Etienne Wéry, Attorney - ULYS Law Firm How does the internal market for financial services work? Helsinki, May 2002 The Directive on electronic commerce and the regulation of financial services in Europe

Etienne Wéry, Attorney - ULYS Law Firm Etienne Wéry Attorney at the Bars of Brussels and Paris Partner Ulys – Author of : « Le droit de l’internet & de la société de l’information. Droits européen, belge et français », Larcier, Brussels, 2001.

Etienne Wéry, Attorney - ULYS Law Firm Introduction & Overview 1. The E-Com directive 2. Articulation E-Com Directive – financial services legislation

Etienne Wéry, Attorney - ULYS Law Firm Directive on electronic commerce Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 (E-com Directive) Implementation before 17 January 2002 Principles:  Objectives  Scope – coordinated field  Applicable Law?

Etienne Wéry, Attorney - ULYS Law Firm E-com Directive - Objectives Guaranteeing the free provision of Information Society Services (article 49 EC Treaty) Promoting development of e-commerce in the Internal Market -> adequate legal framework Building Consumer confidence Creating legal certainty for business: Reducing legal obstacles and ensuring that business opportunities can take full advantage of the internal market

Etienne Wéry, Attorney - ULYS Law Firm E-com Directive - scope -« Coordinated field »:  horizontal Directive ->delivery of all Information society Services (ISS), indifferent of their nature:  Excluded services: article ISS?: Directives 98/34/EC and 98/48 EC  « Any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services »  « service »: article 50 EC Treaty:  « at a distance »: parties not simultaneously present  « by electonic means »: service is sent and received by means of electronic equipment  « at the individual request of a recipient »: a request proceeds the provision of the service  Exclusions: indicative list in Annex V

Etienne Wéry, Attorney - ULYS Law Firm E-Com Directive: Applicable Law Two Alternatives: « Country of Destination» vs. « Country of Origine » Article 3: « Internal Market Clause » – Mutual recognition and rules of the country of establishment – « country of establisment »: country from which the activities are effectively carried out. (conf.Subsidiary) Derogations: general and case-by-case

Etienne Wéry, Attorney - ULYS Law Firm General Derogations: art. 3§3 the Annex Contractual obligations concerning consumer contracts Parties determine the applicable law Investment funds (UCITS): Directive 85/611/EEC Electronic money: Directive 2000/46/EP Insurance services: Directives 92/49/EEC, Directive 92/96/EEC Rome Convention Significant implications for financial services, especially for consumer financial services

Etienne Wéry, Attorney - ULYS Law Firm : Applicable Law - Derogations on a case-by-case basis: art.3 § 4-6 Member state can restrict the freedom to provide ISS Substantial Conditions: Measures must be necessary to fullfil specific objectives: public policy, protection of consumers (including investors), public health Directed against a given ISS which prejudices these objectives or which presents a serious and grave risk of prejudice Measures must be proportionate to those objectives The burden of proof is on the country of destination Formal Conditions Home country did not adopt adequate measures when asked upon Prior notification to the Commission and the Home Country (exc. Urgency) Commission plans to issue a Guidance: Member States know in advance to what extent they can impose restrictions on financial service providers

Etienne Wéry, Attorney - ULYS Law Firm Articulation between the Electronic Commerce Directive and financial services legislation

Etienne Wéry, Attorney - ULYS Law Firm Financial regulations  Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions ( coordinating thef first and second Council« Banking Directives »: Dir. 77/780/EEC of 12 September 1997and Directive 89/646/EEC of 15 December 1989 )  Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)  Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field

Etienne Wéry, Attorney - ULYS Law Firm E-com -Sectorial Regulation The E-com Directice is a horizontal directive not tailored to meet all the requirements of particular sectors, such as Financial Services The Commission’s Communication of 7 February 2001, COM (2001),66 Resolution of « conflicts of Law »? Not « lex specialis derogat lex generalis » but « lex posterior derogat priori » In case of a conflict, the E-commerce Directive is applicable The Commission reafirmed that the E-com Directive is the foundation for future policy developments and regulatory provisions

Etienne Wéry, Attorney - ULYS Law Firm Hybrid Transactions What if service provided both on- and off-line? ex. promoted on-line but delivered off-line – The e-com Directive only relates to « on-line services » -> promotion = commercial communication – Off-line services: not covered by E-com Directive, even if connected with an on-line service => Dual set of regulation -> need for a coherent set of rules for all modes of financial trades

Etienne Wéry, Attorney - ULYS Law Firm Derogations to the Internal Market Clause: the Annex If listed in the Annex, Internal Market Clause not applicable Examples – article 44.2 of the UCITS Directive « Any UCITS may advertise its units in the Member State in which they are marketed. it must comply the provisions governing advertising in that State ». solution: Application of general principles of European Law -> mutual recognition Problem: national regulations may differ -> e.g. public interest, jurisprudence of the European Court of Justice

Etienne Wéry, Attorney - ULYS Law Firm Derogations Contractual obligations: – Article 1§3: E-com directive does not intefere in Private international Law (PIL) or competent Jurisdiction Competent jurisdiction: The Brussels Regulation (22 December 2002) and the 1968 Brussels Convention Applicable Law: 1980 Rome Convention: – Choice of Law, not: Law of the country most closely connected – Exception: Consumer: not deprived from protecion offered by the country of his usual residence and the service is not exclusively delivered in that country (art. 5)

Etienne Wéry, Attorney - ULYS Law Firm Derogations: Service not listed in Annex Internal market Clause applicable, so Home country rules -> What if national rules significantely diverge? ->Member States may invoke art. 3§4: case-by- case derogation, e.g. protection of the general interest e.g. Article 22§5 Directive 2000/12/CE (banking services) « The provisions of paragraph 1 to 4 shall not affect the power of host Member States to take appropriate measures to prevent or to punish irregularities committed within their territories which are contrary to the legal rules they have adopted in the interest of the general good. This shall include the possibility of preventing offending institutions from initiating any further transactions within their territories. »

Etienne Wéry, Attorney - ULYS Law Firm Derogations: Service not listed in Annex  Need for convergence and harmonization  Maximum or minimum harmonization?  e.g. prohibitive clauses – Consumer Protection (Directive 93/13 CEE): minimalistic approach -> Member states may impose stricter obligations  Commission’s Guidance: Identification of legal provisions from which Member States may derogate Member States know in advance to what extent they can impose restrictions on financial service providers