Court of Justice of the European Communities (including Court of First Instance Decisions)

OPINION OF ADVOCATE GENERAL

Mazák

delivered on 9 September 2008 (1)

Case C-518/06

Commission of the European Communities

v

Italian Republic

(Failure of a Member State to fulfil obligations Articles 43 EC and 49 EC Right of establishment Freedom to provide services Non-life-insurance Compulsory third-party motor vehicle liability insurance Obligation to contract Directive 92/49/EEC Premium rates)

I Introduction

1. In these proceedings pursuant to Article 226 EC, the Commission contends that the Italian Republic by imposing, inter alia, an obligation to contract on insurance undertakings which are authorised to provide compulsory third-party motor vehicle liability insurance in Italy is in breach of its obligations under Articles 43 EC and 49 EC. Italian law obliges such undertakings to provide coverage for compulsory third-party motor vehicle liability insurance to all categories of insured persons in all regions of Italy. The Commission also contends that by introducing and maintaining in force legislation pursuant to which premiums for third-party motor vehicle liability insurance must be calculated on the basis of fixed parameters and by making the premiums for such insurance subject to ex post controls, the Italian Republic is in breach of its obligations under Articles 6, 9, 29 and 39 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 (third non-life-insurance Directive). (2) The obligations in question apply to undertakings which have their head office in Italy and to undertakings which have their head office in another Member State, but operate in Italy under the freedom of establishment or the freedom to provide services. Infringement of the Italian legislation in question may lead to the imposition of penalties by Istituto per la vigilanza sulle assicurazioni private e di interesse collettivo ('ISVAP'), the Italian supervisory body for private insurance.

II Legal context

A Community legislation

2. Article 6 of Directive 92/49, which is included in Title II headed 'The taking up of the business of insurance', provides:

'...

3. Nothing in this Directive shall prevent Member States from maintaining in force or introducing laws, regulations or administrative provisions requiring approval of the memorandum and articles of association and communication of any other documents necessary for the normal exercise of supervision.

Member States shall not, however, adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums and forms and other printed documents which an undertaking intends to use in its dealings with policyholders.

Member States may not retain or introduce prior notification or approval of proposed increases in premium rates except as part of general price-control systems.

...'

3. Article 9 of Directive 92/49, which is included in Title III headed 'Harmonisation of the conditions governing the business of insurance', provides:

'...

1. The financial supervision of an insurance undertaking, including that of the business it carries on either through branches or under the freedom to provide services, shall be the sole responsibility of the home Member State.

2. That financial supervision shall include verification, with respect to the insurance undertaking's entire business, of its state of solvency, of the establishment of technical provisions and of the assets covering them in accordance with the rules laid down or practices followed in the home Member State under provisions adopted at Community level. ...

3. The competent authorities of the home Member State shall require every insurance undertaking to have sound administrative and accounting procedures and adequate internal control mechanisms.'

4. Article 29 of Directive 92/49, which is also included in Title III, states:

'Member States shall not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums, or forms and other printed documents which an insurance undertaking intends to use in its dealings with policyholders. They may only require non-systematic notification of those policy conditions and other documents for the purpose of verifying compliance with national provisions concerning insurance contracts, and that requirement may not constitute a prior condition for an undertaking's carrying on its business.

Member States may not retain or introduce prior notification or approval of proposed increases in premium rates except as part of general price-control systems.'

5. Article 39 of Directive 92/49, which is included in Title IV headed 'Provisions relating to right of establishment and the freedom to provide services', provides:

'...

2. The Member State of the branch or of the provision of services shall not adopt provisions requiring the prior approval or systematic notification of general and special policy conditions, scales of premiums, or forms and other printed documents which an undertaking intends to use in its dealings with policyholders. It may only require an undertaking that proposes to carry on insurance business within its territory, under the right of establishment or the freedom to provide services, to effect non-systematic notification of those policy conditions and other documents for the purpose of verifying compliance with its national provisions concerning insurance contracts, and that requirement may not constitute a prior condition for an undertaking's carrying on its business.

3. The Member State of the branch or of the provision of services may not retain or introduce prior notification or approval of proposed increases in premium rates except as part of general price-control systems.'

B National legislation

6. Article 11(1) of Law No 990 of 24 December 1969 (published in the Official Journal of the Italian Republic, No 2 of 3 January 1970) relating to compulsory insurance against civil liability in respect of the use of motor vehicles and craft ('Law No 990') provides:

'Insurance undertakings shall be required, on the basis of the contract terms and insurance rates approved or established by the Minister for Industry, Commerce and Small Craft Industries, to accept the proposals regarding compulsory insurance which are submitted to them in accordance with the present law.'

7. Article 11(1)(a) of Law No 990 provides:

'In compliance with the obligations envisaged under paragraph 1, undertakings, when calculating their premium rates, shall calculate pure premiums and loadings separately, according to their technical bases that must be sufficiently broad and refer to at least five years. If these bases are not available undertakings can use market statistics. If ISVAP ascertains that there is a circumvention of the obligation to provide insurance in respect of specific territorial areas or specific categories of policyholders, a penalty is applied of 3% of the premium relating to motor liability insurance as shown in the last balance sheet approved, with a minimum of one million euros up to a maximum of five million euros. In case of repeated circumvention of the obligation to insure the authorisation to pursue an activity in the field of civil liability insurance in respect of the use of motor vehicles may be withdrawn.'

8. Article 12(a) of Law No 990 provides:

'1. To guarantee disclosure and competition in the supply of insurance services as well as adequate information for users, undertakings which operate in the field of compulsory insurance against civil liability in respect of the use of motor vehicles and craft shall make available to the public the premiums and the general and special contract terms applied in the territory of the Italian Republic.

2. The premiums applied, as fixed by each insurance undertaking, to policyholders which are in the category with the maximum bonus over the previous two years, must be uniform for the whole of the national territory.

3. Advertising of premiums and contract terms pursuant to paragraph 1 shall be undertaken at each point of sale of the insurance undertaking and through internet sites thereby enabling users to calculate premiums and obtain information on the terms of insurance contracts for the vehicles, motorcycles, mopeds and crafts to be insured.

...

5. Each breach or incomplete execution of the obligations contained in paragraphs 1 and 3 shall be subject to an administrative sanction varying from EUR 2 600 to EUR 10 300. In the event of an omission or delay which exceeds 30 days, the sanction shall be doubled.'

9. Article 12(d)(1) of Law No 990 provides:

'Breach or circumvention by insurance undertakings of the obligation to accept the proposals of potential policyholders in accordance with Article 11 in relation to compulsory insurance against civil liability in respect of the use of motor vehicles and craft shall be subject to a sanction varying from three to nine million Lire in accordance with the breach committed.'

10. The obligation to contract provided by Article 11(1) of Law No 990 was maintained in force pursuant to Article 132(1) of Legislative Decree No 209 of 7 September 2005 Code of Private Insurance (published in the Official Journal of the Italian Republic, No 239 of 13 October 2005) (the 'Code'), which entered into force on 1 January 2006. Article 132(1) of the Code provides:

'Insurance undertakings shall be required, on the basis of the contract terms and insurance rates they must establish in advance for any risk in respect of the use of motor vehicles and craft, to accept the proposals regarding compulsory insurance which are submitted to them, without prejudice to the necessary assessment of the correctness of the data shown in the certificate of claims experience, and the identification of the policyholder and the vehicle's owner, if other than the policyholder.'

11. Article 132(2) of the Code, which establishes an exception to the general obligation to contract contained in Article 132(1) of the Code, provides:

'Insurance undertakings may request that the authorisation be limited to fleet business for the purposes of compliance with the obligations arising from paragraph 1.'

12. Article 11(1)(a) of Law No 990 was replaced by Articles 35(1) and 314(2) of the Code. Article 35(1) of the Code provides:

'When determining premium rates the undertaking shall calculate pure premiums and loadings separately and consistently with its technical bases, which shall be large enough and spanning at least five financial years. Where these bases are unavailable the undertaking may use market statistical data.'

13. Article 314(2) of the Code provides:

'The breach or circumvention of the obligation to insure set forth in Article 132(1), which has been committed with respect to certain territorial areas or single categories of policyholders, shall be punished with a pecuniary administrative sanction varying from one million to five million euros.'

14. Article 12(a) of Law No 990 was replaced by Articles 131 and 313 of the Code. Article 131 of the Code provides:

'1. To guarantee disclosure and competition in the supply of insurance services as well as adequate information for those who must comply with the obligation to insure motor vehicles and craft, undertakings shall make available to the public an information note and the contract terms applied in the territory of the Italian Republic at any point of sale and on the internet.

2. Advertising of premiums shall be undertaken by means of customised estimates issued at any point of sale of the insurance undertaking and through internet sites from which it shall be possible to receive the same estimate for the vehicles and craft indicated in the implementation regulation. ...

