Bayerische Ärzteversorgung and Others (Economic and monetary policy - European system of national and regional accounts - Statistical reporting requirements applicable to pension funds - Opinion) [2024] EUECJ C-758/22

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	Court of Justice of the European Communities (including Court of First Instance Decisions)
You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Bayerische Ärzteversorgung and Others (Economic and monetary policy - European system of national and regional accounts - Statistical reporting requirements applicable to pension funds - Opinion) [2024] EUECJ C-758/22_O (29 February 2024) URL: http://www.bailii.org/eu/cases/EUECJ/2024/C75822_O.html Cite as: ECLI:EU:C:2024:191, [2024] EUECJ C-758/22_O, EU:C:2024:191

Bayerische Ingenieurversorgung-Bau m. Psychotherapeutenversorgung (C‑758/22)

(Request for a preliminary ruling from the Bundesverwaltungsgericht (Federal Administrative Court, Germany))

(Preliminary-ruling proceedings - Economic and monetary policy - Regulation (EU) 2018/231 - Statistical reporting to the European Central Bank (ECB) - Occupational mutual institutions - Regulation (EU) No 549/2013 - European system of national and regional accounts in the European Union (ESA) - Statistical reporting requirements applicable to pension funds - Special pension schemes for the professions - Compulsory membership and contributions - Financial intermediation by pension funds)

1. These two requests for a preliminary ruling provide the Court of Justice with the opportunity to interpret Regulation (EU) 2018/231, (2) which grants the European Central Bank (‘ECB’), among others, the power to obtain detailed statistical information from pension funds (‘PFs’) concerning their financial intermediation activities.

2. Occupational mutual social insurance institutions (3) are well-established in Germany. Six such organisations (4) are in dispute with the Deutsche Bundesbank (Central Bank, Germany), which requires them to disclose financial information because, as PFs, it considers them to be subject to Regulation 2018/231. Those institutions, on the other hand, claim that they are social security funds, a status which exempts them from supplying the information required.

3. The dispute centres on the interpretation of the classification of the European system of national and regional accounts in the European Union (‘the ESA 2010’), adopted by Regulation (EU) No 549/2013, (5) and referred to in Regulation 2018/231. Its interpretation is particularly complex because the ESA 2010 contains a statistical classification of the economy as a whole, based on concepts whose legal meaning is not always straightforward to determine. The Court has already dealt with a number of difficulties raised by the ESA 2010 in some recent judgments. (6)

1. “pension fund (PF)” (subsector S.129 of the ESA 2010) means a financial corporation or quasi-corporation that is principally engaged in financial intermediation as the consequence of the pooling of social risks and needs of the insured persons (social insurance). A pension fund as a social insurance scheme provides income in retirement and may provide benefits for death and disability.

‘1. The actual reporting population shall consist of the PFs resident in the euro area Member States.

2. The PFs in the actual reporting population shall be subject to full statistical reporting requirements unless any derogation granted pursuant to Article 7 applies.

‘1. This Regulation sets up the European System of Accounts 2010 (“the ESA 2010” or “the ESA”).

(a) a methodology (Annex A) on common standards, definitions, classifications and accounting rules that shall be used for compiling accounts and tables on comparable bases for the purposes of the Union, together with results as required under Article 3;

7. Chapter 1 (‘General features and basic principles’) of Annex A to the ESA 2010 includes the following paragraphs:

1.37 Differentiating between market and non-market, and so, for public sector entities, classifying them into the general government sector or the corporations sector, is decided by the following rule.

An activity shall be considered as a market activity when the corresponding goods and services are traded under the following conditions:

(1) sellers act to maximise their profits in the long term, and do so by selling goods and services freely on the market to whoever is prepared to pay the asking price;

(2) buyers act to maximise their utility given their limited resources, by buying according to which products best meet their needs at the offered price;

(3) effective markets exist where sellers and buyers have access to, and information on, the market. An effective market can operate even if these conditions are not met perfectly.

1.57 Institutional units are economic entities that are capable of owning goods and assets, of incurring liabilities and of engaging in economic activities and transactions with other units in their own right. For the purposes of the ESA 2010 system, the institutional units are grouped together into five mutually exclusive domestic institutional sectors:

The five sectors together make up the total domestic economy. Each sector is also divided into subsectors. The ESA 2010 system enables a complete set of flow accounts and balance sheets to be compiled for each sector, and subsector, as well as for the total economy. Non-resident units can interact with these five domestic sectors, and the interactions are shown between the five domestic sectors and a sixth institutional sector: the rest of the world sector.

8. Chapter 2 (‘Units and groupings of units’) of Annex A to the ESA 2010 contains the following paragraphs:

2.12 Definition: an institutional unit is an economic entity characterised by decision-making autonomy in the exercise of its principal function. A resident unit is regarded as constituting an institutional unit in the economic territory where it has its centre of predominant economic interest if it has decision-making autonomy and either keeps a complete set of accounts, or is able to compile a complete set of accounts.

2.34 Diagram 2.1 shows how units are allocated to the main sectors. In order to determine the sector of a unit which is resident and not a household, according to the diagram, it is necessary to determine whether it is controlled by general government or not, and whether it is a market or a non-market producer.

2.59 The function of insurance corporations and pension funds consists of the pooling of risks. The liabilities of such institutions are insurance, pension and standardised guarantee schemes (AF.6). The counterparts of liabilities are investments by the insurance corporations and pension funds, acting as financial intermediaries.

2.111 Definition: the general government sector (S.13) consists of institutional units which are non-market producers whose output is intended for individual and collective consumption, and are financed by compulsory payments made by units belonging to other sectors, and institutional units principally engaged in the redistribution of national income and wealth.

2.117 Definition: the social security funds subsector includes central, state and local institutional units whose principal activity is to provide social benefits and which fulfil each of the following two criteria:

(a) by law or by regulation certain groups of the population are obliged to participate in the scheme or to pay contributions; and

(b) general government is responsible for the management of the institution in respect of the settlement or approval of the contributions and benefits independently from its role as supervisory body or employer.

There is usually no direct link between the amount of the contribution paid by an individual and the risk to which that individual is exposed.’

9. Chapter 3 (‘Transactions in products and non-produced assets’) of Annex A to the SEC 2010 includes the following paragraphs:

3.17 Definition: market output consists of output that is disposed of on the market or intended to be disposed of on the market.

3.19 Definition: economically significant prices are prices that have a substantial effect on the amounts of products that producers are willing to supply and on the amounts of products that purchasers wish to acquire. Such prices arise when both of the following conditions apply:

(a) the producer has an incentive to adjust supply either with the goal of making a profit in the long run or, at a minimum, covering capital and other costs; and

(b) consumers have the freedom to purchase or not purchase and make the choice on the basis of the prices charged.

Not economically significant prices are likely to be charged in order to raise some revenue or achieve some reduction in the excess demand that may occur when services are provided completely free.

