EU banking and financial law: A proper application of the principle of home country control and of the duty of mutual cooperation between authorities

PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingOnix Asigurari SA
Istituto per la Vigilanza Sulle Assicurazioni (IVASS)
CJEU3rd Ch.J. MalenovskýY. BotHome country control principle and duty of cooperation with the host country
KeywordsReference for a preliminary ruling — Directive 73/239/EEC — Directive 92/49/EEC — Principle of single authorisation — Principle of supervision by the home Member State — Article 40(6) — Concept of ‘irregularities’ — Reputation of shareholders — Prohibition on insurance companies established in a Member State concluding new contracts within the territory of another Member State
Significant pointsThis request for preliminary ruling concerned the interpretation of Article 40(6) of Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and amending Directives 73/239/EEC and 88/357/EEC.

A dispute arose between Onix Asigurari SA, a Romanian insurance company, which has provided its services on the Italian market since 2012 under the freedom to provide services and the Istituto per la Vigilanza Sulle Assicurazioni (IVASS), the Italian insurance supervisory authority. According to the information provided by the Romanian financial supervisory authority (ASF) to the IVASS, the reference shareholder of Onix was found by the IVASS to have not satisfied the reputation requirements necessary to provide insurance cover in Italy under the principle of single authorisation.

Consequently and after the ASF’s inability to revoke Onix’s single authorisation, the IVASS adopted, inter alia, a decision on the basis of Article 40(6) of Directive 92/49 prohibiting Onix from concluding new insurance contracts in Italy, the aim being the protection of the interests of Italian insured persons.

After having lodged an unsuccessful complaint with the European Insurance and Occupational Pensions Authority, Onix brought the case before the GC, the Regional Administrative Court in Lazio (Italy) and the Italian Council of State. The latter decided to stay the proceedings and refer a preliminary question to the CJ regarding the principle of single authorisation for insurance undertakings and the supervision of their compliance with the reputation condition in the home Member State. More specifically, doubts were raised in the questions referred as to whether or not the supervisory authority of the Host Member State of an insurance operator was allowed to issue, in cases of emergency, decisions prohibiting the conclusion of new contracts in the host State for the reason of non-compliance with the requirement of good repute, being a precondition for the authorisation to engage in insurance business.

First of all, the CJ pointed out that, in accordance with the objective pursued by the directive, only the authorities of the home Member State were allowed to grant and withdraw the single authorisation to an insurance company and were therefore also competent to judge on the requirement of good repute of the companies’ directors (paragraphs 43, 44 and 49). However, the CJ concluded that the directive did not preclude that the Host Member States could adopt, in situations of emergency, appropriate measures in order to ensure the protection of the interests of insured persons against a real and imminent danger of irregularities committed on its territory (paragraph 50). Nevertheless, these specific prerogatives were only valid if the measures adopted were protective and pending a decision by the competent authority of the home Member State (paragraphs 49 and 52). The latter still had to take into account the evidence identified by the Member State where the services were provided in order to respect the principle of legal certainty (paragraph 52).
NoteworthyThis judgment is to be approved. It ensure the perfect application of two overarching principles of the normal EU regime of supervision of financial operators benefiting from a unique licence which is granted by a national competent authority (by contrast to the still more exceptional situations where the licence is granted by an EU authority like the ECB or the ESMA): the principle of home country control and the duty of fair cooperation between the home country authority and the host country equivalent. In addition, it requires that the Host Member State authority take measures where it establishes (i) a real and imminent danger of irregularities (ii) committed on its territory. Otherwise, the risk would be too great that the Host Member State circumvents the home country control principle.

Following the recent judgment of the General Court in T-122/15 Landeskreditbank Baden-Württemberg v. ECB concerning the Banking Union and the allocation of powers between the ECB and the national supervisory banking authorities, this case provides a perfect illustration of how prudential supervision may be shared between the authorities of the home Member State of the service provider and the host Member State where the service is provided.