ...'

13. Article 25 was repealed by the Third Non-life Insurance Directive. 9 Arti- 15. Kvaerner took out professional indem- cle 46(2) of that directive however re- nity insurance, worldwide umbrella insur- enacted Article 25 in similar terms, albeit ance and worldwide catastrophe insurance not limited to insurance contracts conclu- with an insurer established in the United ded by way of provision of services. The Kingdom. The contracts of insurance men- tion as the insured Kvaerner and/or its subsidiaries and/or associated companies as 9 — Cited in note 1. instructed by the policy-holder. Without

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being instructed to do so by JB BV, the insurance contract relates is situated in Kvaerner also included JB BV's business the Netherlands. Both those findings flow operations within that cover. Kvaerner paid from Articles 20 and 21 of the Law on the premiums and invoiced JB BV via John transaction tax, as amended with effect Brown pic for that part of the premiums from 1 July 1990 in line with Articles 2(d) attributable to cover for JB BV's business and 25 of the Second Non-life Insurance operations. Directive.

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Member State to levy insurance tax on The first and second questions a legal person established in another Member State in respect of premiums paid to an insurer also established in another Member State for the business insurance of a subsidiary or sub-sub- sidiary established in the Member State making the levy?

21. As a preliminary point, I would note that the first question referred by the national court appears to be asking about the lawfulness of levying insurance tax on premiums paid for business insurance gen- erally ('verzekering van bedrijfsrisico's'), a 2. Does it make any difference to the term presumably intended to comprise the reply to Question 1 if the policy-holder three types of insurance (professional is not the overall parent company but indemnity insurance, worldwide umbrella some other company in the group (for insurance and worldwide catastrophe example a captive insurance com- insurance) individually mentioned in the pany)? order for reference. As the Commission notes, however, the final indent of Arti- cle 2(d) at issue in the main proceedings is merely a residual rule. To the extent that the other categories of insurance taken out cover risks for example relating to build- ings, it will be the first indent of Arti- cle 2(d) which applies. 3. Does it make any difference to the replies to Questions 1 and 2 or to the interpretation of the terms "policy- holder" or "Member State where the risk is situated" if the insurance pre- mium relating to the insured risk is not (wholly or in part) passed on to the subsidiary or sub-subsidiary?'

24. Before turning to the analysis of Arti- cle 2(c) and 2(d) which to my mind pro- vides the answer to the national court's first question, I would mention that I do not 23. The French, German and Netherlands accept the French Government's argument Governments and the Commission in con- that JB BV is to be considered to be the trast all take the view that the Netherlands policy-holder for the purposes of the may tax the transaction. The French Gov- Directive. That argument amounts to ernment argues that JB BV is to be con- equating the terms 'insured person' and sidered to be the policy-holder for the 'policy-holder'. As the Commission pointed purposes of the Directive; the Member out at the hearing, although those terms are State where the risk is situated is accord- not defined in the Directive (or indeed in ingly the Netherlands. The German Gov- the First or Third Directives) it is current ernment submits that any permanent pre- usage in the insurance world, not only in sence, therefore including subsidiaries, con- the context of life assurance, to distinguish stitutes establishment for the purpose of between the two. That usage reflects the Article 2(d). The Netherlands Government fact that the policy-holder is not necessarily is of the view that the establishment of a the same person as the insured. The Second policy-holder for the purpose of Arti- Life Assurance Directive 10 moreover uses cle 2(d) is to be determined by reference the term 'insured person' where it wishes to to Article 43 of the Treaty and hence describe a person other than the policy- includes subsidiaries. Both those Govern- holder who is covered by the contract. 11 ments also conclude that the Netherlands is The undesirability of interchanging the two therefore the Member State where the terms even in the non-life insurance sector policy-holder's establishment, to which the is demonstrated by the comment made by contract relates, is situated, and hence also the Economic and Social Committee on where the risk is situated. The Commission Article 2 of the Commission's original considers that, while Article 2(c) cannot be proposal for the Second Non-life Insurance construed as including subsidiaries within Directive. The Committee '[drew] the the definition of 'establishment', Arti- Commission's attention to the fact that cle 2(d) is to be interpreted by reference the French version talks about the Member to the place where the activities giving rise to the risks covered are carried out and accordingly 'Member State where the risk 10 — Council Directive 90/619/EEC of 8 November 1990 on the is situated' means the Member State of coordination of laws, regulations and administrative provisions relating to direct life assurance, laying down establishment of the branch or agency or, in provisions to facilitate the effective exercise of freedom to the case of group insurance, the company provide services and amending Directive 79/267/ E EC, OJ 1990 L 330, p. 50. in the policy-holder's group to whose 11 — Article 2"\

25. Moreover I do not consider it necessary to give an interpretation of 'policy-holder' in order to answer the questions referred by the national court since in my view it becomes clear from an analysis of the wording of Article 2(c) and the final indent 'it is desirable to define the provision of of Article 2(d) that the concept of estab- services taking into account both the insur- lishment is used in the Second Directive in er's establishment and the place where the general and in Article 2 in particular in two risk is situated [and] to distinguish between different contexts: Article 2(c) is concerned the activity pursued by way of establish- with the establishment of an undertaking ment and the activity pursued by way of providing insurance, while Article 2(d) is freedom to provide services'. 13 concerned with the establishment of a policy-holder. It is regrettable that the same word is used in successive provisions in two different senses; it is consequently, as the Netherlands Government and the Commis- sion both stress, crucial to distinguish between the two usages.