The economically significant price of a product is defined in relation to the institutional unit and local KAU that has produced the output. For example, all the output of unincorporated enterprises owned by households sold to other institutional units is sold at economically significant prices; it is thus to be regarded as market output. For the output of other institutional units, the ability to undertake a market activity at economically significant prices will be checked notably through a quantitative criterion (the 50% criterion), using the ratio of sales to production costs. To be a market producer, the unit shall cover at least 50% of its costs by its sales over a sustained multi-year period.

3.24 Definition: market producers are local KAUs or institutional units the majority of output of which is market output.

If a local KAU or institutional unit is a market producer, its main output is by definition market output, as the concept of market output is defined after having applied the distinction market, for own final use and non-market output, to the local KAU and institutional unit that have produced that output.

3.26 Definition: non-market producers are local KAUs or institutional units the major part of the output of which is provided for free or at not economically significant prices.’

10. Chapter 17 (‘Social insurance including pensions’) of Annex A to the SEC 2010 includes the following paragraph:

17.43 Definition: social security pension schemes are contractual insurance schemes where the beneficiaries as participants of a social insurance scheme are obliged by general government to insure against old age and other age-related risks such as disability, health etc. Social security pensions are provided to beneficiaries by general government.

11. Chapter 20 (‘The government accounts’) of Annex A to the ESA 2010 reads:

20.10 In addition to this primary unit, there are government entities with separate legal identities and substantial autonomy, including discretion over the volume and composition of their expenditures and a direct source of revenue, such as earmarked taxes. Such entities are often established to carry out specific functions, such as road construction or the non-market production of health, education or research services. These entities are considered to be separate government units where they maintain full sets of accounts, own goods or assets in their own right, engage in non-market activities for which they are held accountable at law, and are able to incur liabilities and enter into contracts. Such entities (together with non-profit institutions controlled by government) are known as “extra-budgetary units” because they have separate budgets, receive substantial transfers from the main budget, and their primary sources of finance are supplemented with own sources of revenue that fall outside the main budget. These extra-budgetary units are classified to the general government sector unless they are predominantly market producers controlled by another government unit.

20.12 Social security funds are government units devoted to the operation of social security schemes. Social security schemes are social insurance schemes covering all or a large part of the community as a whole, which are imposed and controlled by government. A social security fund is an institutional unit if it is organised separately from the other activities of government units, holds its assets and liabilities separately, and engages in financial transactions on its own account.

20.38 Employers’ pension schemes are arrangements set up to provide retirement benefits to participants, based on a contractual employer-employee relationship. They include funded, unfunded, and partly funded schemes.

20.39 A defined-contribution funded scheme, established by a government unit, is not treated as a social security scheme, where there is no government guarantee on the level of pensions due, and the level of pensions is uncertain because it depends on asset performance. As a consequence, the unit identified as managing the scheme - as well as the fund itself, if it is a separate institutional unit - is considered a financial corporation, classified in the insurance corporations and pension funds subsector.

12. The Gesetz über das öffentliche Versorgungswesen (7) applies in the Free State of Bavaria. In accordance with that Law, occupational mutual insurance institutions:

– Must fulfil the necessary conditions for their members to be exempted from the obligation to be insured under the statutory pension insurance scheme (Paragraph 28, third sentence, of the VersoG).

– May only operate on a not-for-profit basis and may use their funds and assets for the sole purpose of carrying out their insurance-provision tasks (Paragraph 9(1) and (3) of the VersoG).

– Must finance their administrative expenses, including the salaries of their employees and the benefits payable to their beneficiaries, from their own funds (first sentence of Paragraph 9(2) of the VersoG).

– The vast majority of their members are legally required to be members because they practise their profession in the Free State of Bavaria. (8) An exemption from compulsory membership is permitted only in exceptional cases. (9)

– Compulsory members who have ceased their activity may remain as voluntary members, (10) in accordance with the provisions of the institution’s statutes, in order to maintain their entitlement to future pensions by payment of the same contributions as those paid by compulsory members.

– Regulate, by means of their own statutes, within the framework of the statutory criteria, the collection of contributions or payments used to finance performance of their tasks, as well as conditions, detailed rules, amounts, and the termination of pension rights. (11)

– Their statutes may authorise the members to make voluntary additional payments to increase their pension entitlement, provided that the sum of the additional payments and the compulsory contribution does not exceed the ceiling set by law. (12)

13. In the Free State of Saxony, the Sächsisches Heilberufekammergesetz (13) and the Satzung über die Sächsische Ärzteversorgung (14) are applicable. According to the order for reference in Case C‑759/22, the content of those provisions does not differ substantially, as regards occupational mutual insurance institutions, from that of the provisions applicable in Case C‑758/22.

14. The referring court points out the following features of the Säschische Ärtzeversorgung (Occupational Mutual Social Insurance Association for Medical Practitioners of the Free State of Saxony):

– It is an institution with partial legal capacity, is part of the Sächsische Landesärztekammer (Association of Medical Practitioners of the Free State of Saxony), and pays benefits to the members of that association and to the Landestierärztekammer (Association of Veterinarians of the Free State of Saxony). (15)

– By law, its members are those who are compulsory members of the Association of Medical Practitioners and of the Association of Veterinarians in the Free State of Saxony. (16)

– Its compulsory members include, in principle, all medical practitioners and veterinarians authorised to practise in the Free State of Saxony and who practise their profession or have their principal place of residence in that Land.

– It is principally engaged in financial intermediation as the consequence of the activities described in the first and second sentences of Article 1(1) of Regulation (EU) 2018/231, by providing contribution-based old-age, survivors’ and disability pensions to its members.

– It keeps a complete set of accounts (Paragraph 8 of the Statutes). Although it has no legal personality, it is organisationally and economically independent of the Association of Medical Practitioners and has extensive autonomy. It performs its tasks in accordance with the law and the Statutes, through its own bodies, under its own responsibility and using its own funds (which are separate from those of the Association). In doing so, it is economically active, can hold rights and obligations, participate in legal transactions and establish liabilities for which it will be liable with its assets.

15. By letters of 7 September 2018 and 25 March 2019, the Deutsche Bundesbank (Central Bank) informed four Bavarian institutions that, in accordance with Articles 1 and 2 of Regulation 2018/231, they were subject to statistical reporting requirements in their capacity as PFs and that, from 30 September 2019, they would have to provide it, on a quarterly basis, with certain data, which it set out, regarding their financial circumstances.

16. By means of almost identically worded letters of 12 November 2018 and 17 July 2019, it instructed another applicant institution to submit more limited data on an annual basis.

17. The institutions each brought administrative proceedings, seeking the annulment of the communications concerning them and, in the alternative, a declaration that they were not subject to reporting requirements.

18. In the judgment of 4 November 2021, the Verwaltungsgericht Frankfurt am Main (Administrative Court, Frankfurt am Main, Germany) dismissed the actions, holding that the applicants were PFs for the purposes of Article 1(1) of Regulation 2018/231, and that they were subject to reporting requirements pursuant to Article 2(1) of that regulation.

19. The applicant mutual institutions brought leapfrog appeals for review against the first-instance judgment before the Bundesverwaltungsgericht (Federal Administrative Court, Germany).

