4.1 Initial Comments on Art. 1(2) Letter (j)
Article 1(2) letter (j) reads that the following shall be excluded from the scope of the Regulation: “insurance contracts arising out of operations carried out by organisations other than undertakings referred to in Article 2 of Directive 2009/138 of the European Parliament and of the Council of 25 November 2009 concerning life assurance the object of which is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work.” This provision contains a description of specific risks relating to employed and self-employed persons. That is why “insurance the object of which is to provide benefits for employed […] persons,” concluded by an “undertaking” or “group of undertakings” is a contract for account of a third party. The same apparently refers to situations when an “insurance contract the object of which is to provide benefits for […] self-employed persons” is concluded, in his or her own name, by a representative of their “trade” of “group of trades.” Presently, this issue is regulated by Art. 9(2) of Directive 2009/138/EC (Solvency II).Footnote 46
A characteristic feature of insurance contracts for account of a third party is that only the third party may take advantage of such insurance.Footnote 47 The way in which the third party takes such advantage depends on whether the insurance for account of the third party is direct or indirect.Footnote 48 In the former case, the subjective law claim against the insurer for the payment of benefit is vested in the third party, whereas in the latter in the policyholder, who is legally bound to deliver the benefit received from the insurer to the third party. This distinction is of secondary importance from the point of view of the conflict of laws qualification.Footnote 49
Textual interpretation of Art. 1(2) letter (j) in conjunction with Art. 2 of the Directive 2009/138/EC of 25 November 2009 concerning life insurance, leads to the conclusion that Art. 1(2) letter (j) does not refer to insurance undertakings pursuing in the EU business of direct insurance in the life assurance branch. Such undertakings are both insurance undertakings seated in a Member State of the EU and insurance undertakings seated outside the EU.
Reasoning a contrario from Art. 1(2) letter (j) in conjunction with Art. 2 of Directive 2002/83/EC (currently Article 2 of the Directive 2009/138/EC) allows to include among “organisations other than undertakings referred to in Article 2 of Directive 2002/83/EC” (currently Article 2 of the Directive 2009/138/EC): (1) insurance undertakings engaging in re-insurance activities, (2) insurance undertakings engaging in insurance activities of direct insurance other than life assurance, (3) insurance undertakings pursuing outside the EU insurance activities of direct insurance in the life assurance branch, (4) organisations other than insurance undertakings. However, such reasoning—in my opinion—is illegitimate. The prototype of Art. 1(2) letter (j) is Art. 9 item 2 of the Directive 2009/138/EC. Nevertheless, when drafting Art. 1(2) letter (j), the legislator overlooked that the Directive 2009/138/EC, according to its general provisions, does not refer to any of the four abovementioned groups of entities. One should interpret the expression: “organisations other than undertakings referred to in Art. 2 of the Directive 2002/83/EC” (currently Art. 2 of the Directive 2009/138/EC), in the understanding of Art. 3(3) of the Directive 2002/83/EC (currently Art. 9(2) of the Directive 2009/138/EC), in the context of those general provisions. The same expression used in Art. 1(2) letter (j) is affected by a legislative error. In consequence, establishment of the scope of the subjective exclusion under Art. 1(2) letter (j) requires further investigations.
The expression: “organisations other than undertakings referred to in Article 2 of Directive 2002/83/EC” (currently Art. 2 of the Directive 2009/138/EC) in the understanding of Art. 1(2) letter (j) refers to one of the parties to the insurance contracts specified in that provision. As a result, this expression should be distinguished from the concept of “undertaking,” used here in its subjective meaning to denote employer.
The formulation: “the object of which is to provide benefits for employed or self-employed persons belonging to an undertaking or group of undertakings, or to a trade or group of trades, in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work” must be referred to the expression “insurance.” As far as Art. 1(2) letter (j) mentions benefits in the event of sickness related to work or accidents at work, this provision relates both to the insurance of risk of invalidity caused by accident or sickness as a type of additional insurance in the understanding of Art. 2(3) letter (a) point (iii) of the Directive 2009/138/EC (I insurance group in the life assurance branch) and insurance against accidents at work and occupational diseases (I insurance group from the branch of insurance other than life assurance). Consequently, it must be concluded that “insurance undertakings” in the expression “organisations other than insurance undertakings” are all insurance undertakings pursuing in the European Union (including in Denmark) activities in the area of direct insurance. This means, at the same time, that the expression “organisations other than insurance undertakings referred to in Art. 2 of the Directive 2002/83/EC” (currently Art. 2 of the Directive 2009/138/EC) covers organizations other than insurance undertakings operating in the EU.