3. ISVAP shall, by its own regulation, establish the duties imposed on undertakings and intermediaries.'

15. Article 313 of the Code provides:

'Non-compliance with the obligations set forth in Article 131 shall be punished with a pecuniary administrative sanction varying from one thousand to ten thousand euros.'

16. Article 12(d)(1) of Law No 990 was replaced by Article 314(1) of the Code which provides:

'The refusal to perform or circumvention of the obligation to insure set forth in Article 132(1), shall be punished with a pecuniary administrative sanction varying from one thousand five hundred to four thousand five hundred euros.'

III Pre-litigation procedure and court proceedings

17. By letter dated 22 March 2004, the Commission informed the Italian authorities that it considered that Articles 11(1), 11(1)(a), 12(a) and 12(d) of Law No 990 as modified were not compatible with Articles 6, 29 and 39 of Directive 92/49. By letter dated 8 June 2004, the Italian authorities indicated that they considered that the Italian legislation on compulsory third-party motor liability insurance was compatible with Community law and in particular with Articles 6, 29 and 39 of Directive 92/49.
18. On 9 July 2004, the Commission sent the Italian Republic a letter of formal notice. The Commission indicated that it had received complaints, from three insurance companies offering motor insurance in Italy under the freedom to provide services, concerning the application of Article 11(1)(a) of Law No 990 by ISVAP. The Commission considered that the Italian Republic had failed to comply with Articles 6, 29 and 39 of Directive 92/49 and invited that Member State to submit observations within a period of two months. By letter of 31 August 2004, the Italian Republic replied to the Commission's letter of formal notice, indicating that it considered that Italian law fully complied with Community law.
19. On 22 December 2004, the Commission sent a supplementary letter of formal notice to the Italian Republic in the wake of the judgment of the Court in CaixaBank France. (3) The Commission considered, in particular, that the obligation to contract imposed on all undertakings authorised to provide compulsory third-party motor vehicle liability insurance in Italy is a restriction of the right of establishment pursuant to Article 43 EC and the freedom to provide services pursuant to Article 49 EC. The Commission invited the Italian Republic to submit observations within a period of one month.
20. In the absence of any response to its supplementary letter of formal notice, the Commission, on 18 October 2005, sent the Italian Republic a reasoned opinion. The Commission stated in its reasoned opinion that it considered that the Italian Republic had failed to comply with its obligations pursuant to Articles 6, 29 and 39 of Directive 92/49 and Articles 43 EC and 49 EC. The Commission called on the Italian Republic to take the measures necessary to comply with that reasoned opinion within two months of its notification.
21. On 3 November 2005, the Italian Republic notified the Commission of the publication of the Code in the Official Journal of the Italian Republic (la Gazzetta Ufficale della Repubblica Italiana). The Italian Republic considered that Article 132(2) of the Code, which provides that an insurance undertaking may request that its authorisation be limited to fleet business, satisfies the objections raised by the Commission in its letter of formal notice.
22. By letter of 30 December 2005, the Italian Republic claimed, in reply to the Commission's reasoned opinion, that Italian legislation fully complies with Community law. The Italian Republic also stated that the proceedings by ISVAP against the three insurance companies offering motor insurance in Italy under the freedom to provide services which complained to the Commission had been suspended. In addition, the Italian Republic once again drew the Commission's attention to Article 132(2) of the Code.
23. In the light of the Italian Republic's response to the Commission's reasoned opinion, the Commission, on 10 April 2006, sent an additional reasoned opinion to that Member State. The Commission stated that the obligation to contract, contained in Article 11(1) of Law No 990, is linked to the obligation imposed on insurance undertakings to calculate their premium rates according to their technical bases that must be sufficiently broad and refer to at least five years. According to the Commission, the regulation of premium rates is contrary to Articles 6, 29 and 39 of Directive 92/49. In addition, the Commission considered that the financial supervision exercised by ISVAP in relation to the calculation of premium rates infringes Article 9 of Directive 92/49 which provides that the responsibility for such supervision lies with the home Member State. The Commission also considered that the obligation to contract contained in Article 11(1) of Law No 990 is an unjustified restriction of the freedom of establishment pursuant to Article 43 EC and the freedom to provide services pursuant to Article 49 EC.
24. On 18 May 2006, in response to the Commission's additional reasoned opinion, the Italian Republic restated that it considered that the obligation to contract imposed by Italian law and the rules in relation to the calculation of premium rates complied with Community law. The Italian Republic once again drew the Commission's attention to the terms of Article 132(2) of the Code. Moreover, the Italian Republic stated that the provisions of Italian law in question were justified, inter alia, on grounds of public interest.
25. Since it considered that the Italian Republic's arguments in reply to the additional reasoned opinion were insufficient, the Commission decided to bring the present action.
26. By order of the President of the Court of 21 June 2007, the Republic of Finland was granted leave to intervene in support of the form of order sought by the Italian Republic.
27. Written observations were submitted by the Commission, the Italian Republic and the Republic of Finland. The Commission and the Italian Republic presented oral submissions at the hearing on 13 May 2008.

IV Declarations sought

28. The Commission asks the Court to

'declare that the Italian Republic

by introducing and maintaining legislation pursuant to which premiums for third-party motor vehicle liability insurance must be calculated on the basis of fixed parameters;

by making the premiums for third-party motor vehicle liability insurance subject to controls ex post facto,

has failed to fulfil the obligations relating to the free marketing of insurance products incumbent upon it under the provisions on pricing freedom laid down in Articles 6, 29 and 39 of Council Directive 92/49/EEC ...;

by controlling the detailed rules in accordance with which insurance undertakings which have their head office in another Member State but operate in Italy in exercise of the freedom of establishment or the freedom to provide services, calculate their insurance premiums;

by imposing penalties for infringement of the Italian rules concerning the detailed rules for calculating insurance premiums, even in the case of insurance undertakings which have their head office in another Member State but which operate in Italy, in exercise of the freedom of establishment or the freedom to provide services,

has failed to fulfil its obligations under Article 9 of Directive 92/49;

by maintaining an obligation to provide coverage for third-party motor vehicle liability, incumbent upon all insurance undertakings, including those which have their head office in another Member State but which operate in Italy, in exercise of the freedom of establishment or the freedom to provide services,

has failed to fulfil its obligations under Articles 43 and 49 of the Treaty establishing the European Community;

order the Italian Republic to pay the costs.'

29. Italy contends that the application should be dismissed.

V Admissibility

30. At the hearing on 13 May 2008, the Italian Republic claimed that the application in the present proceedings is inadmissible. According to the Italian Republic, the Commission 'totally reversed the logic of its claims' against that Member State. The Italian Republic considers that the Commission initially criticised the national rules on premium rates. Subsequently the Commission solely objected to the obligation to contract imposed on insurance undertakings pursuant to the relevant Italian legislation.
31. The Commission considers that the present proceedings are admissible.
32. I consider that the claim raised by the representative of the Italian Republic as to admissibility is somewhat vague. However, it would appear from the specific reference made by the representative of the Italian Republic to the 'inadmissibility of the application' in the present proceedings (4) that that Member State considers that the pre-litigation procedure leading up to lodging of the application in the present case is flawed as the Commission revised the relative importance of certain of its objections to Italian legislation over the course of the pre-litigation procedure and the lodging of the application.
33. It is settled case-law that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the objections formulated by the Commission. (5) The proper conduct of that procedure thus constitutes an essential guarantee required by the EC Treaty in order to protect the rights of the Member State concerned. It is only when that guarantee is observed that the contentious procedure before the Court can enable it to judge whether that State has in fact failed to fulfil the obligations which the Commission alleges it has breached. (6)
34. Furthermore, it must be observed that, while the reasoned opinion referred to in Article 226 EC must contain a coherent and detailed statement of the reasons which led the Commission to conclude that the Member State in question has failed to fulfil one of its obligations under the Treaty, the letter of formal notice cannot be subject to such strict requirements of precision, since it cannot, of necessity, contain anything more than an initial brief summary of the complaints. (7)
35. It is in the light of that case-law that it is necessary to examine whether the Commission has respected the rights of the defence with regard to the Italian Republic in the pre-litigation procedure.
36. It must be recalled that the Commission claimed in its additional reasoned opinion that the obligation to contract contained in Article 11(1) of Law No 990 is linked to the obligation imposed on insurance undertakings to calculate their premium rates in a particular manner which is contrary to Articles 6, 29 and 39 of Directive 92/49. In addition, the Commission considered that the financial supervision exercised by ISVAP in relation to the calculation of premium rates infringes Article 9 of Directive 92/49. The Commission also considered that the obligation to contract imposed by Italian law on insurance undertakings constitutes an unjustified restriction of the freedom of establishment pursuant to Article 43 EC and the freedom to provide services pursuant to Article 49 EC.
37. In my view, the additional reasoned opinion and the application in the present proceedings are based on the same claims. Indeed, the order of the claims in the application in the present proceedings is identical to the complaints in the additional reasoned opinion. In addition, contrary to the Italian Republic's assertion, (8) the Commission specifically criticised, in its letter of formal notice and supplementary letter of formal notice, the obligation to contract imposed on insurance undertakings and the rules on premium rates pursuant to the relevant Italian legislation. (9)
38. Therefore, I consider that the Commission's objections in the pre-litigation procedure were sufficiently clear to enable the Italian Republic to deploy its defence in the present proceedings before the Court.
39. It should be noted, for the purpose of completeness, that the representative of the Commission at the hearing considered that the plea of inadmissibility raised by the Italian Republic related to the fact that the Commission, in its reply, had reordered the relative importance of its complaints against the Italian Republic in the light of statements made by that Member State in its defence. The Commission also claimed that it understood from the Italian Republic's defence in the present proceedings that 'the sole aim of the sanctions was to ensure compliance with the obligation to contract'.
40. In that regard, the Commission in its reply in the present proceedings indeed stated that, in the light of the Italian Republic's defence and the relative weight accorded by that Member State to the complaints raised in the Commission's application, the complaints concerning firstly, breach of Articles 6, 29 and 39 of Directive 92/49 and secondly, breach of Article 9 of Directive 92/49 are merely ancillary to the principal complaint raised concerning breach of Articles 43 EC and 49 EC resulting from the obligation to contract imposed on insurance undertakings.
41. In my view, the Commission's reply and its statement at the hearing concerning the relative weight to be accorded to its complaints must be interpreted in the light of Article 42(2) of the Rules of Procedure of the Court. That article provides that no new plea in law may be introduced in the course of proceedings unless it is based on matters of law or fact which have come to light in the course of the procedure.
42. I consider that the Commission, in its reply, did not introduce any new pleas which were not already contained in the Commission's application in the present proceedings. Moreover, in my view, the reordering of the relative importance of Commission's complaints against the Italian Republic and the designation of the complaint concerning the breach of Articles 43 EC and 49 EC due to the obligation to contract imposed by Article 11(1) of Law No 990, as modified, as the principal complaint does not give rise to a new plea within the meaning of Article 42(2) of the Rules of Procedure but merely amplifies a plea which must regarded as admissible. (10)
43. Accordingly, the Italian Republic's plea of inadmissibility must be rejected.

