Opinion of the Advocate-General
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Mr President,
Members of the Court,
A ° Introduction
1. The present reference for a preliminary ruling from the Belgian Raad van State concerns the interpretation of Article 55 of the EEC Treaty. It relates to the question whether it is permissible under Community law for admission to the office of approved commissioner to be reserved to Belgian nationals.
2. The supervision of the activities of insurance undertakings in Belgium is governed by the Law of 9 July 1975 on the regulation of insurance undertakings (1) (hereinafter "the Law"). According to Article 29 et seq. of the Law, the supervision is carried out by a supervisory authority, the Controledienst voor de Verzekeringen (hereinafter the "Insurance Inspectorate"). The Insurance Inspectorate has the task of supervising the application of the Law and its implementing regulations.
3. Under Belgian law, undertakings whose financial situation and annual accounts are subject to an obligatory audit must appoint one or more auditors for this purpose. (2) Article 38 of the Law requires that for Belgian insurance undertakings which take the form of a commercial company or association one (at least) of these auditors (hereinafter "approved commissioners") must be a member of the Belgian Institute of Auditors who has been approved by the Insurance Inspectorate. (3) Foreign insurance undertakings must also appoint an approved commissioner for the particular purpose of managing their operations in Belgium.
4. This approved commissioner ("erkende commissaris" or "commissaire agréé") performs his duties under the supervision of the Insurance Inspectorate. First, he must fulfil the duties of an ordinary auditor, that is, he must examine the financial situation and annual accounts of the undertaking. In addition, he has the task of immediately bringing to the notice of the undertaking and of the Insurance Inspectorate any infringement of the Law on the regulation of insurance undertakings and of its implementing regulations, and anything which in his opinion could jeopardize the financial position of the undertaking (Article 40(2) of the Law). Moreover, Article 40(4) of the same Law provides that:
"Should an approved commissioner obtain knowledge of a decision by the undertaking the implementation of which might constitute an offence, he shall veto such implementation and refer the matter to the Inspectorate forthwith. His veto shall have suspensory effect for a period of eight days."
According to Article 55, if the provisions of the Law or of its implementing regulations are infringed, the persons responsible shall be liable to imprisonment or a fine or both.
5. Mr Thijssen, a Netherlands national, applied in 1986 for admission to the office of approved commissioner. His application was rejected by the Insurance Inspectorate on the basis of Article 2(1)(1) of Regulation No 6 of 15 January 1986 (4) (implementing the Law on the regulation of insurance undertakings), according to which only Belgian nationals may be admitted as approved commissioners.
6. Mr Thijssen brought an action for annulment of that decision before the Raad van State, which referred the following question to the Court of Justice for a preliminary ruling:
Does the derogation from the principle of freedom of establishment provided for in the first paragraph of Article 55 of the EEC Treaty apply to the office of approved commissioner introduced by Articles 38 to 40 of the Belgian Law of 9 July 1975 on the regulation of insurance undertakings?
B ° Opinion
7. According to the first paragraph of Article 55 of the EEC Treaty, the provisions on freedom of establishment (Article 52 et seq. of the EEC Treaty) do not apply to activities which in a Member State are connected either permanently or occasionally with the exercise of official authority.
8. However, because of the fundamental importance of the principle of freedom of establishment within the framework of the Treaty, (5) this provision is to be interpreted restrictively. The derogations which it permits cannot extend beyond "the objective for which this exemption clause was inserted". (6) The provision is therefore to be restricted to activities which in themselves "involve a direct and specific connection with the exercise of official authority". (7) If a profession entails activities which are connected with the exercise of official authority, an extension of the derogation provided for in Article 55 to the profession as a whole is possible only if those activities are linked with the profession in such a way that they cannot be regarded as separable from it. (8)
9. The first question to be examined, therefore, is whether an approved commissioner is entrusted with the exercise of official authority.
The exercise of official authority
10. The activities of the Insurance Inspectorate, as all those involved in the proceedings have acknowledged, are undoubtedly connected with the exercise of official authority. The function of supervising insurance undertakings which has been conferred by statute on the Insurance Inspectorate is intended to protect insured parties and the general interest. For the purpose of performing this task, the authority can, in its regulatory capacity, intervene directly in the business activities of insurance undertakings by means of preventive and positive measures.
11. In my opinion the activities of an approved commissioner, too, are connected with the exercise of official authority.