The wording of Art. 1(2) letter (j) suggests that the provision relates only to intra-Union situations, i.e., insurance contracts referred to in that norm concluded by organizations other than insurance undertakings as a part of their activities in the European Union. Nevertheless, this question must be finally resolved by purposive interpretation based on the final conclusions as to what “insurance contracts” the discussed provision refers to.
4.2 The European Law of Occupational Pension Schemes
Article 1(2) letter (j) makes a conflict of laws section of the EU regime of occupational pension schemes. This is indicated by the connection of that norm with Art. 9 item 2 of the Directive 2009/138/EC. The Directive’s provision was adopted with a view to the works harmonizing the laws of the EU Member States in the occupational pension schemes.Footnote 50 The effect of those works was the Directive 2016/2341/EU.Footnote 51 It contains a comprehensive substantive law regime of occupational pension schemes. Its provisions are helpful in the interpretation of Art. 1(2) letter (j). This refers, in particular, to the definition of institution for occupational retirement provision (Art. 6(1) of the Directive 2016/2341/EU) and definition of retirement benefits (Art. 6(4)) of the Directive 2016/2341/EU), showing similarity to that provision. For that reason, it is legitimate to determine—in interpreting Art. 1(2) letter (j)—the circle of institutions for occupational retirement provision to which the provisions of the Directive 2016/2341/EU apply. For that purpose, one should, in the first place, consider the catalogue of subjective exclusions under Art. 2(2) of the Directive 2016/2341/EU.
The principle of separateness of institutions for occupational retirement provision, as expressed in their definition (Art. 6(1) of the Directive 2016/2341/EU), from financial institutions (as defined in Art. 6(3) of the Directive 2016/2341/EU) relates to the exclusion of companies using book-reserve schemes with a view to paying out retirement benefits to their employees (Art. 2(2) letter (e) of the Directive 2016/2341/EU). This exclusion refers to employers performing the obligations incurred vis-a-vis their employees under occupational pension schemes by establishing reserves with a view to paying out future benefits. The source of such obligations may, for instance, be direct promise (Direktzusage) under German law, direct promise of benefit (direkte Leistungszusage) under Austrian lawFootnote 52 or—by all appearances—self-administered pension scheme under the law of the United KingdomFootnote 53 or individual pension obligations (engagements individuels de pension/individuele pensioentoezeggingen) under Belgian law.Footnote 54 In connection with Art. 2(2) letter (e) of the Directive 2016/2341/EU, attention should also be drawn to the Italian law construction known as trattamento di fine rapporto.Footnote 55
Just as insurance undertakings ensure benefits in accordance with insurance contracts, institutions for occupational retirement provision, in the understanding of the Directive 2016/2341/EU, ensure pension benefits in accordance with the pension scheme, defined as “contract, an agreement, a trust deed or rules stipulating which retirement benefits are granted and under which conditions” (Art. 6(2) of that Directive). On the other hand, the concept of pension scheme does not refer to contracts relating to the occupational pension scheme regime but having as their subject obligations other than the obligation to provide pension benefits. This relates, among others, to contracts the object of which is investment of the entrusted funds on capital markets. Such contracts form a part of the activities of entities covered by the exclusion under Art. 2(2) letter (b) of the Directive 2016/2341/EU. This refers to investment firms as well as undertakings for collective investment in transferable securities (UCITS) and companies managing UCITSs.
The customers of “investment firms” may be, according to section I point 1 letter (f) of Annex II to the Directive 2014/65/EU,Footnote 56 “pension funds and management companies of such funds.” Furthermore, under Art. 6(3) letter (a) of the Directive 2009/65/EC,Footnote 57 management companies may, by operation of national law of a given Member State, be entitled to manage investment portfolios belonging to pension funds.