VI Substance

A Preliminary remark

44. The present action is based on three complaints. Given the fact that the parties to the action would both seem to have identified the Commission's claim that the Italian Republic failed to fulfil its obligations under Articles 43 EC and 49 EC as the principal complaint, I shall deal firstly with that complaint.

B The first complaint Infringement of Articles 43 EC and 49 EC

1. Arguments of the parties

45. The Commission considers that the obligation to contract pursuant to Article 11(1) of Law No 990 (11) imposed on all insurance undertakings authorised to provide compulsory third-party motor vehicle liability insurance in Italy in relation to all categories of insured persons and all regions of Italy restricts the freedom of establishment pursuant to Article 43 EC and the freedom to provide services pursuant to Article 49 EC. Articles 11(1)(a), 12(a) and 12(d)(1) of Law No 990, (12) which provide for the imposition of penalties by ISVAP, are solely applied by that body in order to prevent circumvention of the obligation to contract, also restrict the freedom of establishment pursuant to Article 43 EC and the freedom to provide services pursuant to Article 49 EC.
46. At the hearing on 13 May 2008, the Commission stated that an obligation to contract is the worst restriction that a legislator can impose on an undertaking as it denies the undertaking the basic freedom of choosing the party to whom it sells goods or provides services. The Commission admits that there may however be situations, such as the case of the supply of water, gas and electricity, where an obligation to contract is justified.
47. According to the Commission the obligation to contract, pursuant to Italian legislation, discourages insurance undertakings established in other Member States from establishing themselves in Italy and from providing services there, and thus impairs access to the Italian market. As a result of the obligation to contract, insurance undertakings cannot exercise strategic market choices by freely choosing the insurance services they wish to supply and the addressees of such services. Insurance undertakings, in order to comply with Italian legislation, must bear costs which are totally excessive relative to their corporate strategy. Such additional costs, which effectively discourage insurance undertakings from entering the Italian market, are even more restrictive for insurance undertakings offering motor insurance in Italy under the freedom to provide services and which thus wish to complete a limited number of transactions on the Italian market of an occasional nature. Community insurance undertakings are prevented from developing their activities in Italy in a progressive fashion, thereby rendering their access to the Italian market for third-party compulsory motor vehicle liability insurance too costly and risky. The Commission also notes that insurance undertakings from other Member States are prevented from offering compulsory third-party motor vehicle liability insurance in specific regions of Italy where for linguistic reasons or reasons of geographic proximity it is advantageous for them to do so.
48. The Commission also states in its reply that national insurance undertakings can offset the economic inconveniences resulting from the obligation to contract with whoever seeks such coverage against the possibility of selling different types of insurance to the persons in question.
49. The Commission highlighted the difficulties encountered by three insurance undertakings from France, Belgium and Ireland which offered compulsory third-party motor vehicle liability insurance in Italy under the freedom to provide services. The first case concerned a French non-life-insurance undertaking with branch offices in 14 Member States where it carries on a similar business model covering commercial and industrial insurance and offering motor insurance for large commercial fleets. Since 2003, ISVAP asserted that due to the rates applied by that undertaking it was seeking to circumvent its obligations under Article 11 of Law No 990. ISVAP required the undertaking to systematically communicate its rates to ISVAP and to offer rates to all categories of policyholders in all geographic areas, including those in which the undertaking had no strategic desire to be involved. ISVAP imposed fines of one million euros on the undertaking. The Commission also referred to a Belgian insurance undertaking with branches in 13 Member States which offers, under freedom to provide services, motor insurance as part of other covers to multinational companies. In 2003, ISVAP asserted that the undertaking circumvented its obligations pursuant to Article 11 of Law No 990 and in particular that the tariffs applied by the undertaking were considerably higher than the average on the market and were intended to circumvent the obligation to provide insurance. ISVAP fined the Belgium undertaking one million euros. The Commission finally referred to an insurance undertaking based in Ireland which is part of a multinational car-hire group. The undertaking, which has branches in eight Member States, is a small operation with only 10 employees which provides insurance coverage for its parent companies without any intention to provide coverage to the general public in any of the nine Member States where it operates. Even though the undertaking's business in Italy since 1997 was limited to the provision of motor insurance to companies belonging to its parent companies, ISVAP considered that the undertaking must comply with Article 11 of Law No 990. According to the Commission, complying with ISVAP's requirements would have required a very large investment on the part of the undertaking in question, such as the setting up of an internet website, calculating the tariffs according to ISVAP guidelines, updating the website and setting up a service to answer prospective policyholders' requests for a quote. In addition, if the undertaking were to offer motor insurance to the general public in Italy, this would have a direct impact on its obligations regarding solvency margins. Due to the onerous burdens imposed by ISVAP, the undertaking in question ceased its activities in Italy and its parent companies now obtain motor insurance from a third-party insurer.
50. According to the Commission the insurance undertakings in question found themselves in a similar position to the Spanish bank in the CaixaBank France case. (13) In that case, the Court held that a prohibition on the remuneration of sight accounts pursuant to French legislation constituted, for companies from Member States other than the French Republic, a serious obstacle to the pursuit of their activities via a subsidiary in the latter Member State, affecting their access to the market.
51. The Commission considers that despite the adoption of Article 132(2) of the Code, which introduced an exception to the general obligation to contract and which may have resolved the problems faced by one of the three insurance undertakings referred to at point 49 above, that provision only has a slight impact on the very wide scope of the obligation to contract.
52. Moreover, according to the Commission, the obligation to contract constitutes an obstacle which is neither justified nor proportionate to the aim pursued. Pursuant to the Court's case-law, the concept of public policy may be relied upon in the event of a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society. However, as the Court has repeatedly stated, the public policy exception, like all derogations from a fundamental principle of the Treaty, must be interpreted restrictively. The Commission admits that the protection of consumers constitutes an objective in the public interest which may justify the restriction of fundamental freedoms established by the Treaty. However, the Commission considers that the obligation to provide coverage pursuant to Italian law does not in fact increase consumer protection as it prevents the emergence of specialised insurance undertakings which may serve consumers' needs better and reduces the number of insurance undertakings in Italy.
53. The Commission also considers that the obligation to contract imposed by Law No 990 and the Code is not an appropriate measure in order to ensure, as claimed by the Italian Republic, that injured third parties are adequately compensated. Injured third parties are adequately protected by other more appropriate instruments set up pursuant to Community law in order to prevent the emergence of other uncoordinated national instruments with legitimate public interest objectives but which could unnecessarily restrict the freedom of establishment and the freedom to provide services. In that regard, pursuant to Article 3 of Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of Member States relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability, (14) each Member State must take the necessary measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance. In addition, in accordance with Second Council Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles, (15) each Member State must set up a body to provide compensation for injury caused by an uninsured or unidentified vehicle. Moreover, pursuant to Articles 32 and 35 of Directive 92/49, every insurance undertaking that proposes, under the freedom of establishment or freedom to provide services, to provide compulsory third-party motor vehicle liability insurance must become a member of the national guarantee fund of the host Member State. The Commission also considers that the obligation to contract cannot be justified in order to limit compensation paid by the guarantee fund or the costs incurred by the social security system due to accidents involving uninsured drivers. In that regard, the Commission notes that the Court, in its case-law, has systematically held that purely financial or economic reasons may not be considered imperative requirements justifying restrictions on free movement guaranteed by the Treaty.
54. The Commission also claims that the general obligation to contract imposed by Italian legislation is excessively restrictive in order to achieve its stated objective of ensuring that certain categories of drivers or drivers resident in certain regions of Italy may obtain insurance. These considerations also apply, mutatis mutandis, to the aim identified by the Italian Republic of protecting injured third parties.
55. The Commission notes that as the Italian Republic specifically indicated that the legislative provisions in question were adopted in order to prevent discrimination against young drivers and drivers resident in the south of Italy, a special legal instrument should therefore have been adopted in order to address the difficulties in obtaining insurance faced by those drivers rather than imposing a general obligation to contract. The Commission also claims that the Italian Republic failed to produce any data on the extent of the problems faced by young drivers or drivers resident in certain regions of Italy. Moreover, according to the Commission there is no absolute right to freely drive a vehicle. Given that the right in question can be restricted for public safety reasons where, for example, individuals drive under the influence of drugs or alcohol, insurance undertakings should also be permitted to refuse to provide coverage to such drivers.
