Abstract
This chapter unfolds the concept of home country control as envisaged and applied by the European Commission and Member States. What were the initial concerns faced by European leaders, what were the underlying considerations and principles that led to this approach, how did it evolve and what were the issues stemming from its application? As indicated before, the original aim of the Community was to establish a Single Market in investment and other financial services throughout the EU by introducing minimum harmonisation of the national laws of each Member State insofar as they concerned the establishment of financial institutions and the cross-border provision of services and the setting of common standards of prudential supervision. In this effort, the overall objectives of the EC Treaty should be kept, in particular the concepts of freedom of establishment and freedom to provide services.1
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Notes
See Dassesse, M. et al., EC Banking Law (London: Lloyd’s Press, 2nd ed., 1994) 68.
See Alexander, K., ‘The International Supervisory Framework for Financial Services: An Emerging Regime for Transnational Supervision’ (2000) 1 JIBR 33, 35; see also Chapter 4.
See Bradley, C., ‘Competitive Deregulation of Financial Services Activity in Europe after 1992’ (1991) 11 Oxford Journal of Legal Studies 545, 549.
Indeed, the full harmonisation attempt undertaken in the early 1970s failed, as the Member States found themselves unable at that point to reach agreement on the content of the relevant legislation. For a historical analysis that led to this choice, see Walker, G., European Banking and Financial Law (Oxford: Oxford University Press, forthcoming 2003).
See Bratton, W. et al., International Regulatory Competition and Coordination (Oxford: Clarendon Press, 1996) 31.
European Commission, Completing the Internal Market: White Paper to the Council (COM(85) 310 final, 28 June 1985, hereinafter ‘White Paper’) Paragraphs 102–3.
See Basel Committee, Report on the Supervision of Bank’s Foreign Establishments (Concordat, September 1975) 2–3.
For an extensive analysis on the original principles set out in the Concordat, see Walker, G., International Banking Regulation: Law, Policy and Practice (London: Kluwer, 2001) 86 et seq.
The Basel Concordat, Principles for the Supervision of Banks’ Foreign Establishments (May 1983) has replaced the 1975 Concordat. Since then, it was further supplemented in 1990 and 1992.
See Roth, W., ‘EEC Treaty Article Fifty-Nine and Its Implications for Conflicts Law in the Field of Insurance Contracts’ (1992) 2 Duke Journal of Comparative and International Law 131.
Case 120/78 [1979] ECR 649. Although the case concentrated only on the free movement of goods under Article 30 EEC Treaty, its approach was extended, through the White Paper, to services under Article 59. However, Eeckhout notes that, if one looks at the fundamental freedoms from a personal, rights-based perspective, the potential extension of cases relating to the free movement of goods to other freedoms (such as services) should be made with great caution. See Eackhout, P., ‘Recent Case-Law on Free Movement of Goods: Refining Keck and Mithouard’ (1998) EBLR 271. Here, a distinction has to be made between at least three types of cross-border provision of services: (a) the service provider moves to another Member State where the service is provided, (b) the service receiver moves to another Member State in order to receive that service, and (c) neither the service provider nor the receiver move across borders. The analogy mentioned above seems more appropriate in the latter situation, where the nature of the service is such as not to involve the provider of the service in moving physically between Member States, but where instead it is transmitted by post or telecommunications. See Opinion by Advocate General in Case C-76/90 Sager [1991] ECR I-4221; Opinion 1/94 Competence of the Community to conclude international agreements concerning services and the protection of intellectual property [1994] ECR I-5267, Paragraphs 44–5. See also Kapteyn, P. and Verloren Van Themaat, P., Introduction to the Law of the European Communities (Deventer: Kluwer, 2nd ed., 1989) 443–52.
See Hertig, G., Imperfect Mutual Recognition for EU Financial Services, in Buxbaum, R. et al., European Economic and Business Law: Legal and Economic Analysis on Integration and Harmonisation (New York: Walter de Gruyter, 1996) 220.
See Timmermans, C., ‘How Can One Improve the Quality of Community Legislation?’ (1997) 34 CMLRev 1239.