12. In examining this question, however, it is necessary to distinguish between the activities of an "ordinary" auditor and the special duties and powers which the Law on the regulation of insurance undertakings confers upon approved commissioners.
13. An auditor has the task of auditing a company' s finances and annual accounts and of presenting to the general meeting a report on the audits which he has carried out. In order to carry out these audits, he is empowered to inspect the company' s records at any time and to obtain all necessary information from the persons responsible. (9) These activities, as the Belgian Government has confirmed in its submissions, are not connected with the exercise of official authority.
14. Of the special tasks entrusted to the approved commissioner under the Law on the regulation of insurance undertakings, the duty to report to the Insurance Inspectorate either regularly or upon request and to notify any particular circumstances should be considered first. The United Kingdom regards this as an intrusion into the private commercial sphere of the undertaking concerned, and concludes from this that an approved commissioner does exercise official authority. Against this it may be argued that the performance of these duties cannot be regarded as an exercise of official authority because there is no act of public power which would affect the rights of the undertaking or impose obligations upon it. Admittedly, the approved commissioner' s fulfilment of his duty to report and inform also serves the public interest. This alone, however, does not suffice to invest his activities with the character of an exercise of official authority. Thus, for example, Council Directive 91/308/EEC (10) of 10 June 1991 on the prevention of the use of the financial system for the purpose of money laundering, to which Mr Thijssen' s lawyer referred (in another connection) during the hearing, provides in Article 6 that credit and financial institutions are to report any suspicious facts to the responsible authorities on their own initiative. It could hardly be maintained that this represents the exercise of official authority on the part of the banks.
15. The same holds true, of course ° a fortiori ° for the approved commissioner' s duty to indicate to the insurance undertaking itself any infringement of the Law or circumstances which might jeopardize the financial position of the undertaking. Undertakings are not obliged to act on any such indication.
16. Again, an approved commissioner' s power to obtain from the undertaking the information necessary for the fulfilment of his tasks is, contrary to the opinion of the United Kingdom, immaterial in this regard. This power is not derived from the Law on the regulation of insurance undertakings but from the general provisions of company law already mentioned. (11) It is evident that the use of such a right cannot be construed as the exercise of official authority.
17. The fact that the approved commissioners must swear on oath faithfully to fulfil the duties conferred upon them likewise does not strike me as decisive. The act of swearing an oath sheds no light on the question whether the activities whose performance the oath is intended to secure are such as to involve the exercise of official authority.
18. What is crucial in my view is rather the fact that an approved commissioner has the power ° and the duty ° to veto the implementation of certain measures. The Commission is justified, it is true, in arguing that the term "veto" is not wholly appropriate here, as it concerns not the prevention of a measure but its (temporary) suspension. Nonetheless, the fact remains that the insurance undertaking may not put the intended measure into effect for a maximum period of eight days. In commercial life, however, even a postponement as short as this can have serious or irreversible consequences ° one need only think of planned takeover bids or other stock market transactions where the time factor is all-important. In any case, what is at issue here is an act of intervention in the activities of an insurance undertaking which has the effect of imposing a direct legal obligation upon it. Hence, such measures on the part of the Insurance Inspectorate constitute an exercise of official authority even when they emanate not from the Inspectorate itself but from a person acting for it in an auxiliary capacity.
19. In this respect the activities of an approved commissioner differ from those, say, of a legal practitioner (avocat) (12) or of a traffic accident expert, (13) both of which the Court had to examine in previous cases. In those cases it was central to the reasoning of the Court that the exercise of the (typical) tasks of an avocat and experts' reports regarding traffic accidents are not binding on the courts but "leave the discretion of judicial authority and the free exercise of judicial power intact". (14) Likewise, the measures taken by an approved commissioner do not pre-empt the decision of the Insurance Inspectorate. However, that does not alter the fact that those measures can have practical consequences which even the Insurance Inspectorate cannot reverse. The United Kingdom has rightly argued in this connection that such a measure on the part of an approved commissioner resembles, in terms of its effect, an interim measure of a court.
20. Solely for the sake of completeness I would like to add that the fact that an approved commissioner is remunerated by the undertaking concerned and not by the Insurance Inspectorate (or directly by the State) does not alter anything in the nature of his activities. It is equally immaterial that the approved commissioner must decide independently on the basis of the law whether, and if so when, he should enter his veto, without being bound by instructions from the Insurance Inspectorate. A judge, too, is independent and subject only to the law, and still exercises official authority.
