C-472/03 Arthur Andersen

JUDGMENT OF THE COURT (First Chamber)

Legal context and the dispute

3 March 2005 *

In Case C-472/03,

REFERENCE for a preliminary ruling under Article 234 EC from the Hoge Raad der Nederlanden (Netherlands), made by decision of 7 November 2003, received at the Court on 12 November 2003, in the proceedings

Staatssecretaris van Financiën

ν

Arthur Andersen & Co. Accountants c.s.,

THE COURT (First Chamber),

composed of P. Jann, President of the Chamber, K. Lenaerts (Rapporteur), N. Colneric, K. Schiemann and E. Juhász, Judges,

* Language of the case: Dutch.

Advocate General: M. Poiares Maduro, Registrar: M.-F. Contet, Principal Administrator,

having regard to the written procedure and further to the hearing on 11 November 2004,

after considering the observations submitted on behalf of:

— Arthur Andersen & Co. Accountants c.s., by R. Vos and P.J.B.G. Schrijver, advocaten,

— the Netherlands Government, by H.G. Sevenster and N.A.J. Bel, acting as Agents,

— the Commission of the European Communities, by R. Lyal, A. Weimar and L. Ström-van Lier, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 12 January 2005,

gives the following

Judgment

1The reference for a preliminary ruling relates to the interpretation of Article 13B(a) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) ('the Sixth Directive').

2That reference was made in the course of proceedings concerning the refusal of the Staatssecretaris van Financiën (Netherlands State Secretary for Finance) to exempt from value added tax ('VAT') 'back office' activities performed by Arthur Andersen & Co. Accountants c.s. ('the defendant') in the life assurance sector.

Legal background

Community legislation

3According to Article 4(1) of the Sixth Directive, a taxable person means any person who independently carries out in any place any economic activity specified in paragraph 2 of that article, whatever the purpose or the results of that activity.

4Article 4(4) provides that the term 'independently' in paragraph 1 excludes employed and other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer's liability.

5Article 13 Β of the Sixth Directive states:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents ...'

6Article 2 of Council Directive 77/92/EEC of 13 December 1976 on measures to facilitate the effective exercise of freedom of establishment and freedom to provide services in respect of the activities of insurance agents and brokers (ex ISIC Group 630) and, in particular, transitional measures in respect of those activities (OJ 1977 L 26, p. 14), in force at the material time, provided:

'1. This Directive shall apply to the following activities falling within ex ISIC Group 630 in Annex III to the General Programme for the abolition of restrictions on freedom of establishment:

(a) professional activities of persons who, acting with complete freedom as to their choice of undertaking, bring together, with a view to the insurance or reinsurance of risks, persons seeking insurance or reinsurance and insurance or reinsurance undertakings, carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim;

(b) professional activities of persons instructed under one or more contracts or empowered to act in the name and on behalf of, or solely on behalf of, one or more insurance undertakings in introducing, proposing and carrying out work preparatory to the conclusion of, or in concluding, contracts of insurance, or in assisting in the administration and performance of such contracts, in particular in the event of a claim;

2. This Directive shall apply in particular to activities customarily described in the Member States as follows:

(b) activities referred to in paragraph 1(b):

— in the Netherlands:

— Gevolmachtigd agent,

— Verzekeringsagent;

National legislation

7Article 11 of the Wet op de omzetbelasting 1968 (Law of 1968 on turnover tax) provides:

'The following are exempt from taxation on the conditions laid down by general administrative measures:

(k) insurance and the performance of services carried out by insurance agents.'

The background to the dispute and the question referred for a preliminary ruling

8At the material time in the main proceedings, the defendant, which was established in Rotterdam (Netherlands), included a private company established under Netherlands law called Andersen Consulting Management Consultants (ACMC).

9On 26 May 1997, Royal Nederland Verzekeringsgroep NV, Universal Leven NV ('UL'), a company active on the life assurance market through insurance agents, and ACMC concluded a collaboration agreement, which provided that ACMC would undertake on behalf of UL various activities designated in that agreement as 'back office' activities. ACMC delegated these activities to one of its divisions, Accenture Insurance Services (AIS'), which shares premises with UL.

10The 'back office' activities in question are described as follows in the order for reference: the acceptance of applications for insurance, the handling of amendments to contracts and premiums, the issuing, management and rescission of policies, the management of claims, the setting and paying of commission to insurance agents, the organisation and management of information technology, the supply of information to UL and to insurance agents and the drafting of reports for insured parties and third parties, such as the Fiscale Inlichtingen- en Opsporingsdienst (Tax inquiry and inspection service). When the information supplied by an applicant for insurance shows that a medical examination is necessary, the decision on acceptance of the risk is made by UL, otherwise that decision is made by ACMC and binds UL. AIS is in charge of almost all contact with the insurance agents.

11UL has staff corresponding to the equivalent of 2.9 full-time staff ('FTS '), whilst AIS has 17 FTS working on the 'back office' activities. The AIS staff are trained in life assurance.

