DSV proposes deletion in the draft directive

VS – 10/2022

The European Commission presented a package of measures for a "fair and sustainable economy" on 23 February. The package also includes a Proposed Directive on corporate due diligence in the area of sustainability (European Supply Chain Law) (see also the News of March 2022). With the proposed Directive, the EU wants to assume its international responsibility and protect human and children's rights along global supply chains as well as strengthen environmental protection.

The DSV supports the European Commission's proposal that all workers inside and outside the EU should have access to healthy working conditions and that child labour and forced labour should be abolished worldwide. The European Commission's proposal for a Directive, however, includes not only companies but also pension insurance institutions in the obligations.

The statutory pension insurance institutions are social security system institutions, though, and not economic enterprises within the meaning of EU law. Therefore, the DSV proposes in a current Opinion deletion of the reference to the statutory pension insurance.

The concept of "entity" in European case law

The proposed Directive includes statutory pension insurance institutions among the financial entities that fall within its scope. This represents a departure from the previous understanding of the term "entity" at the European level and in European case law. Thus, in 1993, the European Court of Justice (ECJ) stated in its judgement in Case C-159/91 - Poucet and Pistre v. AGF and Cancava that "the concept of entity within the meaning of Articles 85 and 86 of the [EEC] Treaty does not cover organisations entrusted with the management of social security schemes." This judgement has been confirmed several times in subsequent ECJ case law, most recently in June 2020 in the judgement in Joined Cases C-262/18 P and C-271/18.

Solvency II Directive explicitly excludes statutory pension schemes

Other EU legislation also excludes pension insurance institutions from its scope. Thus, explicitly in the Solvency II Directive (Directive 2009/138/EC). This also applies to EU legislation on corporate reporting requirements. For example, the related Directive 2013/34/EU on "consolidated accounts and related reports of certain types of entities" excludes pension schemes that qualify as social security schemes.

Deletion of the reference to the statutory pension insurance

The purpose of including the statutory pension insurance institutions in the scope of the proposed Directive is not clear. The statutory pension insurance institutions are not entities in the sense of the valid understanding of EU law. Also, on the capital market in all of the EU Member States, the financial resource investment options used by the statutory pension funds are subject to strict legal regulation as well as tight controls. Therefore, in its opinion the DSV proposes the deletion of the reference to the statutory pension insurance institutions in Article 3 (a) IV of the proposed Directive. The proposed Directive is currently being discussed in the European Council and the European Parliament.