JUDGMENT OF THE COURT (Fifth Chamber)

16 December 1999 (1)

(Failure to fulfil obligations — Non-transposition of Directives 92/49/EEC and92/96/EEC — Direct insurance other than life assurance and direct lifeassurance)

In Case C-239/98,

Commission of the European Communities, represented by C. Tufvesson, LegalAdviser, and B. Mongin, of its Legal Service, acting as Agents, with an address forservice in Luxembourg at the Chambers of C. Gómez de la Cruz, of the sameservice, Wagner Centre, Kirchberg,

applicant,

v

French Republic, represented by K. Rispal-Bellanger, Head of Subdirectorate inthe Legal Affairs Directorate of the Ministry of Foreign Affairs, and C. Chavance,Secretary for Foreign Affairs in the same directorate, acting as Agents, with anaddress for service in Luxembourg at the French Embassy, 8B Boulevard JosephII,

defendant,

APPLICATION for a declaration that, by failing to adopt (or bring into force) andcommunicate all the laws, regulations and administrative provisions necessary in

order to comply fully with Council Directive 92/49/EEC of 18 June 1992 on thecoordination of laws, regulations and administrative provisions relating to directinsurance other than life assurance and amending Directives 73/239/EEC and88/357/EEC (third non-life insurance Directive) (OJ 1992 L 228, p. 1) and withCouncil Directive 92/96/EEC of 10 November 1992 on the coordination of laws,regulations and administrative provisions relating to direct life assurance andamending Directives 79/267/EEC and 90/619/EEC (third life assurance Directive)(OJ 1992 L 360, p. 1) and, in particular, by not transposing those directives withregard to mutual societies governed by the Code de la Mutualité, the FrenchRepublic has failed to fulfil its obligations under the EC Treaty and under thosedirectives,

THE COURT (Fifth Chamber),

composed of: D.A.O. Edward, President of the Chamber, J.C. Moitinho deAlmeida (Rapporteur), L. Sevón, J.-P. Puissochet and P. Jann, Judges,

Advocate General: S. Alber,

Registrar: H. von Holstein, Deputy Registrar,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 7 July 1999,

after hearing the Opinion of the Advocate General at the sitting on 29 September1999,

gives the following

Judgment

1.

    By application lodged at the Registry of the Court on 7 July 1998, the Commissionof the European Communities brought an action under Article 169 of the ECTreaty (now Article 226 EC) for a declaration that, by failing to adopt (or bringinto force) and communicate all the laws, regulations and administrative provisionsnecessary in order to comply fully with Council Directive 92/49/EEC of 18 June1992 on the coordination of laws, regulations and administrative provisions relatingto direct insurance other than life assurance and amending Directives 73/239/EECand 88/357/EEC (third non-life insurance Directive) (OJ 1992 L 228, p. 1) and withCouncil Directive 92/96/EEC of 10 November 1992 on the coordination of laws,regulations and administrative provisions relating to direct life assurance andamending Directives 79/267/EEC and 90/619/EEC (third life assurance Directive)

(OJ 1992 L 360, p. 1) and, in particular, by not transposing those directives withregard to mutual societies governed by the Code de la Mutualité, the FrenchRepublic has failed to fulfil its obligations under the EC Treaty and under thosedirectives.

2.

    According to the first recital in their preamble, Directives 92/49 and 92/96 have astheir purpose to complete the internal market in the insurance sector as regardsboth the right of establishment and the freedom to provide services, in order tomake it easier for insurance and assurance undertakings with head offices in theCommunity to cover risks and commitments situated within the Community.

3.

    According to the fifth recital in their preamble, those directives lay down theprinciple of mutual recognition of authorisations and prudential control systems,making it possible to grant a single authorisation valid throughout the Communityand to apply the principle of supervision by the home Member State.

4.

    Under Article 6 of Directive 92/49 (which replaces Article 8 of First CouncilDirective 73/239/EEC of 24 July 1973 (OJ 1973 L 228, p. 3)):

'1.    The home Member State shall require every insurance undertaking forwhich authorisation is sought to:

(a)    adopt one of the following forms:

...