12The collaboration agreement provides for the formation of two committees, the 'Review Committee' and the Operating Committee', composed of representatives of UL and of ACMC, with the tasks of assessing the cooperation between UL and ACMC, ensuring compliance with the terms of the agreement, planning the 'back office' activities, discussing developments in insurance and their impact on those activities and resolving any disputes relating to that agreement. It provides for the appointment of a 'Service manager' and an 'Operational manager', who are to oversee the day-to-day cooperation between UL and AIS in order to ensure the efficiency of the 'back office' activities. It contains an exclusivity clause prohibiting ACMC from performing for third parties 'back office' activities comparable to those performed for UL. It provides for remuneration, calculated on the basis of the insurance portfolio and premiums received, for those 'back office' activities and a minimum remuneration.

13In its declaration for the month of September 1998, the defendant stated that it had paid the amount of NLG 10 000 in respect of turnover tax. That sum corresponded to the difference between, on the one hand, the turnover tax calculated on the payment invoiced to UL for the 'back office' activities carried out during that period and, on the other, the turnover tax deducted in that respect.

14Considering that the 'back office' activities carried out for UL were exempt from turnover tax, the defendant sought from the relevant inspector reimbursement of the sum of NLG 10 000, which was refused. It appealed against that refusal to the Gerechtshof te 's-Gravenhage (Regional Court of Appeal, The Hague) (Netherlands), which upheld its claim by judgment of 23 October 2001. That court considered that, by their collaboration, UL and ACMC intended jointly to make use of their skills in a common purpose, namely the joint operation of an insurance company. Thus, according to that court, the activities carried out by ACMC for UL cannot be regarded as the provision of financial services subject to turnover tax.

15The Netherlands State Secretary for Finance appealed on a point of law against the judgment of the Gerechtshof te 's-Gravenhage to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands). The defendant cross-appealed.

16The Hoge Raad der Nederlanden considers that the activities in question cannot be exempt from VAT as insurance transactions. To that effect, it observes, firstly, that according to the documents in the file and the findings of the Gerechtshof te 's-Gravenhage UL alone bears the risks inherent in the performance of insurance activities and, secondly, that the insurance contracts are underwritten in the name of UL and not of ACMC.

17However, it is unsure as to the concept of 'services performed by an insurance agent' within the meaning of Article 13B(a) of the Sixth Directive. It observes that certain elements characteristic of that concept, such as the requirement for a direct link between the taxable person and the insured party, do indeed appear to be lacking in the present case. However, it adds that the activities in question constitute services relating to insurance transactions in which ACMC intervenes to a great extent as an agent. According to it, ACMC acts as such firstly between the insurance agents and UL by handling the insurance applications sent by them and very often by finalising them in the name of UL, and secondly between the latter and the insured parties by acting on behalf of UL with regard to those insured parties during the lifetime of the contract and when it is rescinded.

18In those circumstances the Hoge Raad der Nederlanden decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:

'Where a taxable person has concluded an agreement with a (life) assurance company, such as the agreement at issue between ACMC and UL, under which that taxable person undertakes, for a certain remuneration and with the aid of qualified personnel who are expert in the insurance field, most of the actual activities related to insurance — including, as a rule, the taking of decisions that bind the insurance company to enter into insurance contracts and maintaining contact with the agents and, as the occasion arises, with the insured — while the insurance contracts are concluded in the name of the insurance company and the insurance risk is borne by the latter, are the activities undertaken by that taxable person in execution of the agreement "related services performed by insurance brokers and insurance agents" within the meaning of Article 13B(a) of the Sixth Directive?'

19By a letter of 5 January 2004, the national court asked the parties whether they considered that the judgment of 20 November 2003 in Case C-8/01 Taksatorringen [2003] ECR I-13711 meant that the question referred for a preliminary ruling should be withdrawn. By letter of 11 February 2004, after having heard the views of the parties, it informed the Court that it wished to maintain its reference for a preliminary ruling.

The question referred for a preliminary ruling

20First of all, it is necessary to reject the argument in the defendant's written observations that ACMC was bound to UL by a relationship of subordination such as to exempt the activities in question from VAT under Article 4(4) of the Sixth Directive.

21The reference in that provision to the concepts of 'employer' and 'employee' shows that the exemption from taxation provided for therein presupposes the existence of an employment relationship, which is clearly lacking between ACMC and UL.

22Furthermore, as stated in the order for reference and not contested by the defendant, ACMC has no contractual relationship with the insured parties, since the insurance contracts are underwritten by UL. The national court was therefore correct to consider that ACMC s activities do not constitute insurance transactions within the meaning of Article 13B(a) of the Sixth Directive (see, to that effect, Case C-240/99 Skandia [2001] ECR I-1951, paragraphs 41 and 43).

23Consequently, in the present case the Court is requested to interpret exclusively the concept of 'services related to insurance transactions performed by insurance brokers and insurance agents' within the meaning of Article 13B(a) of the Sixth Directive and to state whether that concept, which is not defined in that directive, covers activities such as those at issue in the main proceedings.

24The terms used to specify the exemptions provided for by Article 13 of the Sixth Directive are to be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (Skandia, paragraph 32, and Taksator ringen, paragraph 36).

25It is also settled law that those exemptions constitute independent concepts of Community law whose purpose is to avoid divergences in the application of the VAT system as between one Member State and another and must be placed in the general context of the common system of VAT {Skandia, paragraph 23).