56. The Commission also highlights the fact that other Member States such as France, Belgium, Spain, the Netherlands and Portugal have adopted less restrictive regimes than the obligation to contract provided by Italian law in order to achieve the aims identified by the Italian Republic. When a driver is refused compulsory third-party motor vehicle liability insurance in these Member States, a public body intervenes in order to ensure that the driver obtains insurance. The Italian legislator has however 'offloaded' this clearly public burden onto private undertakings by imposing on the latter an obligation to contract.
57. The Italian Republic and the Republic of Finland consider that there is a direct symmetrical or bilateral relationship between the obligation imposed on vehicle drivers to obtain compulsory third-party motor vehicle liability insurance and the obligation imposed on insurance undertakings to contract.
58. According to the Italian Republic, while compulsory third-party motor vehicle liability insurance is a private insurance, it has a social purpose, namely the need to ensure that third-party victims of motor accidents receive effective and swift compensation. In order to ensure that objective, the European Convention on compulsory insurance against civil liability in respect of motor vehicles was adopted in Strasbourg on 20 April 1959. The Italian Republic, by imposing an obligation to contract on insurance undertakings, seeks to protect drivers, in their capacity as consumers, from discrimination and to protect the victims of motor accidents. The obligation to contract must therefore be seen within the context of its social function, which is linked to public policy objectives. According to the Italian Constitutional Court, protecting the victims of motor accidents is in the public interest as it is a means of fulfilling the requirements of social solidarity laid down in Article 2 of the Italian Constitution. The obligation to contract imposed both on drivers and on insurance undertakings is also linked to road safety as it is aimed at reducing the damage caused by accidents. According to the Italian Republic the objectives in question should not be compromised by the freedom to do business. If the arguments of the Commission are accepted, the system of compulsory third-party motor vehicle liability insurance will be based purely on market logic and will lose its social purpose.
59. The Italian Republic claims that if insurance undertakings are permitted to refuse undesirable consumers, the drivers in question may have recourse to dubious undertakings and the falsification of documents. An asymmetry between the obligation to contract on drivers and insurance undertakings will lead to an increase in the number of uninsured drivers and accidents caused by them, an increase in the compensation payable to accident victims by the Italian guarantee fund for victims of motor accidents, an increase in litigation and the disappearance of effective and rapid compensation for victims of motor accidents. In 2005, the Italian fund paid 113.4 million euros for accidents involving uninsured drivers, which represents an increase of 17.1% since 2004. Also in 2005, 13 771 claims were settled, which represents an increase of 21.8% from the previous year. In addition, the relative cost of claims for accidents involving uninsured vehicles payable by the Italian guarantee fund, which also pays compensation for, inter alia, claims involving unidentifiable vehicles, increased from 7.4% in 1995 to 12.6% in 2000, then to 27.4% in 2004 before reaching 30.6% in 2005. The Italian Republic considers that one of the reasons for the increase in such accidents must be found in the refusal of certain insurance undertakings to provide coverage to certain categories of drivers and drivers resident in the south of Italy. Moreover, as regards the Commission's claim at point 53 above that the Italian Republic may not invoke justifications for purely financial reasons, the Italian Republic considers that the above data on the already substantial and growing problem of circumvention by drivers of the obligation to obtain insurance demonstrate that there would indeed be serious consequences for public policy and the social security system if the obligation to contract imposed on insurance undertakings were abolished.
60. The Italian Republic strenuously claims that the legislation in question does not place national insurance undertakings in a privileged position as compared to those undertakings operating in Italy under the freedom of establishment and the freedom to provide services. Moreover, it claims that the obligation in question does not dissuade insurance undertakings from other Member States from penetrating the Italian market. In that regard, the Italian Republic notes that nearly one third of the hundred insurance undertakings that provide compulsory third-party motor vehicle liability insurance in Italy are from other states. Moreover, the obligation to contract does not render insurance undertakings from other Member States less profitable than Italian undertakings. The Italian Republic considers that the main costs borne by undertakings which provide compulsory third-party motor vehicle liability insurance are linked to the setting up of a structure for the sale of insurance policies and a network for claim settlement. These costs are not greater for foreign undertakings than for Italian undertakings. At the hearing, the Italian Republic stated that the obligation to contract imposed on insurance undertakings has no impact as such undertakings can freely fix their prices, thereby guaranteeing their freedom of economic initiative.
61. As regards the claim by the Commission that the obligation to contract has a dissuasive effect on undertakings which have their main establishment in a Member State other than Italy as they are unable to limit their activities to certain regions of Italy, the Italian Republic considers that the Commission has misunderstood the technical foundations of compulsory third-party motor vehicle liability insurance. Compulsory third-party motor vehicle liability insurance can only be offered to a large insured base. Moreover, the Italian Republic states, in reply to the Commission's assertion that the obligation to contract prevents the emergence of specialised insurance undertakings, that it is unrealistic to expect that insurance undertakings specialised in providing insurance to 'undesirable' consumers will emerge in Italy.
62. In the event that the Court should consider that the obligation to contract restricts the freedom of establishment or the freedom to provide services, the Italian Republic considers that the restriction is appropriate in order to attain the objectives of public policy, protecting the social security system, road safety and consumer protection. The obligation to contract has enabled the Italian Republic to contain the phenomenon of uninsured drivers as witnessed in other Member States where insurance undertakings do not have an obligation to contract. The Italian Republic considers that it has proved both the existence and extent of refusals by insurance undertakings in Italy to conclude contracts for compulsory third-party motor vehicle liability insurance. In that regard, the Italian Republic gave examples of cases where totally unjustified premiums of EUR 10 000 were levied on drivers. In addition, the Italian Republic referred to the constant increase in compensation paid out to accident victims from the guarantee fund and to the fact that ISVAP only brought proceedings for circumvention of the obligation to contract in a small number of cases concerning the most flagrant violations.
63. The Italian Republic considers that the obligation to contract is proportionate. Contrary to the Commission's assertion, it would be neither practical nor legal to limit the obligation to certain categories of drivers or to certain geographical areas in Italy as this would give rise to discrimination and would encourage undertakings not to do business in those regions where the obligation applies. The Italian Republic also emphasises the fact that the obligation to contract has been considerably attenuated by Article 132(2) of the Code. As regards the alternative regimes set up in other Member States in order to ensure that drivers can obtain compulsory third-party motor vehicle liability insurance, the Italian Republic considers that while these alternatives may be adequate to deal with certain problems such as alcohol and drug use, they cannot adequately address the problems encountered in Italy where a large section of the population would be refused insurance coverage. Moreover, the Italian Republic claims that in Spain, where there is a public body (Consorcio de Compensación de Seguros) which directly intervenes in order to insure vehicles which have been refused insurance, the phenomenon of failure by drivers to obtain insurance has not been eliminated, as one million vehicles are uninsured, thus 14% of automobiles are uninsured together with 54% of mopeds. In addition, 41 000 accidents were caused by uninsured drivers in 2004 in the United Kingdom at a cost 750 million euros. Given the lack of Community harmonisation concerning the implementation of the obligation on drivers to obtain compulsory third-party motor vehicle liability insurance, each Member State is free to choose the solution that corresponds best to the social conditions in the country.
64. The Republic of Finland limited its intervention in support of the Italian Republic to the plea concerning infringement of Articles 43 EC and 49 EC. The Republic of Finland considers that even if the obligation to contract limits the freedom of establishment and the freedom to provide services, that obligation is justified for reasons of public policy and consumer protection. According to the Republic of Finland the function of the obligation to contract imposed by Italian legislation on insurance undertakings is to ensure that victims of traffic accidents are guaranteed rapid and effective compensation. The Member State in question considers that there is a direct link between compulsory third-party motor vehicle liability insurance and the social security system. In the event of accidents involving third parties, insurance undertakings pay, inter alia, hospitalisation costs and loss of salary.
65. The Republic of Finland notes that the Court in Omega (16) held that while the prohibition on the commercial exploitation of games involving the simulation of acts of violence against persons, in particular the representation of acts of homicide, limited the freedom to provide services, that limitation was justified on public policy grounds. A fortiori, the need to provide protection to those injured in motor accidents, which is the raison d'être of the obligation on drivers to obtain and on insurance undertakings to provide compulsory third-party motor vehicle liability insurance, is based on public policy grounds which justify a restriction on the freedom of establishment and the freedom to provide services. The fact that a number of Member States have chosen not to impose an obligation to contract on insurance undertakings does not entail that the Italian measures in question are disproportionate.

