Annex
Key Principles for Banking Services
In the important 1997 Interpretative Communication
on the Freedom to Provide Services and the Interest of the General
Good in the Second Banking Directive (SEC(97)1193), The European
Commission stressed four key principles:
— The only host State provisions which
may impose obstacles to the carrying on of activities receiving
mutual recognition by a credit institution "in the same manner"
as in its home State are those which protect the general good
in the host Member State.
— In assessing whether a rule can be
legitimately regarded as protecting the general good a number
of issues have to be considered including, in particular, whether
a rule falls within the scope of a harmonised area, the extent
of protection already provided by the rules of an institution's
home State, and the degree of vulnerability of the customer—on
the last of these the Commission concluded that general good rules
could be not imposed when services are supplied to "circumspect
recipients" such as large corporates and professionals in
the financial sector. (This conclusion built on the principles
outlined in the ECJ's insurance judgements of 1986 which had already
been recognised in Article 11 of the Investment Services Directive:
rules of conduct "must be applied in such a way as to take
account of the professional nature of the person for whom a service
is provided".)
— As regards the Rome Convention's
rules on where the law applicable to "consumer" contracts
is that of the consumer's country, and in particular as regards
the case where protections provided by the consumer's country's
"mandatory rules" are applicable regardless of the choice
of contract law, the Commission stressed that it cannot be assumed
that such rules could satisfy the "general good test"
in every case (given the precedence of Community law).
— As regards determining the State
in which a service is provided, the Commission concluded that
the place of provision of the "characteristic performance
of a service" is the determining factor: for example, for
the purposes of the Banking Directive's notification rules, the
provision of distance banking services through the internet would
not be considered as the "pursuit of activities in the customer's
State".
The Communication was concerned with interpreting
elements of the Banking Directive but the principles were also
applicable to investment firms which can be covered by the Directive
(if certain conditions are satisfied). Also given the similarity
of the language and that the Communication was based on an analysis
of general EU law principles, we believe that the same principles
apply in the case of investment firms authorised under the Investment
Services Directive.
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