26In this case, the defendant emphasises the fact that the staff of AIS, to whom the activities in question were delegated by ACMC, are skilled in the field of life assurance and that those activities are related to insurance transactions.

27However, as the defendant itself admitted at the hearing, those two factors are not sufficient to make ACMC an insurance agent. It is in fact necessary to assess also whether the activities in question correspond to those of such an agent.

28The defendant contends that this is the case. It adds that ACMC has a relationship both with the insurer, UL, and with the insured parties and beneficiaries.

29In that regard, it should be noted that, according to the information in the order for reference, ACMC is bound, in the pursuit of its activities, by an exclusivity clause in favour of UL (see paragraph 12 of the present judgment). Therefore it does not have complete freedom as to choice of insurer, a characteristic of the professional activity described in Article 2(l)(a) of Directive 77/92 corresponding to that of an insurance broker.

30The defendant submits that ACMC's activities are identical to those of the 'gevolmachtigd agent' (agent) referred to in Article 2(2) (b) of Directive 77/92 that are described in Article 2(l)(b). At the hearing, it emphasised that ACMC has the power, both upon signature of the contract and execution thereof, to render UL liable with regard to the insured parties and beneficiaries.

31In that connection, it should be noted that it was indeed held, in relation to the Sixth Directive, that the professional activity described in Article 2(l)(b) of Directive 77/92 'involves the power to render the insurer liable in respect of an insured person who has incurred a loss' {Taksatorringen, paragraph 45).

32However, as the Advocate General points out in point 31 of his Opinion, it cannot be inferred from that case-law that the existence of a power to render the insurer liable is the determining criterion for recognition of an insurance agent within the meaning of Article 13B(a) of the Sixth Directive. Recognition of a person as an insurance agent presupposes an examination of what the activities in question comprise.

33In that regard, irrespective of whether, as part of its activities, ACMC has a relationship with both the insurer and the insured parties, as required by the case-law for recognition as an insurance agent (Taksatorringen, paragraph 44), it is apparent from the information contained in the order for reference, as supplemented by the information provided by the defendant in its written observations, that ACMC's activities consist in handling insurance applications, assessing the risks to be insured, determining whether a medical examination is required, deciding whether to accept the risk where such an examination is deemed unnecessary, issuing, managing and rescinding insurance policies and making amendments to contracts and modifying premiums, receiving premiums, managing claims, setting and paying commission for insurance agents and maintaining contact with them, handling aspects relating to reinsurance and supplying information to insured parties and insurance agents and to other interested parties, such as the tax authorities.

34In the light of that information, it must be held that, although they contribute to the essence of the activities of an insurance company, the services rendered by ACMC to UL, which are not insurance transactions within the meaning of Article 13B(a) of the Sixth Directive (see paragraph 22 of the present judgment), do not constitute services that typify an insurance agent either.

35The services in question have specific aspects, such as the setting and payment of commission for insurance agents, the maintenance of contact with them, the handling of aspects relating to reinsurance and the supply of information to insurance agents and to the tax authorities, which, quite clearly, are not part of the activities of an insurance agent.

36Furthermore, as the Commission of the European Communities stated in its written observations and as the Advocate General pointed out in point 32 of his Opinion, essential aspects of the work of an insurance agent, such as the finding of prospects and their introduction to the insurer, are clearly lacking in the present case. It is apparent from the order for reference — and the defendant has not disputed — that the activity of ACMC starts only when it handles the applications for insurance sent to it by the insurance agents through whom UL seeks prospects in the Netherlands life assurance market.

37As the Commission submitted in its written observations and at the hearing, the agreement between ACMC and UL must be regarded as a contract for subcontracted services under which ACMC provides UL with the human and administrative resources which it lacks, and supplies it with a series of services to assist it in the tasks inherent in its insurance activities. In that regard, it is important to note, on reading the information supplied by the national court, that the staff of UL corresponds to only 2.9 FTS, whereas AIS has 17 FTS working on the 'back office' activities, and that the staff of AIS and UL share the same premises.

38Consequently, the services rendered by ACMC to UL must be regarded as a form of cooperation consisting in assisting UL, for payment, in the performance of activities which would normally be carried out by it, but without having a contractual relationship with the insured parties. Such activities constitute a division of UL's activities and not the performance of services carried out by an insurance agent (see, by analogy, Case C-235/00 CSC Financial Services [2001] ECR I-10237, paragraph 40).

39In the light of the foregoing, the answer to the question referred to the Court must be that Article 13B(a) of the Sixth Directive must be interpreted as meaning that 'back office' activities, consisting in rendering services, for payment, to an insurance company do not constitute the performance of services relating to insurance transactions carried out by an insurance broker or an insurance agent within the meaning of that provision.

Costs

40Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than those of the parties to the main proceedings, are not recoverable.

Operative part

On those grounds, the Court (First Chamber) hereby rules:

Article 13B(a) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that 'back office' activities, consisting in rendering services, for payment, to an insurance company do not constitute the performance of services relating to insurance transactions carried out by an insurance broker or an insurance agent within the meaning of that provision.

[Signatures]

OPINION OF ADVOCATE GENERAL POIARES MADURO 1 delivered on 12 January 2005

Introduction

1In this reference for a preliminary ruling, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) asks the Court a question concerning the interpretation of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (hereinafter the 2 'Sixth Directive').

