Lloyd's Maritime and Commercial Law Quarterly
Insurance contract law as part of an optional European Contract Act
Jürgen Basedow *
In February 2003, the European Commission published an Action Plan on a more coherent European contract law. It hints at the possibility of a Community measure on general contract law as an optional instrument. This article investigates the significance and usefulness of such an Act for insurance contract law. The main conclusion is that such an instrument could be of great practical significance for the implementation of the single insurance market in the small risk sector where divergent mandatory provisions in the national laws of most Continental countries have prevented trans-border business so far. The article also suggests some supplementary amendments to EC law in force.
I. THE NEED FOR HARMONIZED OR UNIFIED INSURANCE CONTRACT LAW
The action plan on A more coherent European contract law
points out:1
In the area of financial services…firms are unable to offer, or are deterred from offering, financial services across borders because products are designed in accordance with local legal requirements or because the imposition of differing requirements under other jurisdictions would give rise to excessive costs or unacceptable legal uncertainty… The same problems occur particularly with insurance contracts… [The] diversity of national regulations governing life insurance contracts, non-life insurance for mass risks and compulsory insurance constitutes a check to the development of cross-border insurance transactions… Choice of law clauses may alleviate the problem in non-life insurance of large risks. However, they are not admissible in the other cases. The wording of a single policy that could be marketed on the same terms in different European markets has proved impossible in practice.
These assertions reiterate similar observations contained in a previous Commission report on the state of the internal market for services where the Communication on European contract law2
is said to have identified “numerous problems with the functioning of the Internal Market resulting from the legal regimes of Member States relating to contract law. These difficulties also affect services and especially financial services (such as the insurance sector in particular)”.3
* Director, Max-Planck Institute for foreign private law and private international law, Hamburg.
1. Communication from the Commission to the European Parliament and the Council: A More Coherent European Contract Law—An Action Plan:
COM (2003) 68 final of 12 February 2003, para. 47s.
2. COM (2001) 398 final; [2001] O.J. C 255/1.
3. Report from the Commission to the Council and the European Parliament on the state of the internal market for services presented under the first stage of the Internal Market Strategy for Services:
COM (2002) 441 final of 30 July 2002, at 35s.
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