2. Assessment

66. It is undisputed in the present proceedings that Article 11(1) of Law No 990 (17) imposes an obligation on all insurance undertakings engaged in compulsory third-party motor vehicle liability insurance in Italy to provide such coverage to all categories of insured persons in all regions of Italy. The obligation to provide such coverage applies to both national insurance undertakings and undertakings providing insurance coverage in Italy under the freedom of establishment and the freedom to provide services. Article 132(2) of the Code establishes an exception to the obligation to provide such coverage. Pursuant to that provision, insurance undertakings may request that the authorisation to provide compulsory third-party motor vehicle liability insurance be limited to fleet business.
67. In addition, Article 11(1)(a) of Law No 990 (18) essentially states that in order to ensure compliance with the obligation to provide compulsory third-party motor vehicle liability insurance, insurance undertakings must calculate their premium rates in a particular manner. In addition, pursuant to the same provision, ISVAP may impose heavy fines if it ascertains that there is circumvention of the obligation to provide such insurance coverage in respect of specific territorial areas or to specific categories of policyholders. The fines in question may range from one to five million euros. Article 12(d)(1) of Law No 990 (19) also provides for other fines in the event that the obligation to provide coverage is breached. Article 12(a) of Law No 990 (20) provides that insurance undertakings must also make available to the public premium rates and contract terms.
68. It must be noted that the Commission in its application submitted that the provisions of Italian law identified in points 66 and 67 above apply indistinctly to national insurance undertakings and those undertakings providing insurance coverage in Italy under the freedom of establishment and the freedom to provide services. However, the Commission in its reply claimed that the Italian legislation in question has a greater impact on undertakings providing insurance coverage in Italy under the freedom of establishment and the freedom to provide services. (21) In my view, it is not entirely clear from the Commission's submissions in the present proceedings whether that institution considers that the relevant Italian legislation applies indistinctly to both national insurance undertakings and those undertakings providing insurance coverage in Italy under the freedom of establishment and the freedom to provide services, or whether the Commission considers that that legislation indirectly discriminates against the latter undertakings.
69. It does not appear to me that the Commission, which has the burden of proof in proceedings for failure to fulfil obligations, has succeeded in demonstrating to the requisite legal standard that Articles 11(1), 11(1)(a), 12(a), 12(d)(1) of Law No 990, and subsequently Articles 35(1), 131, 132(1), 132(2), 313, 314(1) and 314(2) of the Code, have a disparate impact on national insurance undertakings and those undertakings providing insurance coverage in Italy under the freedom of establishment and the freedom to provide services, (22) if that was indeed the Commission's intent.
70. The freedom of establishment provided for in Article 43 EC, read in conjunction with Article 48 EC, is conferred both on natural persons who are nationals of a Member State and on legal persons within the meaning of Article 48 EC. Subject to the exceptions and conditions specified, it includes the right to take up and pursue all types of self-employed activity in the territory of any other Member State, to set up and manage undertakings, and to set up agencies, branches or subsidiaries. Article 43 EC requires the elimination of restrictions on the freedom of establishment. All measures which prohibit, impede or render less attractive the exercise of that freedom must be regarded as such restrictions. (23)
71. Article 49 EC requires the elimination of restrictions on the freedom to provide services. According to well-established case-law of the Court, the freedom to provide services requires not only the elimination of all discrimination on grounds of nationality against providers of services who are established in another Member State, but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, which is liable to prohibit, impede or render less advantageous the activities of a provider of services established in another Member State where it lawfully provides similar services. (24)
72. Given that both Articles 43 EC and 49 EC militate against national measures which, even though applicable without discrimination on grounds of nationality, are capable of hindering or rendering less attractive the exercise by Community nationals of the fundamental freedoms guaranteed by the Treaty, it is necessary to examine whether the obligation to provide coverage imposed by Italian legislation (25) potentially hinders or discourages in a substantial manner the activities of insurance undertakings which provide compulsory third-party motor vehicle liability insurance in Italy under the freedom of establishment and the freedom to provide services.
73. In the present proceedings, I consider that the Commission has adequately demonstrated that the obligations imposed, pursuant to Articles 11(1), 11(1)(a), 12(a) and 12(d)(1) of Law No 990, (26) in relation to the provision of compulsory third-party motor vehicle liability insurance in Italy ensure that undertakings which operate in that market may not, in principal, (27) and without exposing themselves to the risk of substantial fines, specialise in the provision of such coverage to specific categories of policyholders or concentrate their efforts on specific geographical or indeed linguistic regions in Italy.
74. In effect, an insurance undertaking which is authorised to provide compulsory third-party motor vehicle liability insurance in Italy must, in accordance with the Italian legislation in question, be available to do business with and provide compulsory third-party motor vehicle liability insurance to all potential customers from the date of authorisation.
75. The Commission has also demonstrated, in my view, that the obligation to provide coverage pursuant to Italian legislation may impose additional financial and logistical burdens on insurance undertakings, thereby exposing undertakings operating in Italy to increased financial risks. In that regard, the Italian Republic in its pleadings stated that the principal costs associated with the provision of compulsory third-party motor vehicle liability insurance in Italy are not borne to a greater extent by undertakings operating under the freedom of establishment and the freedom to provide services than by national undertakings. (28) However, it must in my view be stressed that the Commission stated, without being contradicted by the Italian Republic, that the obligation to provide coverage imposed by Italian law had a direct impact on the duties imposed on an insurance undertaking concerning its solvency margins. (29)
76. Moreover, it appears that the obligation to provide coverage applies irrespective of an insurance undertaking's established market strategy or specialisation, financial or logistical capacity and experience in the market in question.
77. I therefore consider that the Commission has demonstrated that the Italian legislation in question potentially hinders (30) insurance undertakings which are specialised in providing insurance cover in niche or specialised markets from entering the market for compulsory third-party motor vehicle liability insurance in Italy. (31) Moreover, I consider that the Commission has demonstrated that the Italian legislation in question potentially hinders insurance undertakings from entering the market for compulsory third-party motor vehicle liability insurance in Italy, as it may prevent them from entering that market in a gradual or progressive manner or indeed on an occasional or irregular basis. (32)
78. In my view, the circumstances of the three undertakings outlined by the Commission in its pleadings, which are largely uncontested by the Italian Republic, while not necessarily representative of the obstacles encountered by all undertakings entering the market for compulsory third-party motor vehicle liability demonstrate that the impediments created by the legislation in question may be of some magnitude and not merely hypothetical or remote. (33)
79. While the exception contained in Article 132(2) of the Code may provide relief to certain insurance undertakings, namely those that request an authorisation limited to fleet business, (34) I consider that the exception is extremely narrow in scope. In my view, the exception in question does not reduce the restrictions created by the obligation to contract (35) faced, for example, by insurance undertakings specialised in the provision of coverage in niche markets other than the fleet business. (36) In effect, insurance undertakings may be obliged to alter considerably their existing business model (37) in response to the Italian legislation in question.
80. It is clear from settled case-law that national measures which restrict the exercise of the fundamental freedoms guaranteed by the Treaty can be justified only if they satisfy four conditions: they must apply in a non-discriminatory manner; they must be justified by overriding reasons relating to the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain that objective. (38)
81. In that regard, it should be recalled that the Commission has failed to establish in the present proceedings that the provisions of Italian legislation in question have a disparate impact on insurance undertakings operating in Italy under the freedom of establishment or the freedom to provide services. (39) As regards the question of whether those provisions may be justified by overriding reasons relating to the general interest, the Italian Republic claim that they may be so justified on two grounds. Firstly, the obligation to contract ensures that certain categories of drivers, such as young drivers or drivers resident in certain regions of Italy, can obtain compulsory third-party motor vehicle liability insurance. Secondly, the obligation to contract imposed on insurance undertakings ensures that third parties injured by motor vehicles are compensated for the damage suffered and that such injuries do not lead to a drain on the resources of the social security system. The Italian Republic and the Republic of Finland consider that there is a direct relationship between the obligation on drivers to obtain compulsory third-party motor vehicle liability insurance and the obligation on insurance undertakings to provide such cover.
82. As regards the first justification, in my view, consumer protection can justify interference with the freedom of establishment and the freedom to provide services. (40) As stated at point 77 above, the requirements imposed on insurance undertakings pursuant to Articles 11(1), 11(1)(a), 12(a) and 12(d)(1) of Law No 990, (41) in relation to the provision of compulsory third-party motor vehicle liability insurance, potentially inhibit, inter alia, in my view, the emergence in Italy of specialised insurance undertakings. (42) However, while a lack of or reduction in specialised insurance undertakings in Italy may be detrimental at least to certain consumers in Italy, (43) I consider, in the abstract, that the need to ensure that consumers of compulsory third-party motor vehicle liability insurance are not subject to unreasonable discrimination on the basis of their age or their residence may justify restrictions on the freedom of establishment and the freedom to provide services.
83. It is therefore incumbent on the Italian Republic, which has invoked, as justification for the limitations on the freedom of establishment and the freedom to provide services, the difficulties faced by certain categories of drivers and drivers resident in the south of Italy, to produce sufficient evidence to the Court demonstrating that such difficulties would tend to exist or increase in the absence of the obligation to contract. In that regard, the Italian Republic claimed that the abolition of the obligation to contract imposed on insurance undertakings would have 'devastating' effects, particularly in the south of Italy (Il Mezzogiorno). However, I would note that aside from the concrete statistics produced by the Italian Republic demonstrating an increasingly widespread problem in Italy as a whole concerning accidents involving uninsured vehicles in spite of the existing general obligation to contract, (44) that Member State has produced hardly any evidence which would tend to demonstrate that drivers resident in the south of Italy and young drivers would face discrimination or increased discrimination in the absence of that obligation. (45)
84. If however it is accepted that there would be a risk of discrimination against young drivers and drivers resident in the south of Italy in the absence of the obligation to contract imposed on insurance undertakings, it is necessary to examine whether the measures adopted by the Italian Republic do not exceed what is objectively necessary. (46)
85. It is evident that the obligation to contract imposed by Article 11(1) of Law No 990, and subsequently Article 132(1) of the Code, is general in nature and applies irrespective of the category of consumers in question or their residence. That obligation would thus seem, at least prima facie, disproportionate and excessively restrictive in nature as it would appear to go manifestly beyond what is necessary for the objective sought. (47)
86. However, the Italian Republic claims, in essence, that it is not possible to limit the obligation to contract to certain categories of consumers as this would itself lead to discrimination. Moreover, according to the Italian Republic, if the obligation to contract were limited to certain regions of Italy, this would encourage insurance undertakings not to do business in those regions. The Italian Republic also considers that the different regimes set up in other Member States to address the problems faced by drivers who cannot obtain compulsory third-party motor vehicle liability insurance and which are less restrictive than the obligation to contract would prove inadequate in relation to the problems in Italy.
87. In my view, in accordance with the case-law of the Court, the proportionality of the measures adopted by the Italian Republic may not be excluded merely because other Member States have chosen a system of protection different from that adopted by the Italian Republic. (48) There may be specific circumstances prevailing in the Italian Republic which would militate against it adopting regimes favoured by other Member States. However, I am not persuaded, in the absence of any evidence other than unsubstantiated statements by the Italian Republic, that it is not possible either practically or legally for that Member State to limit the obligation to contract (49) to residents of certain regions of Italy or to certain categories of consumers. I therefore consider that Articles 11(1), 11(1)(a), 12(a) and 12(d)(1) of Law No 990 (50) exceed what is objectively necessary for the stated aim of protecting certain drivers from discrimination.
88. As regards the claim by the Italian Republic that the obligation to contract is justified in order to protect the third-party victims of motor accidents involving uninsured drivers, I consider that such an objective should, in principle, rank among the interests justifying a restriction of the freedom of establishment and the freedom to provide services. (51)
89. However, I consider that the Italian Republic has failed to provide any evidence of its claim that there is a direct link between the absence of an obligation on insurance undertakings to provide compulsory third-party motor vehicle liability insurance to all potential consumers and an increase in the number of third-party victims of accidents involving uninsured vehicles. While the Italian Republic has produced alarming figures in relation to other Member States where there is no obligation to contract and the number of uninsured vehicles and accidents involving those vehicles, (52) it has failed to show to any extent a direct correlation between the two pieces of data. Indeed, the Italian Republic has produced considerable data demonstrating a marked increase in the number of claims on and the compensation paid out by the Italian guarantee fund, and this in a Member State where an obligation to contract is imposed on insurance undertakings. (53) On the basis of the file before the Court in the present proceedings, the obligation to contract imposed by Italian legislation (54) does not appear to be an appropriate means of achieving the objective of protecting third-party victims of motor vehicle accidents.
90. I therefore suggest that the Court should declare that the Italian Republic has failed to fulfil its obligations under Articles 43 EC and 49 EC.