2The question concerns the particular issue of whether 'back-office' activities carried out by an undertaking for an insurance company are to be considered 'related services performed by insurance brokers and insurance agents' within the meaning of Article 13B(a) of the Sixth Directive.

1 — Original language: Portuguese.

2 — OJ 1977 L 145, p. 1.

I — Facts of the main proceedings and the question referred to the Court

3At the material time, the defendant in the main proceedings, the Arthur Andersen & Co. Accountants c.s. group, established in Rotterdam (Netherlands) (hereinafter 'the defendant in the main proceedings'), included the private civil-law partnership governed by Dutch law, Andersen Consulting Management Consultants (hereinafter 'ACMC').

4On 26 May 1997, Royal Nederland Verzekeringsgroep NV, Universal Leven NV (hereinafter 'UL'), a company active, through intermediaries, on the life assurance market, and ACMC concluded a 'sharing agreement', on the basis of which the latter company began to perform various back-office activities for UL. ACMC delegated responsibility for these activities to an internal division known as 'Accenture Insurance Services' (hereinafter 'Accenture'), which is established in the same building as UL.

5These back-office activities include, in particular, the acceptance of new applications for insurance, the processing of contractual and tariff changes, the issue, administration and rescission of insurance policies, the processing of claims, the fixing and payment of commission to insurance agents, the development and administration of information technology (IT), the provision of information to UL and to agents, and the preparation of reports for policyholders and third parties, such as the Fiscale Inlichtin gen- en Opsporingsdienst (FIOD) (Tax Information and Investigation Department). Where it becomes apparent from the answers given in the application form by an applicant for insurance that a medical examination is necessary, it is UL that decides whether or not to accept the risk. Otherwise, it is Accenture that takes the decision to accept applications for life assurance and this decision binds UL. Accenture is responsible for almost all of the daily contacts with intermediaries which are necessary for the implementation of the various tasks involved.

6In its tax declaration for the period September 1998, the defendant in the main proceedings indicated that it had paid an amount of NLG 10 000 in turnover tax, representing the difference between, on the one hand, the turnover tax calculated on the remuneration invoiced to UL in that period for the back-office activities and, on the other hand, the input VAT.

7Considering that back-office activities are not subject to turnover tax, the defendant in the main proceedings applied for reimbursement of this NLG 10 000 from the competent inspector of taxes. This application was rejected.

8The dispute between the defendant in the main proceedings and the Staatssecretaris van Financiën, which ultimately came before the Hoge Raad and which gave rise to the reference to the Court, has its origins in this decision of the inspector of taxes. The referring court asked the Court the following preliminary question:

'Where a taxable person has concluded an agreement with a (life) assurance company, such as the agreement at issue between ACMC and UL, under which that taxable person undertakes, for a certain remuneration and with the aid of qualified personnel who are expert in the insurance field, most of the actual activities related to insurance — including, as a rule, the taking of decisions that bind the insurance company to enter into insurance contracts and maintaining contact with the agents and, as the occasion arises, with the insured — while the insurance contracts are concluded in the name of the insurance company and the insurance risk is borne by the latter, are the activities undertaken by that taxable person in execution of the agreement "related services performed by insurance brokers and insurance agents" within the meaning of Article 13B(a) of the Sixth Directive?'

9This question concerns the interpretation of Article 13B(a) of the Sixth Directive, which provides:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents'.

10Similarly, Article 11 of the Wet op de omzetbelasting 1968 (Law of 1968 on turnover tax), of 28 June 1968 (Stbl. 329), stipulates that:

'1. The following are exempted from tax in accordance with the conditions laid down by general administrative measures:

k) insurance and services supplied by insurance agents'.

11Mention should also be made of Article 2 of Council Directive 77/92/EEC of 13 December 1976 on measures to facilitate the effective exercise of freedom of establishment and freedom to provide services in respect of the activities of insurance agents and brokers (ex ISIC Group 630) and, in particular, transitional measures in respect of those activities, 3 as in force at the material time, which provides:

'1. This Directive shall apply to the following activities falling within ex ISIC Group 630 in Annex III to the General Programme for the abolition of restrictions on freedom of establishment:

3 - OJ 1977 L 26, p. 14.

(a) professional activities of persons who, acting with complete freedom as to their choice of undertaking, bring together, with a view to the insurance or reinsurance of risks, persons seeking insurance or reinsurance and insurance or reinsurance undertakings, carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim;

(b) professional activities of persons instructed under one or more contracts or empowered to act in the name and on behalf of, or solely on behalf of, one or more insurance undertakings in introducing, proposing and carrying out work preparatory to the conclusion of, or in concluding, contracts of insurance, or in assisting in the administration and performance of such contracts, in particular in the event of a claim;

2. This Directive shall apply in particular to activities customarily described in the Member States as follows:

(b) activities referred to in paragraph 1(b):

— in the Netherlands:

— Gevolmachtigd agent

...'

12Finally, Article 2 of Directive 2002/92/ EC of the European Parliament and of the Council of 9 December 2002 on insurance 4 mediation, which repealed Directive 77/92 with effect from 15 January 2005, provides:

'For the purpose of this Directive:

4 — 0) 2003 L 9, p. 3.