20. In their appeals, the applicants submitted that they are non-market producers, that their compulsory benefits constitute the major part of their output and that they are not sold at economically significant prices. In this respect, the compulsory members do not have the freedom, as is required under point (b) of the first subparagraph of paragraph 3.19 of Annex A to Regulation No 549/2013, to choose whether or not to acquire the pension benefits on the basis of the required contributions. The applicants argue that the 50% rule laid down in the third subparagraph of paragraph 3.19 of Annex A to the ESA is not relevant, since it serves only to determine the output. In any event, those mutual institutions are part of the social security funds subsector.

21. The facts and conduct of the main proceedings are, with the exception of the specific features of each case, essentially the same as those of Case C‑758/22.

22. Against that background, the Bundesverwaltungsgericht (Federal Administrative Court) asks the Court for a preliminary ruling on the following questions, which are identical in both proceedings:

‘(1) (a) Does point (b) of the first subparagraph of paragraph 3.19 of Annex A to the ESA require that all consumers of the products offered by the producer must have the freedom to purchase or not purchase those products and to make that choice on the basis of the prices charged?

(b) In cases where the vast majority of those consumers, without having such freedom of choice, receive from the producer products amounting to more than half of its output by virtue of compulsory membership with that producer and are required to pay compulsory contributions in an amount set by the producer, are the requirements of the provision satisfied by the fact that a minority had the option of joining the producer as voluntary members and exercised that option in order to obtain the products in exchange for payment of the same contributions as the compulsory members?

(2) Will market output at economically significant prices, as defined under paragraphs 3.17 to 3.19 of Annex A to the ESA, always be present if the “50% criterion” defined in the third and fourth sentences of the third subparagraph of paragraph 3.19 of Annex A to the ESA is fulfilled by virtue of the fact that at least 50% of the costs are covered by sales over a sustained multi-year period, or is that criterion to be interpreted not as a sufficient condition (one that is sufficient by itself) but rather as a necessary condition that applies in addition to the two preconditions laid down in points (a) and (b) of the second sentence of the first subparagraph of paragraph 3.19 of Annex A to the ESA?

(3) For the purposes of determining whether institutional units are market producers as defined in paragraph 3.24 of Annex A to the ESA, must reference be made not only to paragraphs 3.17, 3.19 and 3.26 of Annex A but also to the additional requirements laid down in the second subparagraph of paragraph 1.37 of Annex A to the ESA?

(4) (a) In order for an institutional unit to be classified in subsector S.129, does paragraph 2.107 of Annex A to the ESA necessarily require that all of its benefits must be provided to all participants on the basis of an insurance contract?

(b) Is the requirement for the benefits to be provided on a contractual basis already fulfilled in this respect if, notwithstanding the fact that the compulsory membership, the compulsory contributions and the compulsory benefits of the institutional unit are governed by the public body pursuant to its statutes, compulsory members can also establish claims to additional benefits through the payment of voluntary additional contributions?

(5) Is point (f) of the third sentence of Article 1(1) of Regulation [2018/231] to be interpreted as excluding from the concept of a “pension fund”, as defined in the first sentence of that provision, only those institutional units that satisfy both of the criteria set out in paragraph 2.117 of Annex A to the ESA, or does that exception also cover other institutional units which are to be regarded as social security pension schemes under paragraph 17.43 of Annex A to the ESA, even if they do not meet all of the requirements set out in paragraph 2.117 of Annex A to the ESA?

(6) (a) Does the concept of “general government” in paragraph 2.117(b) and paragraph 17.43 of Annex A to the ESA refer only to the respective primary unit, or does it also include legally independent pension institutions that have been established on a statutory basis, are organised on the basis of compulsory membership and financed by contributions, and which have the right to self-governance and separate accounting?

(b) Does the settlement of the contributions and benefits, as referred to in paragraph 2.117(b) of Annex A to the ESA, mean approval of the amount, or does it suffice if a law prescribes the minimum risks to be covered and the minimum level of cover, and also regulates the principles and limits for collection of contributions, while leaving it for the pension institution to assess the amount of the contributions and benefits within this framework?

(c) Does the concept of a “government unit”, as referred to in paragraph 20.39 of Annex A to the ESA, include only institutional units that fulfil all the requirements set out in paragraphs 20.10 and 20.12 of Annex A to the ESA?’

23. The requests for a preliminary ruling were received at the Registry of the Court of Justice on 15 December 2022. In view of their similarity, the two cases were joined.

24. Written observations were lodged by the ECB, the Deutsche Bundesbank (Central Bank), the Bayerische Ärzteversorgung, representing the five Bavarian pension funds, the Sächsische Ärzteversorgung, and the European Commission. All those parties took part in the hearing held on 13 December 2023.

25. Before replying specifically to the questions referred for a preliminary ruling, I believe that it is helpful to set out why, in view of their importance to the economic and monetary policy of the Member States, PFs are subject to certain reporting requirements. I shall also deal, as a preliminary point, with the features of the pension system existing in Germany, in so far as is important for these references, and the essential characteristics of the ESA 2010.

26. PFs play an important role in the economy of the euro zone and the European Union as a whole, since they provide households with an opportunity to save for retirement and, at the same time, contribute to the efficient long-term allocation of capital.

27. Since the 2008 financial crisis, the assets of PFs have multiplied and, according to some estimates, those assets come to more than EUR 3 trillion. Those estimates indicate that their percentage of GDP in the euro zone has almost doubled, rising from 13% in 2008 to more than 25% now. (17)

28. The assets in which PFs invest the most are units in investment funds and debt securities. Other smaller-scale investments include shares and holdings, financial derivatives, cash and loans. (18)

29. The gaps in the available information and the lack of comparability between countries made it difficult to ascertain the impact of PFs on the transmission of monetary policy and the risks associated with the investment behaviour of PFs and their interconnection with the rest of the financial system and the real economy.

30. Therefore, the ECB considered it essential to have harmonised, quality statistics on PFs in the euro zone, which explains the legislative process used in relation to the provision of detailed statistical information.

31. Originally, Article 2(a) of Regulation (EC) No 2533/98 (19) excluded PFs from what it called the ‘reference reporting population’. (20) However, the ECB recommended (21) the inclusion of PFs, which was brought about by Regulation (EC) No 951/2009. (22)

– The reference reporting population should comprise the financial corporations sector as a whole, in particular, insurance corporations and PFs, which represent the second largest sub-sector of that sector in terms of financial assets.

– The growing awareness of the financial implications of longevity as well as the general move towards funded pension schemes was likely to increase the importance of that subsector for ECB policy-making.

– Institutions in that subsector were managing their portfolios much more actively than in the past, which increased their relevance for monetary policy.

33. Following their inclusion in the reference reporting population, Regulation 2018/231 imposed on PFs requirements to report statistical information to central banks in the euro zone. (23) In that way, the ECB has certain knowledge of the role of PFs in the monetary policy transmission mechanism.