Scope of the derogation in Article 55
21. Although an approved commissioner may thus find himself in situations in which he exercises official authority, the question remains whether his activities fall within the scope of the derogation in Article 55. Doubts arise immediately as to whether his activities constitute "direct and specific" involvement in the exercise of official authority, in the way that the Court (as already mentioned (15)) required in its decision in Reyners. The exercise of the right of veto on the part of an approved commissioner clearly serves the purpose of enabling the Insurance Inspectorate to take whatever steps are necessary. This is also why the effect of such a veto is only temporary. In this respect the approved commissioner acts simply as an auxiliary agent of the Inspectorate.
22. The last-mentioned consideration raises a further question. If the essential task of an approved commissioner is to preserve the status quo temporarily by exercising his right of veto so as to enable the Insurance Inspectorate to intervene, then it may be asked whether this activity is indeed so closely bound up with the profession of approved commissioner as such that it cannot be separated from it. In the modern age of telecommunications, it is entirely conceivable that the purpose of this provision could just as readily be achieved by the approved commissioner simply informing the Insurance Inspectorate, and the latter itself then ordering the temporary suspension of the transaction concerned.
23. In addition, it should be noted that the exceptions to the principle of the right of establishment recognised in Article 55 are subject to restrictions imposed by Community law, the purpose of which is to prevent the "effectiveness of the Treaty in this area" from being undermined by unilateral provisions adopted by the Member States. (16) The purpose of the first paragraph of Article 55 is to allow Member States to prevent access by non-nationals to functions involving the exercise of official authority. (17) However, that is a derogating provision, which is to be strictly interpreted. The scope of Article 55 is thus limited to "what is strictly necessary in order to safeguard the interests which it allows the Member States to protect". (18)
24. In my view the Belgian regulation does not conform to these requirements. Approved commissioners are (ordinary) auditors who are admitted on the basis that they fulfil certain conditions and who by virtue of the Law on the regulation of insurance undertakings have been entrusted with certain specific additional tasks. It should be recalled that, in the (Eighth) Council Directive of 10 April 1984 on the approval of persons responsible for carrying out the statutory audits of accounting documents, (19) minimum requirements were established with regard to the qualifications to be demanded of an auditor. The Commission rightly points out in this regard that Article 2(1) Nos 2 to 9 (20) of Regulation No 6 make admission to the office of approved commissioner dependent on the fulfilment of stringent conditions, particularly in respect of the requisite professional experience. It is in fact not clear on what grounds a particular nationality should also be deemed necessary for the office.
25. It must be borne in mind here that there is no doubt that an auditor as such can invoke the right to freedom of establishment guaranteed in Article 52. It would amount to disproportionate interference with the principle of freedom of establishment if this basic right could be denied solely because of the possibility of intervention (in the form of the right of veto) granted to an approved commissioner, all the more so as it is not clear to what extent the exclusion of citizens of other Member States would be an appropriate means of realizing the objectives of the Belgian Law on the regulation of insurance undertakings.
26. Above all, however, it should be pointed out that the manner in which the Belgian State itself has proceeded shows that the Belgian rules do not conform to the requirements of Article 55 of the Treaty.
27. The condition of Belgian nationality was introduced only in 1986. It is significant that Article 3(1)(1) of Regulation No 2 of 20 November 1978 (21) still provided that citizens of other Member States, and even of non-EC States, could be admitted subject to certain conditions. (22) The regulation was repealed in 1986 by the afore-mentioned Regulation No 6, (23) which specified, however, that persons who had previously obtained admission under the provisions of Regulation No 2 could retain their status as approved commissioner. (24) This means that citizens of other Member States who were admitted between 1978 and 1986 can still pursue their activities without restriction today.
28. Member States are free to choose not to use the derogation provided for in Article 55. An instance of that is to be found in the "Statement on prophylaxis and the inspection of animal foodstuffs and foodstuffs of animal origin". (25) In this statement the Member States undertook to limit the application of Article 55 with respect to the activities of veterinary surgeons.
29. With regard to the present case, it is my view that by issuing Regulation No 2 in 1978, Belgium indicated that possession of Belgian nationality was not necessary for the exercise of the activities of approved commissioner. The fact that citizens of other Member States were admitted shows that the interests which could justify an exception to the principle of freedom of establishment are not affected.