C The second complaint Infringement of Articles 6, 29 and 39 of Directive 92/49

1. Arguments of the parties

91. The Commission considers that Articles 11(1)(a), 12(a) and 12(d)(1) of Law No 990 (55) breach the principle of freedom to set premiums. The Commission claims that if the Court finds that the obligation to contract imposed by Article 11(1) of Law No 990 (56) is incompatible with Community law, it inevitably follows that Article 11(1)(a) of Law No 990 violated Articles 6, 29 and 39 of Directive 92/49. The Italian Republic itself claimed that the system of ex post surveillance by ISVAP in relation to premiums was enacted precisely to ensure that the obligation to contract was not circumvented.
92. According to the Commission, the obligation imposed on insurance undertakings to calculate their premiums 'according to their technical bases that must be sufficiently broad and refer to at least five years', together with the possibility for ISVAP to control retroactively premiums and impose high sanctions, violates the principle of freedom to set rates. While Italian legislation does not require either the prior approval or systematic notification of premiums to ISVAP, that legislation none the less ensures that premiums correspond to the market average. The effect of the Italian legislation is to set up a system of regulated premiums and thus to prevent insurance undertakings from marketing their services as they see fit, thereby jeopardising the establishment of the single market in insurance.
93. The Italian Republic claims that Italian legislation does not require the prior approval or systematic notification of premium prices. According to the Italian Republic, the rules relating to premium levels contained in Law No 990 and the Code merely seek to ensure that the obligation to contract is not circumvented by charging consumers exorbitant prices. The rules in question correspond to the standard technical rules and actuarial principles followed by insurance undertakings. The Commission is thus incorrect in stating that the aim of the rules in the Italian legislation is to ensure that the price of premiums correspond to the market average. Insurance undertakings may increase their tariffs even to a significant extent in order to take account of a negative evolution in the number of claims or to adopt other technical measures to maintain their financial stability. ISVAP rarely takes action and indeed only intervenes when the tariffs charged by insurance undertakings are abusive or for discriminatory purposes.