34. At the hearing, the ECB confirmed that, for the adoption of its decisions, Regulation 2018/231 now allows it to hold the essential detailed quarterly statistics concerning the financial activities of PFs. Before, it could only obtain those statistics, through an indirect route and on an annual basis, in relation to the assets but not the liabilities of PFs.

35. In Germany, retirement insurance is provided through a number of schemes (pillars). The general scheme is the retirement insurance scheme established as a branch of social security, but other schemes exist, (24) including the scheme provided by mutual social insurance institutions for certain professions. (25)

36. Occupational mutual institutions are governed by the provisions in force in each Land. A Land usually authorises occupational mutual institutions at the request of professional associations, and they are set up as independent institutions governed by public law or as funds under the control of the professional associations which administer them. The professions covered are not identical in each Land.

37. Occupational mutual institutions are financed by the contributions of their members, who are exempt from contributing to the general social security scheme. They obtain additional profits from the funds collected through those contributions and invest these in capital markets, like any other financial intermediary.

38. Members of a profession have been required to join a mutual institution since these were created in the Land where they work, and they must pay a compulsory contribution, in addition to which they may pay a voluntary contribution. Members who cease their activity may continue as voluntary members of the mutual institution. When mutual institutions calculate contributions, they do not differentiate between compulsory and voluntary membership.

39. Occupational mutual institutions finance pensions using members’ contributions. Therefore, they operate on the basis of the risk-pooling principle: their governing bodies decide the amount of the contributions and the criteria for calculating the pensions to be paid to their members.

40. Occupational mutual institutions cover their own administration costs and they do not receive any public funding or support. That factor, among others, distinguishes them from the general retirement pension scheme of the social security system, for which any losses are offset by the State budget.

41. The importance of the PFs set up by German occupational mutual institutions is considerable. In particular, according to some estimates, in 2022, the investments of the five Bavarian mutual institutions in Case C‑758/22 came to EUR 106 800 million and those of the Saxon mutual institution (Case C‑759/22) came to EUR 4 700 million. (26)

42. At the hearing, the Bundesbank stated that the six applicant mutual institutions were alone in objecting to the provision of detailed quarterly statistical information to the ECB, in accordance with Regulation 2018/231. Other similar German organisations have accepted their classification as PFs and have provided that information.

43. In order to determine which PFs are required to provide detailed statistical information to the ECB, Regulation 2018/231 refers to the concepts laid down by Regulation No 549/2013 in the ESA 2010.

44. The ESA 2010 is a statistical classification set out in Annex A to Regulation No 549/2013. It is ‘an internationally compatible accounting framework for a systematic and detailed description of a total economy (that is, a region, country or group of countries), its components and its relations with other total economies.’ (27)

– ‘… for the purposes of the European Union, and in particular for the formulation and monitoring of its economic and social policies, the ESA 2010 establishes a reference framework intended for the drawing up of the accounts of the Member States. In that regard, as stated in recital 3 of that regulation, those accounts should be drawn up on the basis of a single set of principles that are not open to differing interpretations, so that comparable results can be obtained’. (28)

– ‘As is apparent from Article 1 of that regulation, the ESA 2010 lays down a methodology, set out in Annex A, relating, in particular, to common accounting definitions and rules, intended to enable national and regional accounts and tables on comparable bases for the purposes of the European Union to be drawn up. In accordance with Article 3 of Regulation No 549/2013, those accounts are to be transmitted by the Member States to the Commission (Eurostat).’ (29)

46. Since the ESA is a statistical instrument, its interpretation must take into account the fact that the concepts it uses are not always the same as the corresponding administrative concepts. Furthermore, Regulation No 549/2013 states that ‘the concepts in the ESA usually differ from their administrative counterparts in that: … (d) the administrative concepts are generally not optimal for economic analysis and the evaluation of economic policy.’ (30)

47. The concepts and terms used in the SEC 2010 reflect an overall economic approach and cannot be read in isolation or literally. The determination of the underlying logic of those concepts and terms is possible only by means of an interpretation based on systematic and purposive criteria. (31) It is also necessary to bear in mind that the definitions in the ESA are supplemented by indicators, as an aid for verifying whether the components of those definitions are satisfied, and by diagrams creating links between the stages of the examination resulting from the individual definitions.

48. In particular, when the paragraphs of different chapters deal with the same issue and pursue the same objective, even though there are variations in their wording, they ‘must … receive a common interpretation and be regarded as forming one and the same provision.’ (32)

49. For the purposes of the ESA 2010, any institutional unit (33) must be linked to one of the five mutually exclusive national sectors (non-financial corporations, financial corporations, general government, households, and non-profit institutions serving households). (34)

50. The questions referred for a preliminary ruling concern two of those five sectors included in Annex A: (35)

– The financial corporations sector (S.12), one subsector of which is financial intermediaries such as insurance corporations (S.128) and pension funds (S.129).

– The general government sector (S.13), which includes, inter alia, the social security funds subsector (S.1314).

51. I believe that the most appropriate order for replying to the questions submitted by the referring court is, first, to deal with the fourth, fifth and sixth questions together, in order to determine whether the applicant mutual institutions are PFs or social security funds. The dispute turns on the selection of just one of those two options, to the exclusion of any others. (36)

52. The classification of institutional units in the ESA 2010 must be carried out by means of an overall assessment of their features by reference to the economic activity that they perform. (37) A strict reading of the definitions and criteria in the ESA 2010 which does not take account of the principal economic activity of the institutional unit concerned is not appropriate. So-called decision trees (like diagram 2.1 in the ESA 2010) must be used flexibly, without any need to follow a strict, fixed order that disregards the institutional unit’s economic activity. That is, I stress, the key factor of the classification.

53. The referring court expresses its uncertainty regarding how to coordinate the concept of PF in Regulation 2018/231 with the definitions and criteria used in the ESA 2010 for characterising that type of institutional unit.

54. In accordance with Article 2(1) of Regulation 2018/231, the actual reporting population subject to the requirement of comprehensive statistical reporting to the ECB is to consist of the PFs resident in the euro area Member States.

55. In laying down the definition of a PF, Article 1(1) of Regulation 2018/231 refers to subsector S.129 of the ESA 2010, which does not preclude it from using its own definition (38) and from excluding from that definition ‘social security funds as defined in paragraph 2.117 of the ESA 2010’. The definition of PF in Regulation 2018/231 is basically the same as that in paragraph 2.105 of the ESA 2010.

56. In principle, on account of their purpose, the applicant mutual institutions come within the definitions of PF in Regulation 2018/231 and the ESA 2010, since they are principally engaged in financial intermediation (within the meaning of Article 1(1) of Regulation 2018/231) and provide an income in the event of retirement, disability and death.

57. My analysis will consider: (a) the classification of the applicant mutual institutions as PFs; (b) the reasons for not including them in the social security funds category; and (c) their relationship with the concept of ‘general government’.

1. Do the applicant mutual institutions meet the criteria for PFs laid down in the ESA 2010?

58. Paragraphs 2.107 to 2.110 of the ESA 2010 contain criteria for characterising PFs, which I shall go through below in relation to the applicant mutual institutions.