An institution for occupational retirement provision covered by the norms of the Directive 2016/2341/EU may only be such entity against which the financing institution’s employees have a claim for the provision of benefit (argument a contrario from Art. 2(2) letter (d) of the Directive 2016/2341/EU). Such entity is not the institution for occupational retirement provision known to German and Austrian laws under the name Unterstützungskasse (provident society). In German law, Unterstützungskasse provides benefits within the framework of occupational retirement provision under the contract concluded with the employer or under the institution’s statute.Footnote 58 Under that relationship, Unterstützungskasse acquires against the employer a claim for the return of the funds expended on benefits.Footnote 59 As a result, the contract is not accompanied by the transfer of risk.Footnote 60 As a rule, employees do not acquire any claims against Unterstützungskasse for the payment of pension benefits.
Unterstützungskasse must be distinguished from Contractual Trust Arrangement, i.e., special purpose vehicle established by the employer in performance of obligations under Direktzusage with a view to managing the funds provided in trust within the framework of occupational retirement provision.Footnote 61 Contractual Trust Arrangement undertakes to manage those funds under a contract with the employer by the same name. This model is encountered, among others, in German practice.Footnote 62
Pension benefits may be ensured by institutions managing social security schemes. Such institutions (“institutions managing social-security schemes which are covered by Regulation (EEC) No 1408/71(5) and Regulation (EC) No 987/2009(6)”) are covered by the subjective exclusion under Art. 2(2) letter (a) of the Directive 2016/2341.Footnote 63 The concept of social security schemes is explained in Art. 4(2) of the Regulation 1408/71.
The ensuring of pension benefits within the framework of social security schemes subject to the provisions of the Regulation 1408/71 may be grounded not only in the provisions of law. This is indicated by Art. 1 letter (j), second indent, of the Regulation 1408/71. A notification mentioned in that provision was made by France.Footnote 64 Under that notification, the Regulation 1408/71 applies to the operation of pension funds (caisses de retraiteFootnote 65—II pillar of the pension system, régime complémentaire) forming a supplementary pension scheme for hired labourers (ARRCOFootnote 66) and supplementary pension scheme for management staff (AGIRCFootnote 67). The source of each such scheme is a collective agreement.Footnote 68 In addition, Caisses de retraite pay benefits in respect of accidents at work or occupational diseases. Collective agreements are also a source of supplementary pension benefits under Danish law.Footnote 69
The exclusion of institutions managing social security schemes tallies, in principle, with the exclusion relating to institutions which operate on a pay-as-you-go basis (Art. 2(2) letter (c) of the Directive 2016/2341/EU). The essence of pay-as-you-go financing (Umlageverfahren, répartition) is the financing of pension benefits from contributions paid on an ongoing basis by persons currently professionally active.Footnote 70 This principle, in specific situations, may be subject to modifications. The abovementioned caisses de retraite operate on pay-as-you-go basis. However, that modus is accompanied by a system of points (systéme de points) based on such criteria as the duration of the contributory period and the amount of contributions.
4.3 Article 1(2) Letter (j) of the Rome I Regulation as a Fragment of the Conflict of Laws Issue of Occupational Pension Schemes
The above considerations allow to consider the exclusion under Art. 1(2) letter (j) in the context of conflict of laws problems of protection against pension risk.
Nowadays, the legal instruments of protection against pension risk have ceased to be a domain of social security.Footnote 71 This issue is subject to legal provisions of different type.Footnote 72 As a result, it is necessary to demarcate—both in the substantive law and conflict of laws dimension—diverse relationships, including in the area of social security, employment law, financial markets law, private insurance lawFootnote 73 or law of obligations.Footnote 74 On the level of private international law, the total of norms delimiting—in the relations within the framework of legal protection against pension risk—the impact spheres of different national legal systems by designating which of them should apply may be referred to as conflict of laws law of pension security. Such norms comprise both conflict of laws rules of private international law and conflict of laws rules of social security law or, in a wider perspective, of social law.Footnote 75
The subject of demarcation by means of so understood conflict of laws law of social security are miscellaneous sets of public law and private law norms. Their delimitation is a difficult task. It has been noticed in literature that “public law and private law border one another in a distinguishable but inseparable manner.”Footnote 76
The justification of the exclusion under Art. 1(2) letter (j) is the fact that the contractual obligations in question make a source of pension benefits supplementary to the basic pension under the statutory system of pension security (I pillar of the pension system). Non-inclusion in that exclusion of contractual obligations under Direktzusage, as prescribed in German law, or similar legal constructions is an effect of a strict connection of such obligations with the basic relationship. This connection is reflected in the conflict of laws qualification of the obligations. However, one may wonder why Art. 1(2) letter (j) does not refer to insurance contracts concluded with insurance undertakings within the framework of occupational pension insurance. Such contracts are also intended to supplement the basic pension from the statutory pension security system. The ensuing insurance relationship (cover relationship) is, in large measure, determined by the cash relationship, as in the case of the cover relationship involving occupational pension funds. Insurance contracts concluded with insurance undertakings within the framework of occupational pension insurance were, however, treated in the Rome I Regulation in the same way as other insurance contracts.