2. Assessment

94. Directive 92/49, which was adopted on the basis of Articles 57(2) EC and 66 EC (now, after amendment, Articles 47(2) EC and 55 EC), seeks to complete the internal market in direct insurance other than life assurance from the point of view both of the right of establishment and of the freedom to provide services, to make it easier for insurance undertakings with head offices in the Community to cover risks situated within the Community. (57) It is designed to secure freedom to market insurance products in the sector concerned within the Community. (58)
95. As regards Articles 6, 29 and 39 of Directive 92/49, the Court has stated that the Community legislature intended to secure the principle of freedom to set rates in the non-life-insurance sector, including the area of compulsory insurance such as insurance covering third-party liability arising from the use of motor vehicles. That principle implies the prohibition of any system of prior or systematic notification or approval of the rates which an insurance undertaking intends to use in its dealings with policyholders. The only derogation from that principle allowed by Directive 92/49 concerns prior notification and approval of 'increases in premium rates' in the framework of 'general price-control systems'. (59)
96. The parties in this case are in agreement that Articles 11(1)(a), 12(a), and 12(d)(1) of Law No 990 (60) do not establish any system of prior or systematic notification or approval of premium rates in Italy and that the intervention of ISVAP in relation to such rates is purely ex post. It is however necessary to examine whether the effect of Articles 11(1)(a), 12(a), and 12(d)(1) of Law No 990 (61) is in fact to frustrate the principle of freedom to set premiums established by the case-law of the Court.
97. In my view, it is clear that insurance undertakings authorised to provide compulsory third-party motor vehicle liability insurance in Italy do not, pursuant to Article 11(1)(a) of Law No 990, (62) remain entirely free to set the amount of the basic premium. Indeed, departure from the rules concerning the fixing of premiums pursuant to Article 11(1)(a) of Law No 990 (63) may result in fines being imposed on an insurance undertaking varying from one to five million euros. (64)
98. However, I consider that the freedom to set premiums pursuant to Directive 92/49 is not entirely without limits. Insurance undertakings cannot set their premiums with impunity. (65) Indeed, in accordance with the case-law of the Court, full harmonisation in the field of non-life-insurance rates precluding any national measure liable to have effects on rates cannot be presumed in the absence of a clearly expressed intention to this effect on the part of the Community legislature. (66)
99. In the present case, the Italian Republic has clearly asserted that, inter alia, Article 11(1)(a) of Law No 990 (67) was adopted in order to prevent circumvention of the obligation to contract provided by Article 11(1) of Law No 990. (68)
100. As outlined in points 66 to 90 above, I consider that the obligation to contract as provided by Article 11(1) of Law No 990 (69) constitutes an unjustified restriction on the freedom of establishment and the freedom to provide services. I therefore consider that Article 11(1)(a) of Law No 990, (70) which is designed to prevent circumvention of the vitiated obligation to contract, constitutes an unjustified breach of the principle of freedom to set premium rates.
101. I therefore suggest that the Court should declare that, by introducing and maintaining in force legislation on the calculation of premiums designed to prevent circumvention of the obligation to contract, the Italian Republic has failed to fulfil its obligations relating to the principle of freedom to set premium rates referred to in Articles 6, 29 and 39 of Directive 92/49.

D The third complaint Infringement of Article 9 of Directive 92/49

1. Arguments of the parties

102. The Commission considers that the supervision exercised and the sanctions imposed by ISVAP pursuant to Article 11(1)(a) of Law No 990 and subsequently by Articles 35(1) and 314(2) of the Code in relation to insurance undertakings operating in Italy pursuant to the freedom of establishment and the freedom to provide services infringe the division of competence between the home Member State and the host Member State pursuant to Article 9 of Directive 92/49.
103. According to the fifth recital in the preamble to Directive 92/49 the principle of supervision by the home Member State is one of the essential objectives of that directive and any derogations to that principle must be strictly interpreted and either explicitly or implicitly foreseen by other provisions of Directive 92/49 or other directives concerning compulsory third-party motor vehicle liability insurance. Moreover, Articles 11 and 40 of Directive 92/49 confer a wide scope to the principle of supervision by the home Member State. In the event that ISVAP wishes to intervene in relation to the premiums charged by undertakings having their main establishment in another Member State, ISVAP must notify the presumed irregularities to the supervisory body in the home Member State and request it to take the appropriate measures.
104. The Italian Republic claims that the measures adopted by it in order to ensure consumer protection bear no relationship to the financial supervision of insurance undertakings as provided by Article 9 of Directive 92/49. The financial supervision of an insurance undertaking, which is the sole responsibility of the home Member State, concerns solvency margins and technical resources rather than consumer protection.

2. Assessment

105. Directive 92/49 is aimed at '... bringing about such harmonisation as is essential, necessary and sufficient to achieve the mutual recognition of authorisations and prudential control systems, thereby making it possible to grant a single authorisation valid throughout the Community and apply the principle of supervision by the home Member State'. (71)
106. Thus, the taking up and the pursuit of the business of insurance is subject to the grant of a single official authorisation, issued by the competent authorities of the Member State in which an insurance undertaking has its head office, which enables an undertaking to carry on business throughout the Community, under the right of establishment or the freedom to provide services. Moreover, the Member State of the branch or of the provision of services may no longer require insurance undertakings which wish to carry on insurance business there and which have already been authorised in their home Member State (72) to seek fresh authorisation. (73) In addition, as a corollary to the principle of home Member State authorisation, pursuant to Article 9 of Directive 92/49, the home Member State is solely responsible for the financial supervision of insurance undertakings. Financial supervision includes (74) verification, 'with respect to the insurance undertaking's entire business, of its state of solvency, of the establishment of technical provisions and of the assets covering them ...'. (75)
107. In my view, the 'one-shop' authorisation principle and the principle of home Member State financial supervision laid down in Directive 92/49 constitute the cornerstone of the exercise of the freedom of establishment and the freedom to provide services in the non-life-insurance sector.
108. In accordance with the terms of Article 11(1)(a) of Law No 990 and then Articles 35(1) and 314(2) of the Code, insurance undertakings, which are authorised to provide compulsory third-party motor vehicle liability insurance in Italy including those operating under the freedom of establishment and the freedom to provide services, are directed to calculate their premiums in a specific manner. In addition, failure by an insurance undertaking to follow the prescribed methodology for calculating premiums pursuant to Article 11(1)(a) of Law No 990 and then Articles 35(1) and 314(2) of the Code may, in certain circumstances, result in the imposition of heavy fines by ISVAP. As stated at point 99 above, the sole purpose of Article 11(1)(a) of Law No 990 and then Articles 35(1) and 314(2) of the Code is to prevent circumvention of the obligation to contract.
109. In my view, the decision to provide insurance coverage to policyholders and the establishment of premium rates is at the heart of an insurance undertaking's business and may affect its financial equilibrium. The rules laid down in Article 11(1)(a) of Law No 990 (76) on the calculation of premiums, and the supervisory and disciplinary powers granted to ISVAP thereunder, require an insurance undertaking to answer, not only to the competent authorities responsible for financial supervision pursuant to Directive 92/49 in its home Member State, but also to ISVAP on matters which may concern its financial equilibrium.
110. I therefore consider that the Commission's complaint that Article 11(1)(a) of Law No 990, (77) which is designed to prevent circumvention of the vitiated obligation to contract, constitutes a breach of Article 9 of Directive 92/49 is well founded.

VII Costs

111. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Italian Republic has been unsuccessful, the latter must be ordered to pay the costs.
112. Under Article 69(4) of the Rules of Procedure, the Member States which have intervened in the proceedings are to bear their own costs.

VIII Conclusion

113. I therefore suggest that the Court should:

declare that by introducing and maintaining in force an obligation, imposed on all insurance undertakings, including those which have their head office in another Member State but which operate in Italy in exercise of the freedom of establishment or the freedom to provide services, to provide compulsory third-party motor vehicle liability insurance, the Italian Republic has failed to fulfil its obligations under Articles 43 EC and 49 EC;

declare that by introducing and maintaining in force rules on the calculation of premiums designed to prevent circumvention of the obligation to contract, in breach of the principle of freedom to set premiums referred to in Articles 6, 29 and 39 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 (third non-life-insurance Directive), the Italian Republic has failed to fulfil its obligations under that directive;

declare that by introducing and maintaining in force rules in accordance with which insurance undertakings which have their head office in another Member State, but operate in Italy in exercise of the freedom of establishment or the freedom to provide services, calculate their insurance premiums, and by imposing penalties for infringement of those rules in breach of the principle of home Member State supervision referred to in Article 9 of Directive 92/49, the Italian Republic has failed to fulfil its obligations under that directive;

order the Italian Republic to bear its costs and those of the Commission;

order the Republic of Finland to bear its own costs.

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1 Original language: English.

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2 OJ 1992 L 228, p. 1.

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3 Case C-442/02 [2004] ECR I-8961.

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4 See point 30 above.

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5 See, among others, Case C-152/98 Commission v Netherlands [2001] ECR I-3463, paragraph 23; Case C-439/99 Commission v Italy [2002] ECR I-305, paragraph 10; and Case C-185/00 Commission v Finland [2003] ECR I-14189, paragraph 79.

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6 See, in particular, Case C-145/01 Commission v Italy [2003] ECR I-5581, paragraph 17.

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7 See, in particular, Case 274/83 Commission v Italy [1985] ECR 1077, paragraph 21; Case C-279/94 Commission v Italy [1997] ECR I-4743, paragraph 15; and Case C-221/04 Commission v Spain [2006] ECR I-4515, paragraph 36.

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8 See point 30 above.

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9 See points 18 and 19 above.

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10 Case 306/81 Verros v Parliament [1983] ECR 1755, paragraph 9, and Case C-66/02 Italy v Commission [2005] ECR I-10901, paragraph 86.

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11 And then Article 132(1) of the Code.

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12 And then Articles 35(1), 314(2), 131, 313 and 314(1) of the Code.

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13 Cited in footnote 3.

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14 OJ, English Special Edition 1972 (II), p. 360.

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15 OJ 1984 L 8, p. 17.

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16 Case C-36/02 [2004] ECR I-9609.