European Commission, Communication concerning the consequences of the judgement given by the Court of Justice on 20 February 1979 in case 120/78 (OJ C 256/1, 3 October 1980) 2–3.
Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investments firms and credit institutions (OJ L 141/1, 11 June 1993). For a review of the CAD and the issues arising from this Directive, see Moloney, N., EC Securities Regulation (Oxford: Oxford University Press, 2002) 486 et seq.
FESCO, European Standards on Fitness and Propriety to Provide Investment Services (April 1999) 5.
See, e.g., ISD, Article 25. Information exchange on the fitness and propriety of individuals and on firm’s operational structure is also an area covered by the MoU, signed by FESCO members in 1999; see FESCO, Multilateral Memorandum of Understanding on the Exchange of Information and Surveillance of Securities Activities (February 1999).
See IOSCO, Objectives and Principles of Securities Regulation (February 2002) 32.
Ferrarini, G., ‘Introduction’ in Ferrarini, G. (ed.), Prudential Regulation of Banks and Securities Firms: European and International Aspects (London: Kluwer, 1995) 4.
See, e.g., Hartley, T., ‘Recognition of Qualifications and the Right to Work’, in Green, N., Hartley, T. and Usher, J. (eds), The Legal Foundations of the Single European Market (Oxford: Oxford University Press, 1991) 169. Hartley argues that the beneficiary of Article 49 EC might have to comply with formalities designed to inform the local professional organisation of his presence and provide evidence of qualifications. The operation of this principle is illustrated by Gullung, a case concerning legal services; see Case 292/85 Gullung [1988] ECR 111.
See ISD, Article 17 for branches and Article 18 for cross-border services. It is not, though, within the scope of this chapter to analyse and distinguish in detail the Treaty’s basic provisions on the right of establishment and the freedom to provide services. For this purpose, see Chapter 2, Section C.3.1. Also, for such an analysis, see Nielsen, P., Services and Establishment in European Community Banking Law (Copenhagen: DJOF Publishing, 1994) 79 et seq.
European Commission, Report on the Operation of Certain Articles of the Investment Services Directive (COM(1998) 780 final, 21 December 1998) 8.
See FESCO, Standards for Regulated Markets under the ISD (22 December 1999).
FESCO has also taken cognisance of the principles and objectives laid down by IOSCO’s, Objectives and Principles of Securities Regulation (September 1998), regarding consumer protection, fair, efficient and transparent markets and the reduction of systemic risk.
See Cruickshank, C., ‘Is there a Need to Harmonise Conduct of Business Rules?’ in Ferrarini, G. (ed.), European Securities Markets: The Investment Services Directive and Beyond (London: Kluwer, 1998) 131.
See FESCO, Stabilisation and Allotment: A European Supervisory Approach (Consultative Paper, 15 September 2000) 13.
The fear that Member States might use the rules of conduct regime of the ISD as a means to enact protectionist measures has been inter alia expressed by Ashall, P., ‘Investment Services Directive: What was the Conflict all about?’ in Andenas, M. and Kenyon-Slade, S. (eds), EC Financial Market Regulation and Company Law (London: Sweet & Maxwell, 1993) 101.
Steil, B., ‘Equity Trading IV: The ISD and the Regulation of European Market Structure’, in Steil, B. et al., The European Equity Markets: The State of the Union and an Agenda for the Millennium (London: Royal Institute of International Affaires, 1996) 129.
Ibid., Article 19(2). In the latter case, however, information may also be required from investment firms that operate under the freedom to provide cross-border services. The host State also retains in toto responsibility for the measures resulting from the implementation of their policies. See Wouters, J., ‘Conflict of Laws and the Single Market for Financial Services’ (1997) 2 Maastricht Journal of European and Comparative Law 161, 185.
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© 2003 Yannis V. Avgerinos
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Avgerinos, Y.V. (2003). The Home Country Control Principle. In: Regulating and Supervising Investment Services in the European Union. Palgrave Macmillan, London. https://doi.org/10.1057/9780230286870_4
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DOI: https://doi.org/10.1057/9780230286870_4
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