4.4 Article 1(2) Letter (j) as Fragment of the Conflict of Laws Regime of Protection Against Accidents at Work and Occupational Diseases
Article 1(2) letter (j), to the extent it refers to benefits in respect of occupational disease or accident at work, reaches beyond the conflict of laws issue of occupational pension schemes.
Accident at work or occupational disease may cause interruption or limitation of gainful activity, resulting not only in the acquisition of the right to benefits from occupational pension schemes but also of the right to benefits on other grounds. It is the case since accident at work or occupational disease may lead to an increase of financial needs which is unrelated to pension risk.
As in case of pension risks, risks of accidents at work or occupational diseases are governed by legal norms of various type. In consequence, it becomes necessary to demarcate diverse relationships, including relationships in the area of private insurance law,Footnote 77 social security,Footnote 78 employment law and law of obligations. In the conflict of laws context, the total of norms delimitating—in relationships within the framework of legal protection against the risks of accidents at work and occupational diseases—the impact spheres of different national legal systems, by designating which system should apply, may be referred to as conflict of laws law of protection against accidents at work and occupational diseases.
4.5 The National Conflict of Laws Rule on the Law Applicable to the Contractual Obligations Covered by the Exclusion Under Art. 1(2) Letter (j)
In the conflict of laws law of the insurance contract, the insured party’s claim against the insurer is, as a rule, subject to the law applicable to the insurance contract. The same guideline should be followed in relation to employee claims against institutions for occupational retirement provision under the “insurance contract” in the understanding of Art. 1(2) letter (j). According to the position expressed in German doctrine, the relation between the entitled employee and Pensionsfonds is subject, as “subordinate legal relationship” (dienendes Rechtsverhältnis), to the law applicable to the “principal legal relationship” (hauptsächliches Rechtsverhältnis), i.e., relationship forming the basis of occupational pension (Recht der Betriebsrentenbeziehung).Footnote 79
Legitimacy of that position raises doubts. It must be admitted that the contract concluded by the employer with Pensionsfonds remains in connection with the principal contract between the employer and the employee. In German and Austrian laws this connection is stronger because the choice by the employer of the implementation of an occupational pension scheme in the form of Pensionsfonds does not relieve the employee from its obligations vis-a-vis employees under the employer’s own promise of benefit (Einstandspflicht). The employer’s promise to employees forms a constituent element of every form of occupational pension scheme.Footnote 80
The terms “employed person” and “undertaking” (“employer”—in the subjective sense) used in Art. 1(2) letter (j) constitute primary (entry) questions.Footnote 81 The law relevant to their evaluation is the law designated by the national conflict of laws norm on the law applicable to life situations covered by Art. 1(2) letter (j). Provisions that may be given effect in such manner are norms clarifying the term “employed person,” deviating from its meaning in employment law and in social security law.
Example is provided by German law. Under § 17(1) BetrAVG, first sentence,Footnote 82 employees (Arbeitnehmer) are blue collar workers (Arbeiter) and white-collar workers (Angestellte), including persons hired for professional training (die zu ihrer Berufsausbildung Beschäftigten).Footnote 83 Under the second sentence of that provision, BetrAVG norms apply respectively to persons other than employees if they have been promised benefits in consideration of their activities for the undertaking. The group of such persons includes, among others, Geschäftsführer in a limited liability company (GmbH).Footnote 84