C-59/01

COMIMISSION v ITALY

OPINION OF ADVOCATE GENERAL ALBER delivered on 4 July 2002 1

I — Introduction financing of the supervision system, which it considers to be an infringement of Article 44 of the directive. The measures temporarily introduced by Italy were intended to combat inflation and fraud.

1. In the present proceedings for failure to fulfil obligations, the Commission com- plains at the introduction and maintenance of national rules under which premiums for motor vehicle third-party liability insurance II — Legal background policies applicable in Italy are temporarily frozen. The rule applies without distinction between insurance companies having their head office in Italy and those conducting their business there through branch offices or under the freedom to provide services. The Commission believes that there is a breach of the principle of freedom to set A — Community law premiums in the form of the prohibition of prior approval of premiums and systematic notification of insurance conditions and premiums. It considers that Articles 6, 29 and 39 of Council Directive 92/49/EEC on the coordination of laws, regulations and 2. The single market in the insurance sector administrative provisions relating to direct was completed by the 'third non-life insur- insurance other than life assurance and ance directive', which guarantees the free- amending Directives 73/239/EEC and dom to market insurance products. That 88/357/EEC (third non-life insurance direc- directive is Directive 92/49. In addition to tive) 2 have been infringed. Furthermore, provisions on the taking up of the business the Commission complains at the require- of insurance, the directive contains rules on ment of systematic notification of claims the harmonisation of the conditions gov- and other data and the compulsory (joint) erning the business of insurance and thus contributes to the application to the fun- damental freedoms of the right of establish- 1 — Original language: German. ment and freedom to provide services in the 2 — Council Directive of 18 June 1992, OJ 1992 L 228, p. 1. insurance sector.

'The Member State in which a risk is situated shall not prevent a policyholder from concluding a contract with an insur- ance undertaking authorised under the 'Nothing in this Directive shall prevent conditions of Article 6 of Directive Member States from maintaining in force 73/239/EEC, as long as that does not or introducing laws, regulations or admin- conflict with legal provisions protecting istrative provisions requiring approval of the general good in the Member State in the memorandum and articles of associ- which the risk is situated.'

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6. Article 29 of Directive 92/49 states: pulsory insurance be communicated to its competent authority before being circu- lated.'

3. The Member State of the branch or of 'Notwithstanding any provision to the the provision of services may not retain or contrary, a Member State which makes introduce prior notification or approval of insurance compulsory may require that the proposed increases in premium rates except general and special conditions of the com- as part of general price-control systems.'

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Article 44(2) of the directive states: The competent authority of the home Member State shall forward that infor- mation within a reasonable time and in aggregate form to the competent auth- orities of each of the Member States con- cerned which so request.' '2. Every insurance undertaking shall inform the competent authority of its home Member State, separately in respect of transactions carried out under the right of establishment and those carried out under 9. The directive does not make any provi- the freedom to provide services, of the sion concerning the financing of the notifi- amount of the premiums, claims and com- cation and supervision system. missions, without deduction of reinsurance, by Member State and by group of classes, and also as regards class 10 of point A of the Annex to Directive 73/239/EEC, not including carrier's liability, the frequency and average cost of claims.

B — National law

The groups of classes are hereby defined as 10. Decree No 175 of 17 March 1995 follows: implementing Directive 92/49 liberalised premium rates for motor vehicle third- party liability insurance policies, which had up to that point been subject to a price control system in Italy, as in most Euro- pean countries. That liberalisation also applied to policy conditions.

vehicle third-party liability insurance sector 14. Under Article 2(4) of Decree No 70, was concerned, Decree No 70, after insurance undertakings are required, at the amendment, was converted by the Parlia- request of the policyholder, to introduce ment into Law No 137 of 26 May 2000. 4 the possibility of taking out insurance By freezing insurance premiums and by policies in the bonus/supplementary pre- providing that other elements of the con- mium class with an excess of at least ditions of certain motor vehicle third-party ITL 500 000 and at most ITL 1 000 000. liability insurance policies could not be This is without prejudice to the injured modified, and by other measures contained third party. It is solely for the policyholder in Article 2(2) to (5)(d) of Decree No 70, it to choose the bonus/supplementary pre- was intended to counter inflation, initially mium class with excess and to choose the for the period of one year. Under amount of the excess. Article 2(2) of Decree No 70, policies renewed in the year for which the Decree was valid and which provided for a modi- fication of the premium in the event of a claim were subject to a prohibition on increasing the motor vehicle liability insur- 15. Article 2(5) of Decree No 70 gives the ance premium if the policyholder had not policyholder the right, upon the expiry of caused any claims during the period under the prohibition on increasing premiums, to consideration. terminate the policy without giving statu- tory notice, if the insurer demands an increase in the premium — not based on the mechanism of the individual premium classes — which is higher than the esti- mated inflation rate fixed by the Govern- 12. Under the last sentence of Article 2(2), ment. newly concluded policies were, for a period of one year, subject to a prohibition on modifying the premium that applied upon the entry into force of the Decree.