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17 And subsequently Article 132(1) of the Code.

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18 And subsequently Articles 35(1) and 314(2) of the Code.

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19 And subsequently Article 314(1) of the Code.

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20 And subsequently Articles 131 and 313 of the Code.

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21 See point 48 above.

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22 Case C-288/02 Commission v Greece [2004] ECR I-10071, paragraph 35 and the case-law cited.

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23 See, inter alia, CaixaBank France, cited in footnote 3, paragraphs 9 and 11.

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24 See, inter alia, Case C-17/00 De Coster [2001] ECR I-9445, paragraph 29; Joined Cases C-544/03 and C-545/03 Mobistar and Belgacom [2005] ECR I-7723, paragraph 29; Joined Cases C-94/04 and C-202/04 Cipolla and Others [2006] ECR I-11421, paragraph 56; and Case C-208/05 ITC [2007] ECR I-181, paragraph 55.

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25 And the related obligations.

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26 And then Articles 35(1), 131, 132(1), 313, 314(1) and 314(2) of the Code.

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27 See however Article 132(2) of the Code.

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28 See point 60 above.

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29 See point 49 above. In accordance with the third recital in the preamble to Directive 2002/13/EC of the European Parliament and of the Council of 5 March 2002 amending Council Directive 73/239/EEC as regards the solvency margin requirements for non-life-insurance undertakings (OJ 2002 L 77, p. 17), the requirement that insurance undertakings establish a solvency margin to act as a buffer against adverse business fluctuations is an important element in the system of prudential supervision for the protection of insured persons and policyholders.

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30 While it cannot be excluded that insurance undertakings may adopt 'self-help' measures in order to reduce the de facto impact of the legislation in question by, for example, addressing any advertising materials to certain categories of potential policyholders or geographical or linguistic regions, such measures do not alter the fact that the undertakings must, in accordance with Italian legislation, provide insurance cover to all policyholders that seek coverage and must comply with the requirements imposed by Italian law to ensure that the obligation to contract is respected.

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31 In Case C-59/01 Commission v Italy [2003] ECR I-1759, at paragraph 25, the Court stated that '... according to the 19^th recital in the preamble to [Directive 92/49], within the framework of an internal market it is in the policyholder's interest that he should have access to the widest possible range of insurance products available in the Community so that he can choose that which is best suited to his needs'.

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32 I would note that pursuant to the case-law of the Court, the very distinction between the provision of services or establishment may rest on whether an activity is carried out on a stable and continuous basis or on a temporary basis. See to that effect, Case C-55/94 Gebhard [1995] ECR I-4165, paragraphs 21 to 26.

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33 I would also note that the Commission at the hearing stated, without being contradicted by the Italian Republic, that ISVAP had recently imposed fines ranging from one to two million euros on a German, an Italian and a Swiss insurance undertaking for failing to contract.

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34 I would note, as an aside, that the adoption of Article 132(2) of the Code by the Italian Republic demonstrates an awareness of the existence of specialisation in the provision of compulsory third-party motor vehicle liability insurance.

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35 And the provisions of Italian law designed to give full effect to that obligation.

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36 One could envisage for example a situation where an insurance undertaking specialises in the provision of compulsory third-party motor vehicle liability insurance to self-employed taxi drivers.

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37 In effect, the Italian legislation in question may affect the undertaking's method of doing business.

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38 See Case C-424/97 Haim [2000] ECR I-5123, paragraph 57.

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39 If that was indeed its intent. See point 69 above.

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40 See, in relation to the freedom to provide services, Joined Cases C-34/95 to C-36/95 De Agostini [1997] ECR I-3843, paragraph 53; Case C-243/01 Gambelli and Others [2003] ECR I-13031, paragraph 67; and Joined Cases C-338/04, C-359/04 and C-360/04 Placanica and Others [2007] ECR I-1891, paragraph 46.

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41 And then Articles 35(1), 131, 132(1), 313, 314(1) and 314(2) of the Code.

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42 Other than the fleet business, see Article 132(2) of the Code.

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43 And clearly frustrates in my view one of the key objectives of Directive 92/49; see footnote 31.

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44 See point 59 above.

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45 For example the Italian Republic noted that currently (in the presence of an obligation to contract) the contribution of premiums in the Mezzogiorno to GDP is 2% less than the national average and that 70% of damage premiums relate only to compulsory third-party motor vehicle liability insurance. In addition, the Italian Republic highlighted the case of a 45-year-old driver from Naples with a maximum 'malus' who was charged an annual premium of EUR 10 000 by an insurance undertaking, the case of a 21-year-old driver with a licence for two years but who was involved in an accident who was charged an annual premium of EUR 8 000 and the case of a driver with a new driving licence who was charged an annual premium of EUR 7 000.

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46 See, to that effect, Case C-496/01 Commission v France [2004] ECR I-2351, paragraph 68.

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47 See by analogy, Case C-170/04 Rosengren and Others [2007] ECR I-4071, paragraph 51.

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48 See, to that effect, C-124/97 Läärä and Others [1999] ECR I-6067, paragraph 36; C-67/98 Zenatti [1999] ECR I-7289, paragraph 34; and Case C-6/01 Anomar and Others [2003] ECR I-8621, paragraph 80.

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49 Indeed, I would note in that regard, that the Italian Republic imposed specific sanctions pursuant to Article 11(1)(a) of Law No 990, and subsequently Article 314(2) of the Code, in respect of a breach of the obligation to insure set forth in Article 11(1) of Law No 990, and subsequently Article 132(1) of the Code, with respect to certain territorial areas in Italy or categories of policyholders.

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50 And Articles 35(1), 131, 132(1), 313, 314(1) and 314(2) of the Code. The obligations and sanctions contained in Articles 11(1), 12(a) and 12(d)(1) of Law No 990 and Articles 131, 132(1), 313, and 314(1) of the Code are general in nature and apply irrespective of the territorial area in Italy or the category of policyholder concerned. The sanctions provided for in Article 11(1)(a) of Law No 990 and Article 314(2) of the Code apply where there is a breach of the general obligation to insure set forth in Article 11(1) of Law No 990 and Article 132(1) of the Code with respect to certain territorial areas in Italy or categories of policyholders. While the provision on sanctions contained in Article 11(1)(a) of Law No 990, and subsequently Article 314(2) of the Code, would seem to comply with the need that measures be proportionate in nature, I consider that these provisions refer to and are intrinsically linked to the general obligation to contract contained in Article 11(1) of Law No 990 and subsequently Article 132(1) of the Code respectively. In my view therefore, a finding that the Italian Republic has failed, due to the obligation to contract contained in Article 11(1) of Law No 990 and Article 132(1) of the Code, to fulfil its obligations pursuant to Articles 43 EC and 49 EC necessarily entails such a finding in relation to Article 11(1)(a) of Law No 990 and Article 314(2) of the Code respectively.

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51 Indeed, this point is not contested by the Commission.

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52 See point 63 above.

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53 See point 59 above.

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54 And the provisions adopted to give it full effect.

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55 And then Articles 35(1), 131, 313, 314(1) and 314(2) of the Code.

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56 And then Article 132(1) of the Code.

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57 See the first recital in the preamble to Directive 92/49.

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58 Case C-59/01 Commission v Italy, cited in footnote 31, paragraph 26.

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59 See, inter alia, Case C-347/02 Commission v France [2004] ECR I-7557, paragraph 22.

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60 And then Articles 35(1), 131, 313, 314(1) and 314(2) of the Code.

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61 And then Articles 35(1), 131, 313, 314(1) and 314(2) of the Code.

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62 And then Articles 35(1) and 314(2) of the Code.

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63 And then Articles 35(1) and 314(2) of the Code.

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64 Pursuant to Article 11(1)(a) of Law No 990, in the 'case of repeated circumvention of the authorisation to pursue an activity in the field of civil liability insurance in respect of the use of motor vehicles may be withdrawn'. This provision would not seem to have been maintained under the Code.

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65 In my view, predatory pricing and misleading or fraudulent pricing practices would not be sheltered by Articles 6, 29 and 39 of Directive 92/49.

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66 See Case C-347/02 Commission v France, cited in footnote 59, paragraph 25.

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67 And then Articles 35(1) and 314(2) of the Code.

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68 And then Article 132(1) of the Code.

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69 And then Article 132(1) of the Code.

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70 And then Articles 35(1) and 314(2) of the Code.

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71 See the fifth recital in the preamble.

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72 In accordance with Article 1(c) of Directive 92/49, 'home Member State shall mean the Member State in which the head office of the insurance undertaking covering a risk is situated'.

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73 See the sixth recital in the preamble.

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74 But is not, in my view, limited to.

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75 See Article 9 of Directive 92/49.

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76 And then Articles 35(1) and 314(2) of the Code.

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77 And then Articles 35(1) and 314(2) of the Code.