EU makes new offer on financial services to the World Trade Organization
On July 1 1997, the EU made a fresh offer to the World Trade Organization (WTO) in the course of the current talks aimed at liberalizing financial services worldwide. The new offer increases the scope of the previous offer, which included, among other things, free access (on a most-favoured-nation basis) for foreign institutions to the EU's internal market in financial services, and the right to establish branches.
Restrictions to be eliminated under the terms of the new offer include: the requirement that non-EU banks satisfy an 'economic needs' test before they can obtain a licence to operate in Austria; the need for firms wishing to trade in securities in Belgium to incorporate in that jurisdiction; the establishment of a subsidiary in the EU as a prerequisite to becoming a member of the Amsterdam Stock Exchange.
The EU hopes that a deal can be secured by December 12 1997, the deadline originally set by the WTO two years ago. The EU hoped to encourage other WTO countries to improve their own offers and on July 14 1997 the US and Japan submitted their offers. It is understood that the US offer includes equal access to the US financial markets on a most-favoured-nation basis and the abolition of requirements of US citizenship and/or residency for foreign insurers wishing to operate in the US. The Japanese offer includes the possibility for foreign insurers without offices in Japan to insure Japanese clients, the opportunity for individuals and companies to deal with foreign banks directly, and the elimination of the obligation that foreign life insurers maintain yen-denominated assets. The EU, although welcoming the offers, stressed that the success of the current WTO talks depends on the offers made by the emerging economies in Asia and Latin America.
Commission clarifies Second Banking Directive
The Second Banking Directive introduces the principle that credit institutions authorized to offer banking services in one member state are allowed to provide their services in other member states on the basis of home-country control, a single licence and mutual recognition. However, the Commission believes that uncertainties surrounding the interpretation of the Directive are deterring credit institutions from making full use of it. Accordingly, it has issued a Communication offering guidance on the interpretation of the Directive.
Among the areas clarified are the difference between freedom to provide services and right of establishment (which is subject to more stringent requirements) and the meaning of 'general-good rules'.
The Commission considers that a bank operating in the host member state through an independent intermediary is an 'establishment' if three cumulative requirements are met: the intermediary has a permanent mandate, is subject to the management and control of the institution it represents, and is able to commit the credit institution. Where an institution operating automatic telling machines in other member states has in those member states the infrastructures necessary to maintain, equip and repair the machines, it is nonetheless not an establishment.
Recital 16 of the Directive states that member states can in some circumstances force foreign credit institutions to bring their services into line with the rules of the host country when these are justified in the interest of general good. The Commission clarifies that to be justified, these rules should:
- be non-discriminatory;
- be imposed in an area not harmonized at Community level;
- have a general-good objective, according to the Court of Justice's case-law (for example, be imposed for the protection of consumers);
- not be duplicated in the home country; and
- be necessary and proportionate to the objective pursued.
Commission orders Blokker to divest stores
On June 26 1997, the Commission ordered Blokker, a Dutch retailer mainly active in the retailing of household articles and toys, to divest to an independent third party nine outlets in the Netherlands originally belonging to Toys 'R' Us, one of the world's largest toy retailers. The Commission intervened after a request from the Dutch authorities. Without this request, the Commission would not have had jurisdiction, because the two merging entities did not meet the turnover thresholds for examination under the Merger Regulation.
The Commission found that Blokker already enjoyed a dominant position in the market for specialized toy outlets in the Netherlands before the merger. The merger would have strengthened this, giving it access to megastores in suburban areas. Blokker has agreed to sell its majority shareholding in the Dutch Toys 'R' Us to an independent third party. Initially both Blokker and Toys 'R' Us can retain minority shareholdings in the business of up to 20%, but Blokker will eventually have to sell its entire interest.
Allen & Overy