59. First, examples of participants in PFs ‘include employees of a single enterprise or a group of enterprises, employees of a branch or industry, and persons having the same profession.’ (39) The applicant mutual institutions cover persons who practise regulated professions in the German Länder.

60. Secondly, ‘the benefits included in the insurance contract [of those PFs] can be: paid after the death of the insured to the widow(er) and children; paid after retirement; or paid after the insured becomes disabled.’ (40) The applicant mutual institutions cover retirement and, as the case may be, death and disability.

61. Thirdly, ‘in contrast to life insurance corporations, pension funds are restricted by law to specified groups of employees and self-employed’. (41) The membership of the applicant mutual institutions encompasses only one type of self-employed worker, namely, persons who practise certain regulated professions.

62. Fourthly, ‘pension fund schemes may be organised by employers or by general government. They may also be organised by insurance corporations on behalf of employees; or separate institutional units may be established to hold and manage the assets to be used to meet the pension entitlements and to distribute the pensions.’ (42) In the case of Germany, it is professional associations, which have the status of public entities, which foster the creation of mutual institutions, that manage themselves independently. (43)

2. Reasons for excluding the applicant mutual institutions from the social security funds category

63. It is not possible for an entity to be classified as a PF and to fall within subsector S.1314 (social security funds), which comes under sector 13 of the ESA 2010 (general government). Those are mutually exclusive categories.

64. In accordance with paragraph 2.117 of the ESA 2010, the ‘social security funds’ subsector includes units: (a) whose principal activity is to provide social benefits by law or by regulation to groups of the population which are obliged to participate in the scheme or to pay contributions; and (b) whose management in respect of the settlement or approval of the contributions and benefits is the responsibility of general government. (44)

65. Although the applicant mutual institutions fulfil, to a large extent, the first criterion (compulsory membership) (45) for classification as social security funds, (46) that does not appear to be the case as regards the second criterion (management responsibility lies with general government).

66. The applicant mutual institutions are required to comply with a number of statutory minimum requirements, (47) but the settlement and approval of their contributions and benefits is not decided on by general government, unlike in the case of social security funds.

67. According to the information in the case file, the applicant mutual institutions:

– Regulate by means of their statutes, adopted by their representative bodies, the collection of the contributions or payments used to finance the performance of their tasks.

– Lay down the requirements, detailed rules, amounts and conditions for the termination of pension rights and death and disability benefits.

– Act as financial intermediaries at their own risk, since they invest the funds received from the compulsory and voluntary contributions of their members in order to obtain profits and pay pension, death and disability claims to their members, and also to cover their operating costs.

– Manage themselves and keep their own accounts, being independent from the professional associations which create them.

– Are responsible for their own financial management, and, unlike social security funds, do not receive support from the German State in the event of a loss: the referring court expressly states this. (48) The general social security scheme, on the other hand, is a social security fund within the meaning of paragraph 2.117 of the ESA 2010, to which the State makes significant financial contributions to cover its deficits.

68. In my view, paragraph 20.39 of the ESA 2010 confirms categorically that mutual institutions like the applicants do not form part of the social security system. In accordance with that paragraph, there is no social security scheme where there is no government guarantee on the level of pensions due, and that amount depends on asset performance.

69. In this case, the amount of the pensions to be covered by the applicant mutual institutions depends on the profits from the intermediation activity they undertake, that is, on the performance of their assets. If their investments yield good profits, they will be able to pay better benefits and vice versa if they do not. There is no government guarantee on the amount of pensions owed.

70. The above is not precluded by paragraph 17.43 (49) of the ESA 2010, contrary to what the referring court appears to suggest. That court takes the view that the definition of social security pension schemes in paragraph 17.43 may be independent and exhaustive, so that the term ‘general government’ includes legal persons governed by public law which are independent vis-à-vis the primary unit. That is the case of the applicant mutual institutions; they would have to be classified as social security pension schemes because the law requires their compulsory members to participate in their pension schemes and because they provide their benefits as institutional units, with separate legal personality, of a Land.

71. To my mind, however, paragraphs 2.117 and 17.43 of the ESA 2010 are complementary and must be applied together in accordance with a uniform, consistent interpretation. (50)

72. Paragraph 17.43 is included in Chapter 17 of the ESA 2010 and concerns social insurance, including pensions, but, I stress, it must be read in combination (and consistently) with paragraph 2.117, which identifies institutional units that may be classified as social security funds. (51)

73. The conditions set out in paragraph 2.117 for the application of the criteria in paragraph 17.43 are essential. It is not possible to classify institutional units without taking into account the paragraphs in Chapter 2 of the ESA 2010.

74. Paragraph 2.117 of the ESA 2010 defines the social security funds subsector, whereas paragraph 17.43 is a specific provision, intended to draw a distinction within that subsector. Paragraph 17.43 presupposes fulfilment of all the elements of the definition in paragraph 2.117 and supplements it by means of a number of characteristics in order to distinguish social security pension schemes.

75. I conclude, therefore, that mutual institutions like the applicants cannot be classified as social security funds.

76. In its sixth question, the referring court asks whether the concept of ‘general government’ used in paragraph 2.117(b) and paragraph 17.43 of the ESA 2010 refers only ‘to the respective primary unit’ or whether it also includes ‘legally independent pension institutions that have been established on a statutory basis, are organised on the basis of compulsory membership and financed by contributions, and which have the right to self-governance and separate accounting’. (52)

77. In my opinion, paragraphs 2.117(b), 17.43 and 20.39 of the ESA 2010 do not enable the applicant mutual institutions, which act as financial institutions that administer pension funds, to be classified within the general government category.

78. I agree with the Bundesbank (Central Bank) that the authority which regulates the legal framework of occupational mutual institutions can be regarded as general government but not the occupational mutual institutions themselves, which have complete autonomy and responsibility vis-à-vis their members and act as financial intermediaries in the administration of their PFs.

79. Moreover, as I have already pointed out, paragraph 20.39 of the ESA 2010 indicates that, even where a mutual institution is established by general government, it is not a social security scheme where there is no government guarantee on the level of pensions due.

80. Nor is the solution which I propose precluded by paragraph 20.10 of the ESA 2010 since, according to the information supplied to the Court, the applicant mutual institutions do not receive transfers from the State budget. Therefore, they cannot be classified as extra-budgetary units.

81. The same applies to paragraph 20.12 of the ESA 2010, where it states that ‘social security schemes are social insurance schemes covering all or a large part of the community as a whole, which are imposed and controlled by government.’ (53) By contrast, the applicant mutual institutions cover a limited, circumscribed section of workers (liberal professions) and, I repeat, general government has no control over them.

82. In short, my view is that the applicant mutual institutions should be classified as PFs, and not as social security funds, within the meaning of Article 1(1) of Regulation 2018/231 and paragraphs 2.105 to 2.110 of Regulation No 549/2013.

83. The first, second and third questions concern the classification of institutional units on the basis of whether or not they carry out a commercial activity.