—    in the case of the French Republic: ”société anonyme”, ”société d'assurancemutuelle”, ”institution de prévoyance régie par le code de la securitésociale”, ”institution de prévoyance régie par le code rural” and ”mutuellesrégies par le code de la mutualité”.‘

5.

    Article 5 of Directive 92/96 (which replaces Article 8 of First Council Directive79/267/EEC of 5 March 1979 (OJ 1979 L 63, p. 1)) contains the same provision.

6.

    Under the first subparagraph of Articles 57(1) of Directive 92/49 and 51(1) ofDirective 92/96, the Member States were to adopt the laws, regulations andadministrative provisions necessary to comply with Directives 92/49 and 92/96 notlater than 31 December 1993 and were to bring them into force no later than 1July 1994. They were to inform the Commission thereof forthwith.

7.

    By letter of 31 March 1995, the Commission drew the attention of the Frenchauthorities to the fact that neither Law No 94/678 of 8 August 1994 onsupplementary social protection for employees and the transposition of DirectivesNo 92/49 and 92/96 of 18 June and 10 November 1992 of the Council of theEuropean Communities (Journal Officiel de la Republique Française No 184 of 10

August 1994, p. 11 655), nor Law No 94/679 of 8 August 1994 laying downmiscellaneous economic and financial provisions (Journal Officiel de la RepubliqueFrançaise No 184 of 10 August 1994, p. 11 668), transposed Directives 92/49 and92/96 with regard to mutual societies governed by the Code de la Mutualité.

8.

    In reply to that letter, the French authorities stated on 8 June 1995 that a draft lawtransposing those directives with regard to mutual societies governed by the Codede la Mutualité would shortly be submitted to the French Parliament.

9.

    Since no law was adopted, the Commission called upon the French Republic, byletter of formal notice of 31 January 1996 and pursuant to the procedure providedfor under Article 169 of the Treaty, to submit its observations within two monthson the failure to transpose Directives 92/49 and 92/96 with regard to the aforesaidsocieties.

10.

    In their reply of 2 July 1996, the French authorities intimated that the transpositionof the directives with regard to the Code de la Mutualité was at a preparatorystage.

11.

    On 5 March 1997 the Commission sent the French Republic a reasoned opinioncalling upon it to adopt the measures necessary to comply fully with Directives92/49 and 92/96 within two months.

12.

    On 18 November 1997 the French authorities set out, inter alia, the principles ofFrench law governing mutual societies, and sent the Commission a draft law on thetransposition of Directives 92/49 and 92/96 enabling them to be applied to mutualassociations falling within the ambit of the Code de la Mutualité; on 3 December1997, they indicated their intention to submit at the beginning of 1998 a draft lawlaying down general principles and designed to transpose those two directives intonational law. The legislation transposing the technical and prudential rules inDirectives 92/49 and 92/96 was to be made public before the end of 1998.

13.

    On 11 February 1998 the French authorities explained the particular features ofmutual societies to the Commission and informed it of the course they intended topursue in transposing Directives 92/49 and 92/96 to that sector.

14.

    On 11 March 1998 the French Government informed the Commission of the newcourse it intended to pursue whereby a distinction would be drawn in national lawbetween mutual insurance activities carried on in the form of services provided forconsideration in cash or in kind and falling within the scope of the prudential rulesin Directives 92/49 and 92/96 on the one hand, and activities carried on by mutualsocieties which are unconnected with insurance, and which ought to be managedby subsidiaries, on the other.

15.

    By letter of 6 May 1998 the Commission reminded the French authorities of itsview that it was possible to preserve the special character of French mutual

societies whilst giving full effect to Directives 92/49 and 92/96 in relation to thosesocieties.

16.

    On 7 July 1998 the Commission brought this action.

17.

    In its application the Commission begins by pointing out that the French Republichas transposed Directives 92/49 and 92/96 incompletely, since their transpositiondoes not extend to mutual societies governed by the Code de la Mutualité.

18.