(3) "insurance mediation" means the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim.

These activities when undertaken by an insurance undertaking or an employee of an insurance undertaking who is acting under the responsibility of the insurance undertaking shall not be considered as insurance mediation.

II — Analysis

13In this case, the Court is once again invited to analyse the exemption provided for in Article 13B(a) of the Sixth Directive for 'insurance transactions ..., including related services performed by insurance brokers and insurance agents'. The travaux préparatoires offer no precise justification for this exemption. It is an exemption which could only be justified by general considerations of a social, political or administrative simplification character concerning value added tax (here 5 inafter 'VAT'). Moreover, the directive omits to provide any definitions of the concepts employed in this provision. Nevertheless, this is an area that has already been explored in the case-law of the Court, notably in the CPP, Skandia and Taksatorrin 6 gen judgments, in which the concepts of 'insurance transactions' and 'insurance brokers and insurance agents' were analysed.

14At the outset, I would like to draw attention to an argument of the defendant in the main proceedings with which I cannot agree. This is the view that the activities carried out by ACMC for UL may not even fall within the scope of application of the Sixth Directive, since they result from a relationship of employment between two companies as referred to in Article 4(4) of the directive.

15The information provided by the referring court does not reveal any of the

5 — Sec, Farmer. P., and Lyal. R.. EC Tax Law, Oxford, 1994, p. 181. 6 - Case C-349/96 CPP [1999] ECR 1-973; Case C-240/99 Skandia [2001] ECR I-1951. and Case C-8/01 Taksatorringen [2003] ECR I-13711.

elements that the Court considered in its judgment of 25 July 1991, Ayuntamiento de 7 Sevilla, to be characteristic of a 'contract of employment or by any other legal ties creating the relationship of employer and employee' within the meaning of Article 4(4) of the Sixth Directive. On the contrary, it seems clear that AMCM is, in accordance with the wording employed by Advocate General Tesauro in the same case, a person 'who has sufficient organisational freedom with regard to the human and material resources used in carrying out the activity in question and who bears the economic risk 8 entailed in that activity'. The argument put forward by the defendant in the main proceedings that the activities at issue do not fall within the scope of the Sixth Directive should therefore be rejected.

A — The concept of 'insurance transaction'

16As the referring court has correctly held, a company such as ACMC does not carry out 'insurance transactions' within the meaning of Article 13B(a) of the Sixth Directive. In this respect, the Court has already had the opportunity to explain that 'the essentials of an insurance transaction are, as generally

7 - Case C-202/90 [1991] ECR 1-4247.

8 — Ibidem, point 6 and the operative part of the Opinion. understood, that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service 9 agreed when the contract was concluded'.

17Even if it is possible, in accordance with this same case-law, to include within this concept 'the provision of insurance cover by a taxable person who is not himself an insurer but, in the context of a block policy, procures such cover for his customers by making use of the supplies of an insurer who 10 assumes the risk insured', an insurance transaction within the meaning of Article 13B(a) necessarily implies the existence of a contractual relationship between the service provider who claims the exemption and the person whose risks are covered by the 1 insurance, namely the insured. 1

18According to the order for reference, there is no legal relationship of insurance between ACMC and the insured persons. These relations exist exclusively between UL and the policyholders. Although there are legal relations between these two companies

9 — CPP, paragraph 17, and Skandia, paragraphs 37 and 41. See also Taksatorringen, paragraphs 39 to 41.

10 — CPP, paragraph 22, and Skandia, paragraph 38.

11 — Skandia, paragraph 41.

which may certainly be of importance for the performance of insurance transactions between UL and its customers, the activities carried out by ACMC do not, in themselves, constitute insurance transactions exempted under Article 13B(a) of the Sixth Directive.

Β — The concept of 'related services performed by insurance brokers and insurance agents'

19It is common ground that Article 13B(a) of the Sixth Directive exempts not only insurance transactions but also the supply of services related to insurance transactions which are performed by insurance brokers 12 and insurance agents.

20The wording of Article 13B(a) of the Sixth Directive shows that it is not all 'related services [to insurance transactions]' that are exempted. The concept of 'related services' would be sufficiently broad to include

12 — This exemption may be explained by the fact that it was not considered justifiable to impose VAT on insurance services, as this would involve taxing the services of insurance brokers and insurance agents, who perform a vital function of distribution of these services. Moreover, input VAT on such services would not be deductible by the insurers by virtue of the exemption from VAT relating to insurance transactions. virtually all services which, having a link to the provision of insurance, could thus be considered to be related to those transactions.1 3H owever, the Community legislator has expressly limited the scope of the exemption to cover only those services which are performed by insurance brokers or insurance agents. The classification of the person claiming the exemption as an insurance broker or an insurance agent therefore constitutes a vital element in the determination of those activities related to insurance transactions which are to be exempted under Article 13B(a).

21In this respect, the defendant in the main proceedings claims that the activities of ACMC, as set out in the order for reference, correspond to the business of an insurance agent as set out in Directives 77/92 and 2002/92. These activities correspond in particular to those of a 'gevolmachtigd agent', that is to say, an insurance agent under 14 Article 2(l)(b) of Directive 77/92, which refers to 'professional activities of persons instructed under one or more contracts or empowered to act in the name and on behalf

13 — See, to that effect, the Opinion of Advocate General Fennelly in CPP, paragraph 31.