84. Acceptance that the applicant mutual institutions do not form part of the social security funds subsector (S.1314), which is included in the general government sector (S.13), and that they supply financial intermediation services as PFs means, implicitly, that they carry out a market activity.

85. However, with a view to clarifying the uncertainties raised in the first three questions referred for a preliminary ruling, I believe that it is helpful to confirm why those mutual institutions perform a market activity, according to the terminology of the ESA 2010. Furthermore, that is required by the approach which should govern the application of the ESA 2010.

86. The binary test (market/non-market) adopted by the ESA 2010 is readily applicable to what can be called the ‘classic’ production of goods and services. However, the application of that test to financial intermediation institutions requires an overall assessment of the indicators in the ESA 2010.

87. In accordance with paragraph 2.55 of the ESA 2010, ‘the financial corporations sector (S.12) consists of institutional units which are independent legal entities and market producers, and whose principal activity is the production of financial services’. (54)

88. According to the order for reference, it is common ground that the applicant mutual institutions fulfil the first and third of those three conditions: they are institutions governed by public law and they provide financial intermediation services, as the consequence of the pooling of the risks and needs of those they insure. (55)

89. The referring court’s uncertainties therefore concern the second condition, in other words, whether the applicant mutual institutions are market producers. In setting out those uncertainties, the referring court refers to the presence or absence of certain quantitative (first and second questions) or qualitative (third question) indicators which determine market output in the ESA 2010.

90. However, as the ECB observes, (56) that approach is incomplete: the indicators referred to do not determine the classification of institutional units as market producers, a condition which is derived, fundamentally, from the principal activity performed by those units. Only an overall assessment of their activity will make it possible to reach an acceptable outcome in the framework of the ESA 2010.

91. The general criteria for differentiating between market producers and output and non-market producers and output are set out in paragraphs 3.16 to 3.26 of the ESA 2010. The referring court’s questions are focused specifically on the interpretation of paragraph 3.19.

92. In accordance with paragraph 1.37 of the ESA 2010, an activity is to be considered as a market activity when the corresponding goods and services are traded under conditions set out therein, in relation to sellers, buyers and the existence of markets on which sellers and buyers come together. (57)

93. Market output includes, inter alia, ‘products sold at economically significant prices’, to which paragraph 3.19 of the ESA 2010 refers. (58) Economically significant prices are prices ‘that have a substantial effect on the amounts of products that producers are willing to supply and on the amounts of products that purchasers wish to acquire’.

94. Economically significant prices arise, in turn, when two conditions apply: (a) the producer has an incentive to adjust supply either with the goal of making a profit in the long run or, at a minimum, covering capital and other costs; and (b) consumers have the freedom to purchase or not purchase and make the choice on the basis of the prices charged.

95. Since it is not always possible to verify fulfilment of those two conditions, paragraph 3.19 in fine of the ESA 2010 sets out a quantitative criterion based on the covering of at least 50% of the costs through the sales of the institutional unit concerned. (59)

96. In accordance with paragraph 2.40 of the ESA 2010, ‘differentiating between market and non-market, and so for public sector entities classification between the general government sector and the corporations sector, depends on the criteria set out in paragraph 1.37’.

97. That paragraph (1.37) is part of Chapter 1 of Annex A, which contains an overview of the concepts and principles of the ESA 2010. Therefore, the conditions laid down in paragraph 1.37 must be supplemented by the indicators contained in the special chapters of the ESA 2010.

98. I recognise that the criteria for differentiating between market and non-market output set out in paragraphs 3.16 to 3.26 and 1.37 of the ESA 2010 are not straightforward to apply to financial corporations like the applicant mutual institutions.

99. The referring court is aware of that difficulty (60) when it places the emphasis on paragraph 3.19 of the ESA 2010. Although the referring court accepts that the first condition laid down in that paragraph is satisfied in this case (the producer has an incentive to adjust supply, at least with the goal of covering costs), the same cannot be said of the second condition (consumers have the freedom to purchase or not purchase and make the choice on the basis of the prices charged).

100. According to the referring court’s reading of paragraph 3.19 of the ESA 2010, that provision requires, in principle, that all consumers must have the freedom to purchase or not purchase all the products offered to them and to choose those products on the basis of the prices charged. That does not occur in the case of the applicant mutual institutions, whose services are available only to professionals whose membership of those institutions is compulsory and to those who, under strict conditions, are entitled to become voluntary members. Moreover, the contributions paid by the latter are not the consequence of the interplay of supply and demand under market conditions. (61)

101. The referring court appears, therefore, to be inclined to disagree (contrary to the first-instance court’s position) (62) that the quantitative criterion of 50% (paragraph 3.19 in fine of the ESA 2010) is sufficient for classification as a market producer. In any event, that classification requires the fulfilment of two elements of the definition of economically significant prices (points (a) and (b) of paragraph 3.19 of the ESA 2010). (63)

102. Finally, in the referring court’s view, paragraph 1.37 takes the same approach as paragraph 3.19(b) of the ESA 2010, in setting out the trading conditions between sellers and buyers, and the requirement of the existence of effective markets to which sellers and buyers have access and about which they have information. Yet paragraph 1.37 accepts that an effective market can operate even if those conditions are not met perfectly, a statement which leads the referring court to question what should be ‘the nature and intensity of the access restrictions or purchase obligations that would be necessary in order to rule out market-driven activity and economically significant prices’. (64)

103. For my part, I consider that an isolated interpretation of the two paragraphs at issue (paragraphs 3.19 and 1.37 of the ESA 2010), like that carried out by the referring court, would probably be correct if the remaining rules included in the ESA 2010 were disregarded. Those rules make it possible to overcome the apparent contradiction between those two paragraphs and other, equally important paragraphs of its enacting terms.

104. The isolated and strict application of the ‘economically significant prices’ factor or of the conditions laid down in paragraph 1.37 of the ESA 2010 to entities which provide financial intermediation services does not appear to me to be appropriate. In order to classify such institutions as market producers, the decisive factor is, I stress, an overall assessment (65) of their principal activity, which reflects their economic behaviour.

105. I stated above that the applicant mutual institutions are institutional units which, in accordance with paragraph 2.55 of the ESA 2010, are part of the ‘financial corporations’ sector, whose principal activity is the production of financial services. Paragraph 2.69 of the ESA 2010 identifies insurance corporations and PFs as financial intermediaries.

106. Therefore, the final assessment in order to determine whether the applicant mutual institutions are market producers must be carried out, in so far as is possible, by bringing the general criteria laid down in paragraphs 3.16 to 3.26 and 1.37 of the ESA 2010 into line with paragraphs 2.55 to 2.62, 20.32 to 20.34 and 20.38 of the ESA 2010, which refer specifically to the activity of financial intermediation and to PFs as financial intermediaries.

107. In order to assist with that interpretation, the Court may provide the referring court with a set guidelines, which I shall list below.