27. That of course is what Article 2(e) and (f) seek to do. The word 'establishment' used in those paragraphs has the meaning given to it by Article 2(c), namely 'the head office, agency or branch of an undertaking'. 'Undertaking' is itself defined by Arti- Article 2(c) of the Second Non-life Insur- cle 2(b) as 'any undertaking which has ance Directive received official authorisation under... the first Directive'. The definition of 'establish- ment' in Article 2(c) is thus confined to the establishment of an insurer, as envisaged by the preamble. That is wholly consistent 26. First and principally, the concept of with the aim of Article 2(e) and (f), namely establishment is used in the Directive to to distinguish between the situation where

an insurer is exercising its activity across a of the second Member State). 16An insurer frontier by way of establishment and the established in one Member State which situation where an insurer is doing so by operated in another Member State through way of the provision of services. a subsidiary would have been dealt with in accordance with the first approach rather than the second, i.e. the subsidiary would have been regarded as an undertaking in its own right and would have needed autho- 28. The Commission's original proposal for risation from the Member State where its the Second Non-life Insurance Directive 14 own head office was established. That included no definition of the Member State follows from the terms of Article 6(2)(a) of establishment or the Member State of of the First Directive, which in its original provision of services; indeed the Explana- version provided that any undertaking tory Memorandum relates that no attempt which established its head office (siège was made to distinguish between freedom social in the French version) in a Member to provide services and freedom of estab- State was to seek authorisation from the lishment. 15 Nor did it contain a definition competent authority of that State. The of 'establishment'. That definition must amendments to the First Directive made accordingly have been added at some point by the Second Directive did not affect the in the legislative process, which was long fundamental structure put in place by the and slow (over 12 years elapsed between First Directive, which remained in place submission of the proposal and adoption of until a new text of Article 6 was introduced the directive). by the Third Non-life Insurance Direc- tive. 17 The new text of Article 6 essentially requires authorisation to be sought from the Member State where the undertaking's head office is established. 29. It may be wondered why the definition in Article 2(c) of the Second Non-life Insurance Directive does not include sub- sidiaries. The answer again may be found in the historical context of that directive. The First Non-life Insurance Directive drew a sharp distinction between an insurer which operated in a Member State as an 30. The clear wording of the provision and undertaking established in that Member the scheme of the First and Second Non-life State (originally subject to the control of Insurance Directives thus support the view that Member State) and an insurer estab- that the definition in Article 2(c) does not lished in one Member State which operated extend to subsidiaries. The German Gov- in another Member State through a branch ernment however appears to suggest that or agency (originally subject to the control the effect of Article 3 of the Second Direc- tive, to which the definition of establish- ment in Article 2(c) is expressly subject and 14 — Proposal tor a second Council Directive on the coordina- tion of laws, regulations and administrative provisions relating to direct insurance other than lite assurance and lavine down provisions to facihtate the effective exercise of freedom to provide services. C O M ( 7 5 ) 5 1 6 final; 16 — See Article 6 of the First Non lite Insurance Directive, cited 22 December 1975. in note 2. 15 — Paragraph III.2(b). 17 — Cited in note 1, Article 4.

31. I do not accept that argument. In my 33. It is accordingly unquestionable in my view, and as submitted by the United view that the definition of 'establishment' Kingdom, Article 3 simply confirms that in Article 2(c) of the Second Non-life certain types of establishment which are in Insurance Directive does not include sub- substance equivalent to a company's sidiaries. branch or agency, although not formally so described, are to be taken into account. That interpretation is supported by the fact that the wording used in Article 3 is taken almost verbatim from the Court's judgment in Commission v Germany, 18 decided a year and a half before adoption of the Article 2(d) of the Second Non-life Insur- Second Directive. The words in the judg- ance Directive ment were used in the context of deciding what presence falling short of the formal establishment of a branch or agency would nevertheless be sufficiently permanent to show that the undertaking had established 34. The concept of 'establishment' is also itself in another Member State and hence used in Article 2(d), which defines 'the fell within the establishment rather than the Member State where the risk is situated'. services provisions of the Treaty. Article 3 thus correctly interpreted simply extends the definition of 'agency or branch' in 19 — Cited in note 1. 20 —Article 1(b). 21—Article 1(i). The definition refers to the definition of 'subsidiary undertaking' in Articles 1 and 2 of the Seventh Council Directive 83/349/EEC of 13 June 1983 based on 18 —Case 205/84 [1986] ECR 3755, paragraph 21 of the Article 54(3)(g) of the Treaty on consolidated accounts, judgment. OJ 1983 L 193, p. 1.