14 — The activities of ACMC clearly do not correspond with the activity foreseen in Article 2(l)(a) of Directive 77/92 concerning the profession of broker, which is characterised by the fact that 'it... falls [on this latter) to seek out, on behalf of a policyholder, the company that is likely to offer him cover that is best suited to his needs' (Opinion of Advocate General Mischo in Taksatorringen, paragraph 86). It is clear that ACMC supplies its services exclusively to UL and not to the insured parties.

of, or solely on behalf of, one or more insurance undertakings in introducing, proposing and carrying out work preparatory to the conclusion of, or in concluding, contracts of insurance, or in assisting in the administration and performance of such contracts, in particular in the event of a claim'.

22This reasoning raises a preliminary question, namely whether the concepts of insurance broker and insurance agent should automatically be interpreted in the same way in the context of the Sixth Directive and in the context of Directives 77/92 and 2002/92, which are concerned not with VAT but with the freedom of establishment. The Court has preferred not to take an absolute position on 15 this question. The Court has, however, taken the essential elements set out in Directive 77/92 into consideration in defining the concepts of 'insurance broker' and 'insurance agent' referred to in Article 13B(a) 16 of the Sixth Directive. Taking these elements into consideration does not amount, however, to an automatic cross-reference to the definition laid down in Directive 77/92. It is without doubt essential that Directive 77/92 is taken into consideration in order to avoid the development of a concept of 'insurance agent' under Article 13B(a) which would risk losing all contact with legal reality and practice in the area of insurance law. However, as the Court has stated on several occasions, the exemptions from VAT constitute independent concepts of Community law which should be placed in the context of the common system of VAT of the Sixth Directive and whose purpose is to avoid divergences in the application of the VAT system as between one Member State and 17 another.

23Consequently, one should not dwell on what Article 2(l)(b) of Directive 77/92 describes as being activities that can be carried out by an insurance agent, with a view to concluding that a person who performs one of these activities is automatically an insurance agent within the meaning of Article 13B(a) of the Sixth Directive. It is more worthwhile to turn to the definition given by the Court in the Taksatorringen judgment, delivered in the field of VAT.

C — The definition of 'insurance agent' adopted by the Court in Taksatorringen

24In this judgment, the Court stated that 15 — See, in particular, Taksatorringen, paragraph 45, and the the concept of 'related services performed by Opinion of Advocate General Mischo in the same case, point 89.

16 — See, Opinion of Advocate General Mischo in Taksatorringen, points 79 to 87. In addition, note point 32 of the Opinion of Advocate General Fennelly in the CPP case, to the effect that there is nothing to support the view that Article 13B(a) contains a necessary and automatic cross-reference to Directive 77/92.

17 — Judgments in Case 348/87 Stichting Uitvoering Financiële Acties [1989] ERC 1737, paragraph 11; Skandia, cited above, paragraph 23, and Taksatorringen, cited above, paragraph 37. insurance brokers and insurance agents' within the meaning of Article 13B(a) of the Sixth Directive 'refers only to services provided by professionals who have a relationship with both the insurer and the insured party, it being stressed that the b r o k er is no m o re t h an an 18 intermediary'. This definition places the emphasis — in the context of an area such as 19 the distribution of insurance products which is characterised, in its modus operandi, by great complexity and diversity 20 — on the external action of the insurance agent, that is his position as a mediator between the policyholder and the insurance company, necessarily implying the existence of relations with both of these parties.

25The definition adopted by the Court has the merit of simplicity in an area such as exemptions from VAT which is, without doubt, complex and full of uncertainties. To determine whether or not a person is an insurance agent, the essential criterion is thus not simply the nature of the internal activities he performs but, first and foremost,

18 — Paragraph 44.

19 — The first recital of Directive 2002/92 states that '[¡Insurance and reinsurance intermediaries play a central role in the distribution of insurance and reinsurance products in the Community'.

20 — Bigot, I., and Traité dc Droit des Assurances, Tome Langė, D., 2, La Distribution de l'Assurance, LGDļ, Paris, 1999, p. 6. The authors make reference in particular to the existence of 'quite theoretical distinctions which poorly mask a more complex reality' in the framework of the distribution of a product of great technical complexity, such as insurance.

his position with regard to the persons that 21 he puts into contact.

26Following along the same lines, Advocate General Saggio in his Opinion in Skandia points out that a company 'cannot be regarded as a broker or an agent, since it has no legal relationship with the insured'. He adds that it clearly follows from the provisions of Directive 77/92 and other Community texts that 'such business [as that of brokers and agents] is characterised by a 22 direct relationship with the insured'.

27The defendant in the main proceedings submits that ACMC has a legal relationship with the customers of UL, inasmuch as it maintains 'indirect' relations with the insured parties. In this way, ACMC fulfils the criteria of the Taksatorringen judgment and qualifies as an 'insurance agent' within the meaning of Article 13B(a) of the Sixth Directive.