108. First, the (voluntary or compulsory) legal relationship between the institutional unit and the insured persons is not decisive for the purposes of assessing whether the financial intermediation performed by the applicant mutual institutions is a market activity. What is important is not that the engagement of the services of those mutual institutions is compulsory for the majority of their contributors but rather the principal activity which the institutions carry out, which is financial intermediation. (66)

109. Secondly, the fact that the applicant mutual institutions are not authorised to distribute profits, which they must use for the payment of benefits to their members, is irrelevant for the purposes of classifying their financial intermediation activity as a market activity. Paragraph 2.107 specifically characterises PFs as financial corporations whose aim is to pay benefits in the event of the retirement, death and disability of those whom they insure.

110. Thirdly, financial intermediation is a market activity when PFs act to maximise their utility given their limited resources, by buying according to which products best meet their needs at the offered price (paragraph 1.37(2) of the ESA 2010). That indicator is fulfilled when a financial intermediary, like the applicant mutual institutions, places itself at risk by incurring liabilities on its own account (paragraph 20.33 of the ESA 2010), where there is no government guarantee on the level of pensions due, and the level of pensions depends on asset performance (paragraph 20.39). (67)

111. Fourthly, in accordance with paragraph 1.37(3) of the ESA 2010, financial intermediation is a market activity if effective markets exist where sellers and buyers have access to, and information on, the market. An effective market can operate even if these conditions are not met perfectly.

112. For the purposes of conducting that assessment, the fact that the financial intermediary may obtain as consumers of its services only a defined group of clients (in the case of the mutual institutions, those who practise the profession covered) and may not provide its services to any consumer who is prepared to pay the contributions is, once again, irrelevant. Further, paragraph 2.107 of the ESA 2010 stipulates that participants in PF schemes include employees of a single enterprise or a group of enterprises, employees of a branch or industry, and persons having the same profession.

113. The quantitative criterion of 50% (paragraph 3.19 in fine of the ESA 2010) does not determine whether or not PFs carry on a commercial activity. That can be inferred from paragraph 20.34 of the ESA 2010: ‘applying the quantitative criterion of the market/non-market test to public corporations involved in financial intermediation or in managing assets is generally not relevant, because their earnings arise from both property income and holding gains.’ The 50% test set out in paragraph 3.19 in fine of the ESA 2010 does not appear to be conclusive in this case. (68)

114. Paragraph 2.55 in fine of the ESA 2010 provides that the financial corporations sector (S.12) also includes ‘institutional units providing financial services, where most of either their assets or their liabilities are not transacted on open markets’. That occurs in the case of the PFs of the applicant mutual institutions, which usually operate on markets limited by law.

115. Lastly, the financial intermediation performed by the applicant mutual institutions cannot be classified as non-market output that is provided for free or at prices that are not economically significant.

116. As is stated in paragraph 3.23 of the ESA 2010, non-market output exists because it is technically impossible to make individuals pay for collective services because their consumption of such services cannot be monitored and controlled. The production of collective services is organised by government units and financed out of funds other than receipts from sales, namely taxation or other government incomes. The financial intermediation undertaken by the applicant mutual institutions is intended, by contrast, to guarantee that insured persons receive their (retirement, death and disability) benefits, through the investment of their contributions in financial assets in order to obtain profits with which to cover those benefits in addition to the operating costs of the institutions. Benefits are not paid from taxation or other government incomes.

117. In summary, to determine whether mutual institutions like the applicants are market producers or non-market producers, an overall assessment must be carried out taking account of the general criteria laid down in paragraphs 3.16 to 3.26 and 1.37 of the ESA 2010, and paragraphs 2.55 to 2.62, 20.32 to 20.34 and 20.38 of the ESA 2010 relating to the activity of financial intermediation.

118. In the light of the foregoing considerations, I propose that the Court of Justice reply to the Bundesverwaltungsgericht (Federal Administrative Court, Germany) as follows.

Article 1(1) of Regulation (EU) 2018/231 of the European Central Bank of 26 January 2018 on statistical reporting requirements for pension funds, and, as a whole, the paragraphs included in Annex A to Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union,

are to be interpreted as meaning that occupational mutual social insurance institutions created by organisations governed by public law, having a system of compulsory membership for the members of certain professions, constitute pension funds that are subject to statistical reporting requirements and not social security funds, where those institutions carry out financial intermediation in order to pay the pension, death and disability claims of their members, pay their operating costs using their members’ contributions, which are set by the institutions themselves, manage themselves, are responsible for their own financial management, and do not have State support to pay benefits to their members.

2 Regulation of the European Central Bank of 26 January 2018 on statistical reporting requirements for pension funds (ECB/2018/2) (OJ 2018 L 45, p. 3).

3 These are organisations that provide their (professional) members with benefits in the event of incapacity for work, retirement and death.

4 Which I shall refer to from now on as ‘the applicant mutual institutions’.

5 Regulation of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union (OJ 2013 L 174, p. 1).

6 See, for example, judgments of 11 September 2019, FIG and FISE (C‑612/17 and C‑613/17, EU:C:2019:705; ‘the judgment in FIG and FISE’), and of 13 July 2023, Ferrovienord (C‑363/21 and C‑364/21, EU:C:2023:563; ‘the judgment in Ferrovienord’).

7 Law on the Public Insurance System of the Free State of Bavaria (‘VersoG’), in the version published on 16 June 2008 (BayGVBl. p. 371), last amended by Paragraph 32a(18) of the Law of 10 May 2022 (BayGVBl. p. 182)

9 Set out in Paragraph 30(2) of the VersoG. Those cases include temporary employment or employment involving a minimum number of hours’ work, or membership of another insurance institution.

12 Paragraph 31(4) of the VersoG. It is common ground that each institution pays out more than 50% of its benefits as compulsory benefits to compulsory members.

13 Law on Associations of Healthcare Professionals in the Free State of Saxony of 24 May 1994 (SächsGVBl., p. 935), last amended by Paragraph 18 of the Law of 21 May 2021 (SächsGVBl., p. 578); ‘the SächsHKaG’.

14 Statutes of the Pension fund for medical practitioners in the Free State of Saxony, in the version of 28 June 2008 (ÄBS 10/2008, p. 515), last amended by the 6^th amendment of the statutes of 19 June 2021 (ÄBS 09/2021, p. 18); ‘the Statutes’.

15 See Paragraph 6(1), in conjunction with Paragraph 1, of the SächsHKaG, and Paragraph 1 of the Statutes.

16 See Paragraph 6(1), in conjunction with Paragraphs 1 and 2, of the SächsHKaG, in conjunction with Paragraphs 1 and 9 et seq. of the Statutes.

17 ECB, Assets and liabilities of pension funds, available at https://data.ecb.europa.eu/publications/financial-corporations/3030657.

18 PFs are one of the biggest investors in international capital markets. Their investments are diversified in terms of financial instruments, sectors and geographical location. Their role in the financing of general government and non-financial corporations in the euro zone, through investments in debt securities and shares and holdings, is also substantial.

19 Council Regulation of 23 November 1998 concerning the collection of statistical information by the European Central Bank (OJ 1998 L 318, p. 8).

20 In statistical terminology, this means persons or institutions required to provide certain information.

21 Recommendation for a Council Regulation amending Regulation (EC) No 2533/98 concerning the collection of statistical information by the European Central Bank (ECB/2008/9) (OJ 2008 C 251, p. 1).

