Source: FONDS professionell
In principle, it was probably well-intentioned when the Minister of Justice, Brigitte Zypries, who was in office at the time of going to press, had a paper published at the end of August entitled “Cornerstones of a law to amend the Insolvency Code, the Banking Act and other laws”. Zypries pointed out, among other things, that the income of self-employed persons does not enjoy sufficient protection against seizure compared to earned income. This unequal treatment in comparison to salaried employees was not justified; therefore, the assets used for old-age provision and the income of self-employed persons used for old-age provision were also to be protected from the enforcement access of the creditors. But because the German administration of justice has been treading water since the federal elections, politicians have not yet taken any further steps to implement this key points paper. It is therefore no wonder that many intermediaries still advertise to their clients the “insolvency protection thanks to bankruptcy privilege”, which is enshrined in the Liechtenstein Insurance Contract Act. FONDS professionell already pointed out in issue 2/2005 that the argumentation with the insolvency advantages of Liechtenstein in the brokerage of corresponding insurance policies is by no means without pitfalls. This was reiterated by the Federal Financial Supervisory Authority (BaFin) after our article appeared, in a letter to the Liechtenstein Financial Market Authority (FMA) dated 4 August 2005. In this letter, BaFin once again expressly pointed out to its FMA colleagues that apparently not all Liechtenstein life insurers had yet complied with the FMA’s admonition to stop advertising the possibility of choosing Liechtenstein law, which was inadmissible in particular in those cases in which the contract law of the small Principality was chosen by a German national with habitual residence in Germany and – this is of particular importance – the contract was concluded with the assistance of an “intermediary” (broker or intermediary). This, in turn, prompted the FMA to once again clearly draw attention to the legal situation applicable in Germany in a letter of 17 August 2005 addressed to the insurers it supervises. Liability risk with the mediator “But not only some insurers in Liechtenstein do not seem to want to follow the view of the BaFin so quite”, explains the Munich lawyer Johannes Fiala. “Even to some German insurance brokers, the attitude of the supervisor has apparently not yet penetrated.” Thus, when taking out a Liechtenstein policy in Germany, the client is often simply given an additional document to sign, according to which he chooses the foreign, i.e. Liechtenstein law. “However, because the contract is concluded through a German ‘intermediary’, the customer is thus presented with a choice of law which – if one agrees with BaFin’s reasoning – was not effectively made by the customer at all,” Fiala warns. It is of no use if the insurance broker takes his client on a “trip to the Liechtenstein mountains” to sign the contract. Finally, it remains the case that a German ‘intermediary’ was involved in the conclusion of the contract. Fiala: “If something goes wrong, it’s not only risky for the client, but also for the intermediary itself if it’s held liable by the client.” Approaches Fiala, together with his Swiss lawyer colleague Andreas Meier from Gossau near St. Gallen – in the meantime an official cooperation partner of the law firm Fiala, Freiesleben and Weber – as well as the Frankfurt actuarial expert Peter Schramm, has therefore developed a solution which is intended to exclude any discussion or even a court dispute about the admissibility of the choice of law from the outset. “To do this, the German client first establishes residency in Switzerland,” Meier explains, “which is important because Switzerland is not subject to EU law.” This would also prevent annoying questions about the habitual residence. “It sounds cumbersome and expensive,” Meier said, “but we’ve found a workable way to do it that’s also within an acceptable range in terms of cost.” Moreover, it is by no means necessary to remain domiciled in Switzerland. “According to Article 8 of the European Insurance Contract Law (EGVVG), it is harmless if the domicile is later changed again,” Meier said. The cross-border preparations are a “typical” task of a lawyer, who, by virtue of his profession, is not an “intermediary” such as an intermediary or a broker, but exclusively represents the interests of the client. The insurance contract is then concluded – irrespective of where and in what manner – and the law of the habitual residence in Switzerland at the time of conclusion of the contract is agreed. Of course, this effort (maintaining discretion, securing the choice of law, engaging a lawyer) is only worthwhile for those customers, such as shareholder-managing directors, for whom, for example, the entire pension provision could be lost due to an impending insolvency. Lawyer Fiala estimates the costs for the entire transaction at a few per mille for an asset volume of 700,000 euros. The main work is done by the Swiss law firm. However, this raises the question of how the respective free agent can profit at all from such a complex construction. “In principle, there are two possibilities,” explains Johannes Fiala. The first he mentions is fee-based consulting. via this route, the intermediary could agree a fixed fee with his customer for his services and thus also prepare almost everything necessary with his customer from Germany. “What fee-based advice per se eliminates, that’s payment via commissions,” Fiala said, “so that’s one hurdle already cleared.” However, the intermediary should not have any other type of contracts or other permanent contacts with the Liechtenstein insurer, not even for other of his clients. Even sporadic correspondence or telephone calls across the border could, in the opinion of the Munich lawyer, already endanger insolvency protection. This applies to an even greater extent to money transfers abroad as well as to researching and recommending a particular insurer or even its policy. A person who, as an intermediary, initiates a transaction for his customer in this way can, in any case, point out in the event of any disputes about the conclusion of the transaction that the conclusion of the contract was concluded without an intermediary by way of so-called correspondence. “This is precisely the crux of the matter,” explains Fiala, “because the lack of an intermediary means that the contract is no longer subject to German supervisory or contract law. And this means that the respective policyholder, i.e. the customer, is completely subject to foreign insurance law, in this case Liechtenstein insurance law. According to Fiala, one alternative is to go through an asset manager or a bank. “The financial services provider then initially handles the asset structuring for its client,” says Fiala. “Then, when mutual funds come into play, for example, the broker earns on acquisition and trailer fees.” All this still takes place in Germany, and in a second step the invested assets are transferred – then again via a lawyer – into a Liechtenstein policy, whereby the insurance shell basically only acts as a cover for the already existing fund deposit.
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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