21. The Commission claims that the Court 19. Article 2(5)(d) established the possibil- should ity, in the event of failure to fulfil, or belated fulfilment of, the notification requirement, of imposing administrative fines of between ITL 2 million and ITL 6 million or between ITL 1 million and ITL 3 million, which could be further increased in the event of repetition. — declare that the Italian Republic has failed to fulfil its obligations under Directive 92/49 in that it has intro- duced and maintained in force rules under which premiums for motor vehicle third-party liability policies covering risks situated within Italian territory were frozen, without distinc- I I I— Subject-matter and proceedings tion between insurance companies hav- ing their head office in Italy and those conducting their business through branch offices or under freedom to 20. Since, in the view of the Commission, provide services, in breach of: the abovementioned national provisions are not consistent with Articles 6(3), 29, 39 and 44 of Directive 92/49, it pointed out the grievances to the Italian Republic by letter of 14 April 2000. The Italian Govern- ment thereupon replied by letter of 5 June 2000. On 13 July 2000, the Commission (a) the principle of freedom to set drafted a letter of formal notice, requesting premiums and the abolition of observations within three weeks of receipt prior or systematic controls over of the letter. Since the observations made premiums and contracts within the

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meaning of Articles 6, 29 and 39 of TV — Submissions of the parties Directive 92/49 and

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(d) the obligation for all insurance under- context of a general price control system takings operating in the motor vehicle within the meaning of Articles 6, 29 and 39 third-party liability insurance sector to or through legal provisions protecting the offer a bonus/supplementary premium general good — within the meaning of with an excess, which could be no Article 28 — which apply in the Member lower than ITL 500 000 and no higher State in which a risk is situated. than ITL 1 000 000 (Article 2(4));

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27. The Commission also recalls that the the causes and in doing so restricting a only controls that are permissible under the fundamental freedom in an unreasonable legal provisions protecting the general good and disproportionate manner. Lastly, the which apply in the country in which a risk Commission takes the view that the meas- is situated are not systematic controls and, ures are neither reasonable nor proportion- moreover, may be conducted only sub- ate with reference to the rules on compe- sequently. tition, in so far as they are intended to counter cartels and anti-competitive agree- ments, and certainly cannot justify the freezing of premiums in the sector.

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counter inflation in a reasonable and pro- ary in order to combat fraud can and must portionate manner. With regard to con- be obtained in accordance with the direc- sumer protection and social considerations, tive, that is to say solely through trans- the government points out that a temporary mission by the competent authority of the prohibition on increasing premiums for home State. The system introduced by the certain policies was the only way to take Italian authorities is detrimental to the immediate action against the enormous mechanism of cooperation between price increases in the sector. The Italian Member States introduced by the directive. Government stresses that the measures The Court has consistently held that were also the result of a consultation of administrative considerations cannot jus- the affected groups which had lasted for tify derogations by a Member State from some time. It cannot see any incompatibil- the rules of Community law. ity between a temporary freezing of pre- miums and the agreements negotiated between the affected undertakings. Those undertakings had allowed a series of meas- ures to be taken in order to eliminate anomalies in the sector characterised by anti-competitive behaviour and fraudulent 33. The obligation to contribute to the practices. financing of the database is therefore also contrary to Community law.

tions from the principle of freedom to the insurance industry in the indemnity provide services, relying on the judgment insurance sector. 8 Its purpose and objective in Schindler. Obtaining information from is the achievement of the internal market in the Member States is not likely to counter insurance on the basis of the right of fraudulent practices in the same way as establishment and freedom to provide ser- gathering information direct from under- vices. An important element of the internal takings. The setting-up of a database market is the removal and permanent appears to be the only way to detect and prevention of restrictions on the economic track fraudulent conduct, in the interest of activity of insurance undertakings oper- those undertakings operating on the Italian ating outside internal borders. market (even where they have their head office in another Member State), which are the first victims of such fraudulent prac- tices.

