publications:
updates & bulletins 
FSA ISSUES GUIDANCE ON PFI/PPP INSURANCE It was feared, under the new EU Insurance Mediation Directive, that
PFI/PPP project companies could find themselves open to substantial
fines and even criminal prosecution if they arranged insurance on
behalf of other parties in a project without obtaining authorisation
from the Financial Services Authority (“FSA”). However,
the FSA has somewhat allayed these fears, by new guidance issued
earlier this month which suggests that this may not be the case. What does the EU Insurance Mediation Directive say? The EU Insurance Mediation Directive, which comes into force on
14th January 2005, amends the Financial Services and Markets Act
2000 (“FSMA”). Under the FSMA it is unlawful for companies
to conduct “regulated activities” without being exempt
or obtaining prior authorisation from the FSA. The new amendments
will extend the category of “regulated activities” to
cover companies undertaking “insurance mediation” by
way of business. It was thought that if a project company arranged
insurance on behalf of other parties then it may be classified as “insurance
mediation” and so require FSA authorisation. What does the new FSA guidance say? The guidance is in the form of a letter to the PPP Forum which has
been lobbying on this issue. It states that the need for authorisation
will only arise if the project company is carrying on insurance mediation
by way of business. This means that the project company would have
to be taking up or pursuing the activities on behalf of third parties
for remuneration. The guidance goes on to say that any project company
who takes on contractual obligations in relation to the arranging
of insurance on behalf of other parties involved in a project will
not be regarded as providing insurance meditation services to third
parties for remuneration. There will therefore be no need for authorisation.
So is it all plain sailing? Though the new FSA guidance is clearly welcome, it is stated as
only covering projects which comply with its definition of a typical
PFI/PPP project (that is a project involving the provision of works
and/or services by one party to another governed by a long term project
agreement and having certain types of insurance related provisions).
Where any particular project differs materially from those usual
arrangements, that may lead the FSA to a different conclusion. The
FSA recommends, that where there are material differences, project
companies should seek professional legal advice or individual guidance
from the FSA. In addition, the FSA issued a cautionary note to its
guidance, warning that the interpretation of FSMA and its subordinate
legislation is “ultimately a matter for the courts to determine”. For further information on how Martineau can help you with
this matter or for advice on any aspect of
PFI or PPP Catherine Burke (Partner, Head of Projects) catherine.burke@martineau-uk.com for more general advice
in relation
to FSMA
regulation Roger Blears (Partner, Corporate) roger.blears@martineau-uk.com Martineau's publications are no substitute for taking advice
before reaching a decision on your individual problems. If you would
like any further information about any of the issues raised in our
publications please email us at lawyers@martineau-uk.com. |