21 — Which can be perfectly understood in the light of the presentation in Article 13B(a) of the Sixth Directive of the activities performed by an insurance agent who would benefit from the exemption from VAT which, as I have already indicated, are presented, from the perspective of their contents, as the supply of related services to insurance transactions.

22 — Points 19 and note 10 of the Opinion (emphasis added).

28I cannot accept such an argument. Too much importance should not be attributed to the fact that the Court, in that judgment, did not explicitly specify that the professional relationship 'with both the insurer and the insured party' should be direct. The decisive aspect, in my view, lies in the fact that a relationship between an insurance agent and a policyholder necessarily implies the existence of an agent's own declarations, adopted as such and addressed to the policyholder before whom he presents himself as an insurance agent acting on behalf of and 23 possibly in the name of the insurer.

29In the present case, it is evident that there is a network of insurance brokers and insurance agents who continue to handle relations with UL's clients and with whom ACMC enters into contact in the performance of its 'back office' activities for UL. According to the order for reference, it is these agents who 'have a direct link to (potential) policyholders and insured persons, rather than ACMC'. Therefore, in my opinion, the latter cannot be considered to be in a legal relationship with both the insurer and the insured.

23 — One could imagine that an insurance agent may possibly, in the exercise of his activities as an agent acting on behalf of the insurer, communicate with potential policyholders and insured persons not personally but through a third party who intervenes on his behalf and passes on the insurance agent's own declarations addressed to policyholders. In these circumstances, he should not cease to be an 'insurance agent' within the meaning of Article 13B(a) of the Sixth Directive.

D — Substantial independence of the activity of insurance agent in relation to the insurer's own activity and the subcontracting by the insurer of these activities

30The conclusion at which I have just arrived is not inconsistent with the fact that, in the particular circumstances envisaged in the 'sharing agreement' between UL and ACMC, the latter takes part in the negotiation, the preparation and the conclusion of life assurance contracts and that it even has the power to render the insurer liable in respect of an insured person by concluding insurance contracts in the name of UL.

31Article 2(1)(b) of Directive 77/92 refers expressly to the professional activities of persons 'in the name and on behalf of, or 24 solely on behalf of' the insurer. In Taksatorringen, the Court ruled that the type of activities envisaged by this provision 'involves the power to render the insurer 25 liable in respect of an insured person'. Relying on this case-law, ACMC considers itself to be an insurance agent in so far as it has the power to render the insurer liable.

24 — Emphasis added.

25 — Paragraph 45 of the judgment making reference to point 91 of the Opinion of Advocate General Mischo in this case, where it is specified that, for the action of a party on behalf of an insurer to 'qualify him as an insurance agent, he must be party to a contract or an authorisation and act 'in the name and on behalf of, or solely on behalf of, one or more insurance companies', meaning that he must have the power to render the insurance company liable vis-å-vis the insured'. This conclusion is based on the premiss that the classification of a person as an insurance agent stems from the fact that this person has the power to render the insurer liable vis-à-vis the insured person. However, it follows from the aforementioned Article 2(1) (b) that a person may be classified as an 'insurance agent' even when acting 'solely on behalf' of the insurer. It is clear that where he is not acting 'in the name' of the insurer, he does not have any power to render the insurer liable in respect of third parties. An insurer is not rendered liable in respect of policyholders by the declarations of an agent who does not act 'in the name of the insurer' and who is thus not legally his representative. Accordingly, the power to render the insurer liable cannot be the decisive criterion for classifying a person as an insurance agent. It will not be sufficient, per se, to make a taxable person an insurance agent within the meaning of Article 13B(a) of the Sixth Directive. Other conditions must be fulfilled.

32In fact, the action of a subject who concludes insurance contracts in the name of the insurer cannot be separated from the broader context of the business of distribu 26 tion of insurance products, which necessarily presupposes that the intermediary engages actively in finding and introducing customers and insurers. In this respect, the comments of Advocate General Fennelly at point 32 of his Opinion in the CPP case are worth citing. He states that '[t]he authors of the Sixth Directive ... described persons whose named professional activity comprises the bringing together of insurance under

26 — See the first recital of Directive 2002/92.

takings and persons seeking insurance ...'. Without prejudice to a finding by the referring court, it seems that ACMC is not engaged in such an activity, even when it accepts in the name of UL the applications for life assurance contracts addressed to the latter company by potential policyholders.

33The activity of insurance agent should therefore be viewed as a supply of services on a professional basis, which begins and ends in itself and which thus has an independent substance distinct from the business of the 27 insurer. The activity of an insurance agent cannot be confused with that of the insurer on behalf of and possibly in the name of which the agent acts. In the main proceedings, ACMC simply cooperates in the economic activity of the insurer. It does not exercise activities distinct from those usually performed within UL.

34In this respect, I share the view put forward by the Commission in its written submissions to the effect that the activities of ACMC correspond to a pure subcontracting of activities usually performed by an insurance company.

27 — In this respect see, in another context, points 36 and 37 of the Opinion of Advocate Generai Ruiz-Jarabo Colomer in Case C-68/03 Lipjes [2004] ECR I-5879 on the specific qualities of the activity of brokering, to which the judgment refers at paragraph 21.

