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Brussels, 30 July 1999

Financial services: infringement procedures against Italy, Spain, Austria, France and Luxembourg

The European Commission has decided to refer Italy to the European Court of Justice (ECJ) for failure to implement (as regards insurance companies) the so-called "post-BCCI" Directive on supervision of financial institutions. It has also decided to refer Spain to the ECJ because it imposes prior authorisation requirements on insurance agents and brokers established in other Member States who wish to offer their services in Spain. Finally, the Commission has decided to send "reasoned opinions" (second stage of infringement proceedings under Article 226 (ex-169) of the EC Treaty) to Austria, France and Luxembourg for failure to implement the Directive on investor compensation schemes. Should a Member State which has received a reasoned opinion fail to give a satisfactory reply within two months, the Commission may refer the case to the ECJ.

"Post-BCCI" Directive

The so-called "post-BCCI" Directive (95/26/EC) amends a series of Directives on banking, insurance, transferable securities and undertakings for collective investment in transferable securities (UCITS) so as to strengthen the competent authorities' power to carry out proper supervision of financial institutions (see IP/95/640). The Directive was due to be implemented by 18 July 1996, but Italy has not yet introduced the measures necessary to apply the Directive's provisions to the insurance sector.

Insurance agents and brokers Directive

The Commission has decided to refer Spain to the ECJ because Spanish legislation is incompatible with the EU Treaty rules on freedom to provide services (Article 49, ex 59). The Spanish authorities impose a prior authorisation requirement not only for those wishing to set up in business as an agent or broker in Spain but also for those wishing to provide services temporarily. According to a number of rulings by the ECJ, this practice is contrary to Article 49 of the Treaty inasmuch as service providers may not be made subject to the same conditions as those who are establishing themselves on a permanent basis. Nor is the requirement justified by any general interest considerations, such as the need to protect consumers in the Spanish market, since it is neither necessary nor proportional to the objective pursued.

Investor compensation Directive

The investor compensation Directive (97/9/EC) was adopted by the European Parliament and the Council of Ministers on 3 March 1997 (see IP/97/138) with a view to increasing smaller investor's confidence. The Directive requires Member States to ensure that one or more schemes are in place to compensate investors (essentially for smaller investors) in the case of failure of an investment firm (bank or non-bank), where the firm proves unable to refund to investors the money or securities belonging to them. Losses incurred as a result of customers' investments losing market value are not covered by the Directive. Member States may set a ceiling on the level of compensation but such a ceiling cannot be less than 20,000 euro (or 15,000 euro until 31 December 1999 in Member States where the ceiling was below 20,000 euro when the Directive was adopted). The Directive leaves Member States free to decide about both the internal organisation of the scheme and the way it is financed. Member States were due to implement the Directive by 28 September 1998, but Austria, France and Luxembourg have not yet notified national measures to do so.

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