38. In the view of the Commission, the Court has recognised the principle of free- dom to set premiums as a characteristic of the freedom to provide services in insurance in Case C-296/98, 9 where it states in V — Assessment paragraph 29 of that judgment:

A — Infringement of, inter alia, the free- dom to set premiums inter alia 'Any obligation systematically to notify such information is contrary to the freedom to market insurance products within the Community, which Directives 92/94 and 36. The point of law to be decided is 92/96 are designed to achieve.' whether the measures adopted by the Italian Government in Article 2 of Decree No 70, which were indisputably in force and applied at the time of the expiry of the period prescribed in the reasoned opinion, infringed the principle of the freedom to set premiums, as guaranteed under Directive It is not possible to infer further arguments 92/49. on the substance and scope of the freedom to set premiums from the Court's case-law.

3 9 . It does follow, however, from undertakings operating in that Member Article 6(3), second subparagraph, State and be objectively necessary and in Article 29, first subparagraph, and proportion to the objective pursued'. Article 39(2) that prior approval or the requirement of systematic notification of premium rates as a prior condition for an insurance undertaking to carry on business under the right of establishment and free- dom to provide services is prohibited. The requirement of prior notification or the (1) Justification of the restrictive measures approval of proposed increases in premium as part of a general price control system rates are permissible only as elements of a general price control system. The absolute prohibition on increases in premium rates in a certain sector for a certain period is therefore contrary to the wording of the provisions. The rules introduced by 41. The Italian Government claims that the Article 2 of Decree No 70 on the freezing measures laid down in Decree No 70 are to of insurance premiums appear to be meas- be regarded as part of a general price ures that restrict the freedom to determine control system and are therefore lawful. premiums enjoyed by undertakings oper- The concept of a general price control ating in the insurance sector. system is not defined in the directive and therefore has to be interpreted. In doing that, regard must be had to the general harmonisation objective of the directive. Under the directive, the abolition or restric- tion of the freedom to provide services through measures that are part of a general price control system is an exception which must in principle be given a restrictive 40. A restriction of the principle of freedom interpretation. to set premiums, as guaranteed under Directive 92/49, is permissible only where it is justified. Since this is a harmonised sector, the grounds for justification must be laid down in the directive. This might be the case here firstly if the restrictive meas- ures form part of a general price control 42. The Commission takes the view that a system within the meaning of Articles 6(3), general price control system has to be 29 and 39 of Directive 92/49. Secondly, a characterised by an autonomous procedure restrictive measure may be justified under which is conducted by a specifically com- Article 28 of Directive 92/49 where it is a petent authority. Even though the pro- provision of law protecting the general cedural law element does not need to be good and no such provision protecting the resolved in this case, it must nevertheless be general good exists in the home State of the an overall system. Even though that general insurance undertaking. However, as the system does not have to be structurally nineteenth recital makes clear, this applies identical to the price control system appli- only 'provided that such provisions must be cable in Italy prior to liberalisation, it must, applied without discrimination to all however, relate to different economic sec-

46. The term 'general good' is not defined in the directive. The 19th and 20th recitals, which may be used as an aid to inter- pretation, do, however, contain a number 44. The Italian Government is now of criteria that legal provisions protecting attempting to demonstrate that the system the general good must satisfy. Those crite- was general in nature by claiming that ria are based on the consistent case-law of other measures, such as fiscal measures for the Court of Justice, which developed the the oil industry and regulations for public concept of the general good in the field of services, were also adopted. However, it is the free movement of goods and later characteristic of this approach that each of extended it to other fundamental free- the measures is selective and influences doms. 10 Recitals 19 and 20 of Directive prices at different levels. The measures are 92/49 read as follows: not sufficiently coherent in the present case for the price control system to be 'general'. It must therefore be assumed that the contested measures are not part of a general price control system within the meaning of Directive 92/49. '... it is for the Member State in which the risk is situated to ensure that there is nothing to prevent the marketing within its territory of all the insurance products offered for sale in the Community as long as they do not conflict with the legal (2) Justification of the restriction under provisions protecting the general good in legal provisions protecting the general good 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 provi- sions must be applied without discrimi-

47. A further aid to interpretation that may be used is the Commission Interpretative Communication on Freedom to provide services and the general good in the insur- — it is also necessary for the general-good ance sector. 11 For example, under Point objective not to be safeguarded by rules II.2.a, it states: to which the provider of services is already subject in the Member State where he is established.

'The Court requires that a national provi- sion must satisfy the following require- These conditions are cumulative. A ments if it is validly to obstruct or limit national measure which is claimed to be exercise of the right of establishment and compatible with the principle of the free- the freedom to provide services: dom 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.

