Regulation 6 of The Insurance Companies (Legal Expenses Insurance) Regulations 1999 provides that "Where under a legal expenses insurance contract recourse is had to a lawyer … to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person)" (emphasis added). These regulations give effect to Council Directive 87/344 EEC, which uses the same wording.

The issue to be decided by the CJEU here was the meaning of "inquiry". The case involved a request for insurers to cover an employee's legal expenses in a procedure which took place before the Employee Insurance Agency in the Netherlands. This agency is a public body, independent of the central administration, which has the right to authorise the termination of an employment contract on the ground of redundancy.

The CJEU rejected the insurer's argument that an "inquiry" must take place before a court: ""Inquiry" must be read in opposition to the term "proceedings"". Nor could any distinction be made between the preparatory stage and the decision-making stage of the inquiry. Taking into account the context and objectives of the Directive, the court concluded that the procedure before the agency did fall within its scope: "The general scope and obligatory nature that the right of the insured party to choose his lawyer or representative is recognised to possess militates against a restrictive interpretation".

Here, the employee had no right of appeal against the agency's decision, and so "it is indisputable that the rights of the employee are affected" by the agency's decision and so it was held that his interests as an insured person required protection.

(The CJEU went on to point out that Member States are free to make provision for the rules governing legal expenses insurance contracts, provided that the principles of the Directive are not thereby rendered meaningless. So for example, in the case of Sneller v DAS Nederlandse (see Weekly Update 42/13), the CJEU recognised that a Member State can restrict the amount to be paid by the insurer if the insured exercises its right to choose its lawyer).