    Next, it claims, inter alia, that the effect of their not having been transposed is that:

—    French mutual societies are not subject to the prudential and financialrequirements laid down in Directives 92/49 and 92/96 (adequate technicalprovisions, solvency margin);

—    their insurance activities as such are not legally separate from their'philanthropic‘ activities, particularly in relation to pharmaceuticals, opticalcentres, holiday centres and the renting of meeting rooms, in breach of theprinciple of specialisation of insurance companies laid down in Directives92/49 and 92/96, which requires that the commercial and philanthropicactivities pursued by mutual societies should not be managed by the samelegal entity;

—    their portfolio transfer system is not in conformity with that established byDirectives 92/49 and 92/96;

—    their reinsurance system does not comply with the requirements laid downby the Treaty.

19.

    In its defence, the French Government argues first of all that the application isinadmissible since it is clear therefrom that the Commission is widening the scopeof the case inasmuch as it also relates to the compatibility with Community law —that is to say, with Council Directive 64/225/EEC of 24 February 1964 on theabolition of restrictions on freedom of establishment and freedom to provideservices in respect of reinsurance and retrocession (English Special Edition, 1963-1964, p. 13) — of the reinsurance mechanisms in force under the national legislationapplicable to mutual societies governed by the Code de la Mutualité, even thoughno such allegation was made during the pre-litigation procedure.

20.

    In that connection, the Commission stated in the reply and again at the hearingthat the complaint contained in the letter of formal notice, the reasoned opinionand the application had remained unchanged and that both the entire pre-litigationprocedure and the operative part of the application had always related to theFrench Republic's failure to adopt, or in any event to communicate, the laws,regulations and administrative provisions necessary to transpose Directives 92/49

and 92/96 with regard to mutual societies governed by the Code de la Mutualité. In addition, contrary to its erroneous statement in the application, the Commissionacknowledged at the hearing that the failure to transpose Directives 92/49 and92/96 into national law does not affect reinsurance, since the Communityobligations imposed on Member States in that area derive not from those directivesbut from Directive 64/225, which was not referred to at all by the Commission inits application.

21.

    The French Government acknowledges that mutual societies governed by the Codede la Mutualité were included within the scope ratione materiae of Article 6 ofDirective 92/49 and Article 5 of Directive 92/96 and that the implementingprovisions were not rendered applicable to those societies. Moreover, the mannerof their inclusion is still under discussion between the French authorities and thesocieties concerned, since the latter consider that the application of Directives 92/49and 92/96 to their activities would call into question the specific nature of mutualsocieties. At the hearing, the French Government produced a report on mutualsocieties and Community law drawn up at its behest in May 1999 (the RocardReport), which highlights the need to transpose Directives 92/49 and 92/96 intoFrench law as soon as possible.

22.

    Suffice it to note that the French Government does not deny that the provisionsnecessary to transpose Directives 92/49 and 92/96 with regard to mutual societieshave not yet been adopted.

23.

    In those circumstances, the Commission's action must be considered to be wellfounded.

24.

    It must therefore be held that, by failing to adopt the laws, regulations andadministrative provisions necessary to comply fully with Directive 92/49 andDirective 92/96 and, in particular, by not transposing those directives with regardto mutual societies governed by the Code de la Mutualité, the French Republic hasfailed to fulfil its obligations under those directives.

Costs

25.

    Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the Commission has applied for costs and the French Republichas essentially been unsuccessful in its submissions, the French Republic must beordered to pay the costs.

On those grounds,

THE COURT (Fifth Chamber),

hereby rules:

1.    By failing to adopt (or bring into force) and communicate all the laws,regulations and administrative provisions necessary in order to comply fullywith Council Directive 92/49/EEC of 18 June 1992 on the coordination oflaws, regulations and administrative provisions relating to direct insuranceother than life assurance and amending Directives 73/239/EEC and88/357/EEC (third non-life insurance Directive) and with Council Directive92/96/EEC of 10 November 1992 on the coordination of laws, regulationsand administrative provisions relating to direct life assurance andamending Directives 79/267/EEC and 90/619/EEC (third life assuranceDirective) and, in particular, by not transposing those directives with regardto mutual societies governed by the Code de la Mutualité, the FrenchRepublic has failed to fulfil its obligations under the EC Treaty and underthose directives.

2.    The French Republic is ordered to pay the costs.

EdwardMoitinho de Almeida Sevón         Puissochet                                Jann

Delivered in open court in Luxembourg on 16 December 1999.

R. Grass

D.A.O. Edward

Registrar

President of the Fifth Chamber

1: Language of the case: French.