'— the Member State in which the policy- 35. Although as a general rule the same holder habitually resides where any term used in the same article of the same other form of insurance is involved ...' measure must be given the same mean- ing, 2 2 that general rule may exceptionally be defeated where it is clear from the article itself that the same meaning cannot have been intended. In my view that is the case 37. The Commission stated in the Expla- of the provisions at issue. As I have natory Memorandum: 'Under this provi- demonstrated, Article 2(c) is concerned sion, the place where the risk is situated with the establishment of an undertaking depends on the type of insurance involved; which is authorised to pursue insurance in some cases, as for insurance covering activities. Since the fourth indent of Arti- persons, it is taken to be the place where cle 2(d) is not concerned with the establish- the policy-holder is established ...' 27 ment of such an undertaking, being on the contrary expressly concerned with the establishment of the policy-holder, it fol- lows that 'establishment' in the fourth indent of Article 2(d) cannot have the sense ascribed to it by Article 2(c). 2 3 It must 38. Again, this definition evolved during therefore have another meaning. the legislative process; it was in particular

22 — See paragraph 3 5of mv Opinion in C a s eC-258/99 BASE v 24 — Article 4. Bereau VOOR De Industriele Figendom, delivered on 30 November 2000. 25 — Arrticles9 and 10. 23 — It may he noted that in the Danish version of the Directive 26 — Article 14. different terms are used in the two provisions. 27 — Paragraph III.2(a).

40. Article 2(d) defines the 'Member State where the risk is situated' by reference to four circumstances. The first indent con- 42. Second, the concept of 'Member State cerns the insurance of (principally) build- where the risk is situated' is, as the ings, and defines the 'Member State where Commission points out, used in conjunc- the risk is situated' by reference to the locus tion with the concept of 'establishment' as of the property insured. The second indent defined in Article 2(c) in order to determine concerns vehicle insurance, and defines the whether an insurance undertaking is in 'Member State where the risk is situated' by given circumstances exercising its freedom reference to the place of registration of the to provide services or its right of establish- vehicle. The third indent concerns travel or ment. 30 holiday insurance, and defines the 'Member State where the risk is situated' as the Member State where the policy-holder took out the policy. The fourth indent ·— at issue in these proceedings — is a residual category, applying to 'all cases not expli- citly covered by the foregoing indents'. 43. In the circumstances of the present case, a United Kingdom parent company has taken out insurance with a United

28 —Article 7(1). 41. Determination of the Member State 29 — Article 7(2). where the risk is situated is relevant for 30 — Article 12(1), set out in paragraph 11 above.

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45. The legislature accepted that there were wide differences in the fiscal treatment of insurance transactions: the preamble notes 47. Interpreting 'establishment' in Arti- that 'some Member States do not subject cle 2(d) as excluding subsidiaries would, insurance transactions to any form of as the Commission points out, enable the indirect taxation, while the majority apply situation of the risk, and hence the liability special taxes and other forms of contribu- to tax, to be artificially exploited, which tion, including surcharges intended for would be contrary to the objective of compensation bodies; whereas the structure reducing distortions of competition. It and rate of these taxes and contributions could even — as the present case demon- strates — give rise to circumstances where 31 — See the 15th reeital in the preamble to the Second Non-life Insurance Directive AND tile 30th recital in the preamble to the Third Non-lire Insurance Directive. 32 — Ibid.

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51. Finally in the context of the first and second questions it is appropriate to deal with the United Kingdom's argument that it 49. As the Commission submits, however, would be excessively difficult in practice to those objectives would not be attained if determine at what point a subsidiary the only members of a corporate group became sufficiently independent to cease which were covered by the notion of being regarded as part of its parent under- 'establishment' were the parent company's taking. That argument was adduced against subsidiaries. If that interpretation were deeming a subsidiary to be an agency or exhaustive, the rules could be circumvented branch under Article 3 of the Second by the simple expedient of allocating all Directive. It could however equally be group insurance to a company which was raised against the interpretation of Arti- not in a direct parental relationship to the cle 2(d) which I have advocated, by which other insured companies in the group. It is the policy-holder's 'establishment' is regar- accordingly appropriate to interpret that ded as including all companies linked to notion as covering all companies linked to others within a group of companies where others within a group of companies where one company in the group takes out a one company in the group takes out a policy of insurance which covers other policy of insurance which covers other companies in the group. companies in the group.

50. That interpretation entails an affirma- 52. In my view, it will not in practice be tive answer to the referring court's first problematic to determine which companies

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relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/23 9/EEC permit a Member State to levy insurance tax on a legal person established in another Member State in respect of premiums paid to an insurer also established in another Member State for the business insurance of a company in the same group as the policy-holder and established in the Member State making the levy. It makes no difference how the premium relating to the insured risk is (wholly or in part) invoiced or paid within the group.

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