In its judgment in European Commission v Ireland1, the Court of Justice of the European Union (the "ECJ") has ruled that, by failing to apply EU insurance directives to all insurance undertakings on a non-discriminatory basis, Ireland has failed to fulfil its obligations under those directives.
This decision is likely to have significant consequences for the Voluntary Health Insurance Board (the "VHI") and, potentially, the Irish State.
We have set out below a number of key issues arising from this decision, together with a general overview of the case.
Ireland must now take all reasonable steps to ensure compliance with the EU insurance directives; If the VHI as an entity is to continue to operate in its current capacity it must comply with the authorisation and solvency requirements as set out under the EU insurance directives; and Ireland may be exposed to claims from competitors of the VHI who have suffered a loss due to Ireland's failure to apply the EU insurance directives on a non-discriminatory basis. Background:
The VHI was established under the Voluntary Health Insurance Act of 1957 (the "1957 Act") with a view to providing voluntary health insurance on the Irish market. Unlike its competitors, the VHI was not subject to the authorisation and solvency requirements of EU insurance directives as it was granted a derogation from such regulation under Article 4 of the First Non-life Insurance Directive. This derogation was granted on the provision that VHI's capacity remain as it was at the time the derogation was granted.
Under Article 3 of the Third Non-life Insurance Directive, notwithstanding the derogation granted to certain bodies under Article 4 of the First Non-life Insurance Directive, Member States were under an obligation to ensure that monopolies in the non-life insurance market within their territories were abolished by 1 July 1994.
Subsequent to the derogation being granted, various legislation was introduced which amended the 1957 Act. Through this amending legislation, the VHI obtained various powers and rights which extended beyond its capacity as at the time the derogation was granted. For example:
the Voluntary Health Insurance (Amendment) Act of 1996 (the "1996 Act") empowers the VHI to make and carry out 'health-related' insurance schemes; Section 1 of the Voluntary Health Insurance (Amendment) Act of 1998 (the "1998 Act") empowers the VHI to act 'as agent for an insurer in respect of...