— it must come within a field which has not been harmonised, The concept of general good is an excep- tion to the fundamental principles of the 11 — Communication 2000/C-43/03, OJ 2000 C 43, p. 5. Treaty with regard to free movement and

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must, therefore, be interpreted in a restrict- be regarded as a particularly unfortunate ive fashion so as to ensure that recourse is development that liberalisation in Italy has not had to it in an excessive or abusive led to an increase of up to 400% in manner. In the event of a dispute, the insurance premiums in the motor vehicle Member State imposing the restriction has third-party liability sector. anyway to show that the measure meets the aforementioned conditions.'

51. Although combating inflation can cer- tainly be regarded as protecting the general good at an abstract level, following the entry into force of Directive 92/49 the Italian Government no longer has the free- 49. It is first of all doubtful whether the dom unilaterally to influence the deter- freedom to set premiums guaranteed by mination of insurance premiums. harmonised provisions permits interference with the setting of premiums in order to combat inflation, i.e. whether such State influence lies outside the harmonised sec- tor. The 'third insurance directives' 12 lib- eralised the insurance sector; the freedom 52. In addition, one can raise the legitimate to set premiums is an important element of question, as the Commission has done, that freedom. Ultimately, that freedom was whether the temporary freezing of insur- also granted in the interest of the policy- ance premiums constitutes an appropriate holders who, under conditions of free and necessary means of combating competition, were intended to have the inflation. However, it is no longer within option to decide in favour of a certain the scope of this dispute to answer this product. Against this background, it is to question in so far as it can be assumed that the freedom to set premiums in the insur- ance sector could no longer be suspended 12 — Directive 92/49 and Directive 92/96. by unilateral State measures.

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(b) Justification on consumer protection adopt unilateral measures to set premiums grounds in the interest of consumer protection, the question arises whether those measures are in proportion to the objective pursued.

55. The freedom to set premiums, as a fundamental element of the liberalisation of the insurance sector, likewise cannot be regarded as a minimum requirement in B — Infringement of Article 44 of the respect of which the Member State may directive through the gathering of infor- provide for a higher level of protection, if mation in the State of activity necessary in compliance with all the con- ditions governing a permissible legal provi- sion protecting the general good. 59. In principle, under Article 6 of Direc- tive 92/49 the home State of the insurance undertaking is competent for the authori- sation and supervision of that undertaking. Under Article 6 of Directive 92/49 the 56. However, even if it is assumed that the receiving State has only limited supervisory Member State still had the opportunity to powers with respect to compliance with the relevant national provisions. Under Article 35 of the directive, it is sufficient 13 — Case 205/84 Commission v Germany [1986] ECR 3755. for the authorities in the State of activity to

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be informed about the activity of the respect, the Italian Government refers insurance undertaking and to be allowed expressly to the judgment in Schindler, 14 access to certain documents. However, in which the Court recognised that 'pro- these do not include the general and special tection of the recipients of the service and, conditions of the policy. In this regard, the more generally, of consumers' 15 figures directive merely permits, in Articles 29 and among the considerations which can justify 39(2), a non-systematic notification of restrictions on freedom to provide services. those conditions and other documents and that requirement may not constitute a prior condition for an undertaking's carrying on its business.

62. The Italian Government claims, how- ever, that the provisions in question were 14 — Case C-275/92 (cited in footnote 7). 15 — Schindler (cited in footnote 7, paragraph 58). adopted to protect the general good and 16 — See the operative part of the judgment in Schindler (cited in served primarily to combat fraud. In this footnote 7).

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tation that has already been submitted. The activity appears to be a restraint on econ- mutual recognition of the authorisation of omic activity and not an increase in the insurance undertakings and the notification level of consumer protection. of essential information on the activities of undertakings through official channels is intended to prevent potential restrictions hampering the exercise of the right of establishment and freedom to provide ser- vices. 67. The additional compulsory financial participation in the establishment of a system whose function is to procure infor- mation on transactions which may already be demanded through official channels, at 65. The Italian Government could success- least with respect to undertakings operating fully rely on provisions adopted to protect under the right of establishment or freedom the general good for purposes of consumer to provide services in that Member State, protection only if the information obli- must therefore be regarded as a further gations governed in the directive were unjustified restriction of those fundamental minimum standards in respect of which freedoms. the Member State was free to guarantee a higher level of protection.

(a) the principle of freedom to set premiums and the abolition of prior or systematic controls over premiums and contracts within the meaning of Articles 6, 29 and 39 of Directive 92/49 and

(b) the provisions of Article 44 of Directive 92/49 governing the gathering of information.

(2) order the Italian Republic to pay the costs of the proceedings.

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