35Even when ACMC accepts in the name of UL applications for insurance addressed to the latter company by interested parties, it is still in any event merely a person authorised by the insurer to complete certain legal acts within the context of the preparation and conclusion of contracts of insurance. Clearly, this cannot suffice to make ACMC, or any other proxy of UL, an insurance agent.

36In this respect, the judgment in CSC 2 8 Financial Services, even if it was delivered in the different context of the negotiation of financial products, provides important guidance. In this judgment, the Court states that the activity of negotiation 'refers to the activity of an intermediary who does not occupy the position of any party to a contract relating to a financial product... [It must be] a service rendered to, and remunerated by a contractual party as a distinct act of mediation. ... The purpose of negotiation is therefore to do all that is necessary in order for two parties to enter into a contract, without the negotiator having any interest of his own 29 in the terms of the contract'. Consequently, there is no negotiation, but simply subcontracting by one party of the activities of the seller of financial products to another party, when the latter Occupies the same position as the party selling the financial product and is not therefore an intermediary

28 — Case C-235/00 [2001] ECR I-10237.

29 — Ibidem, paragraph 39. Emphasis added.

who does not occupy the position of one of 30 the parties to the contract'.

37In the context of relations such as those between ACMC and UL, ACMC appears to be a subcontractor of UL which takes the place of the employees of the insurer for the performance of certain transactions usually performed by the insurer himself.

38Moreover, I think that the argument of the defendant in the main proceedings that it is contrary to the principle of fiscal neutrality to impose VAT on these services, since this imposition makes it more difficult to have recourse to third parties to carry out services, previously performed within an insurance company, which are identical to the activities traditionally carried out by insurance agents, is of no relevance.

39To the extent that the common system of VAT taxes only those services supplied in an independent capacity, unless they constitute transactions exempted under Article 13B(a), there will of course be a difference in treatment between those insurance companies that choose to 'externalise' their activities and those that choose to entrust these activities to their employees. This difference

30 — Ibidem, paragraph 40.

in treatment is, however, a normal consequence of the application of the common system of VAT and of the natural contradiction that the existence of exemptions implies for the principles of neutrality and equal treatment. This difference of treatment is, moreover, utterly justifiable. It is sufficient to consider the fact that an insurance company which decides to have the tasks necessary for the performance of insurance transactions carried out by its own employees must bear certain costs (fiscal and others, particularly those resulting from the statutory regime of salaried employment), costs of which it would be relieved if it opted for an 31 external service provider. It seems entirely normal that, in this latter case, the activity in question should be subject to the payment of 32 VAT.

40In conclusion, the position maintained by the defendant in the main proceedings

31 — See, by analog)', in the context of the exemption from VAT for banking transactions, the assertion of Advocate General SDC Ruiz-Jarabo Colomer in Case C-2/95 [1997] ECR 1- 3017, point 54 et seq., that '[iļf an undertaking engages the services of another undertaking to perform certain tasks instead of performing them itself with its own staff and equipment, it will have to pay the VAT relating to the performance of those services'. See also my Opinion in Case BBL C-8/03 [2004] ECR 1-10157, point 24.

32 — In the judgment in Case C-108/99 Cantor Fitzgerald International [2001] ECR 1-7257, paragraph 33, the Court stated that '[al taxable person who, for the purposes of achieving a particular economic goal, has a choice between exempt transactions and taxable transactions must therefore, in his own interest, duly take his decision while bearing in mind the neutral system of VAT - The principle of the neutrality of VAT does not mean that a taxable person with a choice between two transactions may choose one of them and avail himself of the effects of the other'.

entails an obvious extension of the concept of insurance agent, as it results from the Taksatorringen judgment, to the extent that ACMC performs activities usually carried out within the insurance company through its own means. Moreover, the activities of ACMC do not replace the activities of the insurance intermediaries, who continue to exercise their functions and through which UL is active on the market.

4 1.S uch an extension is not tenable, bearing in mind the settled case-law of the Court according to which 'the terms used to specify the exemptions envisaged by Article 13 of the Sixth Directive are to be interpreted strictly since they constitute exceptions to the general principle that turnover tax is levied on all services supplied for considera33 tion by a taxable person'.

33 — Stichting Uitvoering Financiële Acties, paragraph 13, and SDC, paragraph 20. See, more recently. Case C-287/00 Commission ν Germany [2002] ECR I-5811, paragraph 43, and Taksatorringen, paragraph 36. It should also be noted that at paragraph 65 of its judgment in SDC, the Court affirms, in the context of financial transactions, that 'since point 3 of Article 13B(d) of the Sixth Directive must be interpreted strictly, the mere fact that a constituent element is essential for completing an exempt transaction does not warrant the conclusion that the service which that element represents is exempt'. See. in the same respect. CSC Financial Services, paragraph 32.

III — Conclusion

42In the light of the considerations set out above, I propose that the Court replies to the question submitted by the Hoge Raad der Nederlanden in the following manner:

Where, by virtue of a contract with an insurance company, a taxable person performs on behalf of this company certain activities linked to insurance transactions, these are not to be considered 'related services [to insurance or reinsurance transactions] performed by insurance brokers and insurance agents' within the meaning of Article 13B(a) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, in so far as the taxable person does not have a direct relationship with the insurer and the insured party and his activities are not independent in relation to the insurer's own activities.