30. A different assessment would be justified perhaps if it were necessary to introduce the condition of Belgian nationality in order to deal with abuses which might have arisen due to the prior admission of non-nationals. However, no submissions have been made to this effect.
31. The Court requested the Belgian Government to state the reasons for introducing the condition of Belgian nationality. The Belgian Government' s answer consisted simply in the somewhat laconic remark that it "was judged necessary". I have submitted this observation to thorough scrutiny but have been unable to derive any greater insight from it than that which Faust says he has gained from the study of law and other subjects.
32. It must be concluded therefore that the reasons which, in 1986, caused Belgium to make admission to the office of approved commissioner subject to the possession of Belgian nationality remain unexplained. It is not possible, therefore, to establish whether the regulation was "strictly necessary" for the protection of those interests which Article 55 allows Member States to safeguard. Article 55 of the EEC Treaty therefore provides no basis for the introduction of the requirement of Belgian nationality for approved commissioners.
33. The fact that the Member States may use the derogation provided for in Article 55 even after the end of the transitional period does not affect that assessment. As is well known, a corresponding obligation not to introduce restrictive legislation with regard to the freedom of establishment of non-nationals is provided for in Article 53 of the EEC Treaty. According to Article 55, however, the provisions of the Chapter on freedom of establishment ° and so too those of Article 53 ° are not applicable to activities which are connected with the exercise of official authority. This case is not concerned with the (undisputed) right of Belgium to make use of the derogation in Article 55, however; what is to be clarified is whether, in 1986, Belgium could make possession of Belgian nationality a condition for admission to the office of approved commissioner. The issue is thus whether the Belgian regulation complied with the requirements of the principle of proportionality, and in particular whether it was strictly necessary for the protection of the interests covered by Article 55. For the reasons stated above, that question is to be answered in the negative.
C ° Conclusion
I therefore propose that the question submitted to the Court be answered as follows:
The exception to the principle of the freedom of establishment provided for in Article 55 of the EEC Treaty is not applicable to the office of approved commissioner introduced by Articles 38 to 40 of the Belgian Law of 9 July 1975 on the regulation of insurance undertakings.
(*) Original language: German.
(1) ° Wet betreffende de controle der verzekeringsondernemingen, Belgisch Staatsblad, 29 July 1975, p. 9267
(2) ° See Article 64 of Part Nine of the First Book of the Code de Commerce (for commercial companies).
(3) ° Similar provisions apply under Article 38(3) to undertakings in the form of mutual insurance societies and non-profit-making associations.
(4) ° Belgisch Staatsblad of 26 March 1986, pp. 3978 and 3985.
(5) ° See, for instance, the judgment in Case 197/84 Steinhauser v City of Biarritz [1985] ECR 1819, at paragraph 14.
(6) ° Case 2/74 Reyners v Belgian State [1974] ECR 631, at paragraph 43.
(7) ° Ibid., paragraph 54.
(8) ° Ibid., paragraphs 46 and 47.
(9) ° See Article 64 et seq. of Part Nine of the First Book of the Code de Commerce.
(10) ° OJ 1991 L 166, p. 77.
(11) ° As is confirmed by Article 40(3) of the Law on the regulation of insurance undertakings, an approved commissioner has, besides the particular functions laid down by this Law, the general duties (and so too the rights) of an ordinary auditor as well.
(12) ° Case 2/74, loc. cit. (footnote 6).
(13) ° Case C-306/89 Commission v Greece [1991] ECR I-5863.
(14) ° Case 2/74, loc. cit. (footnote 6), at paragraphs 52 and 53; Case 306/89, loc. cit. (footnote 3), at paragraph 7.
(15) ° Above, point 8.
(16) ° Case 147/86 Commission v Greece [1988] ECR 1637, at paragraph 8.
(17) ° Case 2/74, loc. cit. (footnote 6), paragraph 44.
(18) ° Case 147/86, loc. cit. (footnote 6), paragraph 7 (my emphasis).
(19) ° OJ 1984 L 126, p. 20.
(20) ° No 10 of this regulation contains a further condition, which the Commission appears to have overlooked.
(21) ° Belgisch Staatsblad, 15 December 1978, p. 15569.
(22) ° For the specific conditions see the text of the provision reproduced in section 1.1.4 of the Report for the Hearing.
(23) ° Above, footnote 3.
(24) ° Article 20 of Regulation No 6.
(25) ° OJ 1978 C 308, p. 1.
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