22 Council Regulation of 9 October 2009 amending Regulation (EC) No 2533/98 concerning the collection of statistical information by the European Central Bank (OJ 2009 L 269, p. 1).

23 The same requirements had been imposed earlier on insurance undertakings by Regulation (EU) No 1374/2014 of the European Central Bank of 28 November 2014 on statistical reporting requirements for insurance corporations (ECB/2014/50) (OJ 2014 L 366, p. 36).

24 For example, life insurance and private pension insurance; the pension scheme for civil servants, established by the State; and pension schemes administered by employers.

25 Including doctors, pharmacists, architects, notaries, lawyers, tax advisers, veterinarians, accountants, dentists and engineers.

26 Annual Report of the Bayerische Versorgungskammer 2022, p. 12, available at BVK_2022_JB_EN_www_240523.pdf and the website of the Sächsische Ärzteversorgung https://www.saev.de/en/index.html. In its observations, the ECB states that the budget of all the PFs in the euro zone is EUR 3,123 billion.

32 Judgment in FIG and FISE, paragraph 37, and judgment of 28 April 2022, SeGec and Others (C‑277/21, EU:C:2022:318, paragraph 28).

33 Defined, essentially, in paragraphs 1.57 and 2.12 of Annex A to Regulation No 549/2013. According to the second sentence of paragraph 2.01 of Annex A, institutional units are economic entities that are capable of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities. An institutional unit is characterised by decision-making autonomy in the exercise of its principal function and by keeping a complete set of accounts, or being able to compile a complete set of accounts (paragraph 2.12 of Annex A).

34 In addition to those sectors, which form the whole of a national economy, there is a sixth institutional sector, the rest of the world sector, which reflects the relationship of non-resident units to the five national sectors.

35 From now on, individual references to the headings of the ESA 2010 are to be taken to refer to Annex A (which I shall omit, to avoid redundancy).

36 There was a discussion at the hearing concerning whether the applicant mutual institutions could be classified as non-profit institutions serving households (NPISH) (S.15); the applicants themselves (and the ECB) ruled out that classification. In so far as they carry out financial intermediation on capital markets to obtain profits which they then use to pay benefits to insured persons and to cover their administration costs, they do not come within the NPISH sector. That sector includes trade unions, professional or learned societies, consumers’ associations, political parties, churches or religious societies, and social, cultural, recreational and sports clubs, and charities, relief and aid organisations financed by voluntary transfers in cash or in kind from other institutional units.

38 ‘A financial corporation or quasi-corporation that is principally engaged in financial intermediation as the consequence of the pooling of social risks and needs of the insured persons (social insurance). A pension fund as a social insurance scheme provides income in retirement and may provide benefits for death and disability.’

43 The fact that occupational mutual institutions are legal persons governed by public law does not preclude them from being regarded as PFs: paragraph 2.109 of the ESA 2010 provides for this. There is no need for the PF to be a private entity. A PF may be public but it is necessary for it to have organisational and management autonomy in order to act as a financial intermediary.

44 The final sentence of paragraph 2.117 of the ESA 2010 adds that there is usually no direct link between the amount of the contribution paid by members and the risk to which they are exposed.

45 The majority of the professional members of each of the applicant mutual institutions are subject to a statutory requirement of membership on the ground that they practise their profession in the Länder of Bavaria or Saxony.

46 For an institutional unit to be included in subsector S.129 as a PF, it is not necessary for all the benefits that it provides to its members to be based on a contractual insurance obligation. In accordance with paragraph 2.117 of the ESA 2010, an institutional entity may be a PF, even if its members are members by operation of law and not pursuant to a contractual insurance obligation. It is also possible for there to be a compulsory part of the membership and another voluntary part of the membership. Compulsory members who have left the occupational mutual institution may remain as voluntary members under the terms of the organisation’s statutes, in order to retain their right to obtain future pensions based on payment of the same contributions as compulsory members.

47 In particular, they must operate on a not-for-profit basis and must use their funds and assets solely for the purposes of carrying out their role as insurance providers and they must cover their administration costs, including employees’ salaries and beneficiaries’ benefits, from their own funds.

51 Paragraph 2.117 is part of Chapter 2 of the ESA 2010, which describes the institutional units used in measuring the economy, and how these units are classified into sectors and other groups to allow analysis (paragraph 1.03 of the ESA 2010).

52 According to the referring court, the term could also include other government units, or even administrative bodies responsible for providing the statutory pension insurance that are independent of the primary unit, allow for their members to be exempted from the statutory pension insurance scheme and are intended to ensure, for certain occupational groups, a self-administered old-age pension that is aligned to their contribution and benefit levels, but which are not subject to government control. The demarcation rule set out in paragraph 20.39 of the ESA 2010, which assumes that the benefits might also be ‘managed’ by a ‘separate institutional unit’ could lend credence to this proposition.

53 It adds that ‘a social security fund is an institutional unit if it is organised separately from the other activities of government units, holds its assets and liabilities separately, and engages in financial transactions on its own account’.

54 Paragraph 2.55 of the ESA 2010 adds that ‘such institutional units comprise all corporations and quasi-corporations which are principally engaged in: (a) financial intermediation (financial intermediaries); and/or (b) auxiliary financial activities (financial auxiliaries). Also included are institutional units providing financial services, where most of either their assets or their liabilities are not transacted on open markets’. According to paragraph 2.56 of the ESA 2010, ‘financial intermediation is the activity in which an institutional unit acquires financial assets and incurs liabilities on its own account by engaging in financial transactions on the market’.

57 ‘Sellers act to maximise their profits in the long term, and do so by selling goods and services freely on the market to whoever is prepared to pay the asking price; buyers act to maximise their utility given their limited resources, by buying according to which products best meet their needs at the offered price; effective markets exist where sellers and buyers have access to, and information on, the market. An effective market can operate even if these conditions are not met perfectly.’

59 ‘… To be a market producer, the unit shall cover at least 50% of its costs by its sales over a sustained multi-year period.’

62 The first-instance court held that the fact that the applicant mutual institutions covered at least half of their costs through the collection of contributions was sufficient to prove the existence of economically significant prices (and therefore that the applicant mutual institutions were market producers), even though the conditions laid down in paragraph 3.19(a) and (b) of the ESA 2010 were not fulfilled.

65 Judgment in FIG and FISE, paragraphs 34, 65 and 70, and judgment of 28 April 2022, SeGEC and Others (C‑277/21, EU:C:2022:318, paragraph 26).

66 In accordance with paragraph 2.33 of the ESA 2010, ‘the institutional units are grouped into sectors on the basis of the type of producer they are and depending on their principal activity and function, which are considered to be indicative of their economic behaviour’.

67 If a public financial unit manages assets but does not place itself at risk by incurring liabilities on its own account, it is classified in the general government sector rather than in the financial corporations sector (paragraph 20.33 of the ESA 2010).

Court of Justice of the European Communities (including Court of First Instance Decisions)