The European Council has agreed its position regarding proposed changes to the Motor Insurance Directive (MID). The paper sets out the negotiating position of the Council ahead of discussions with the European Parliament and the European Commission.

The negotiating mandate confirms that the Council has steered very closely to the position of the Commission when considering the scope of the MID.

The current iteration of the MID requires "insurance against civil liability in respect of the use of motor vehicles." In the absence of a definition of 'use', well-reported decisions such as Vnuk and Rodrigues de Andrade, extended the scope of 'use', prompting consultations and a determination to codify these decisions to ensure certainty.

The Council proposes to define 'use' as "any use of such vehicle as a means of transport, that is, at the time of the accident, consistent with the normal function of that vehicle, irrespective of the vehicle's characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion."

By contrast, the definition of 'use' proposed by the Parliament last year included reference to the "use of a vehicle in traffic". The phrase 'in traffic', required a substantial definition itself.

The Council's proposal makes no reference to 'in traffic', and is therefore aligned with the definition of 'use' proposed by the Commission in 2018.

Definition of vehicle

Interestingly, the Council also proposes a definition of 'vehicle' to be covered by the Directive as follows:

a) any motor vehicle propelled exclusively by mechanical power on land but not running on rails with:

- a maximum design speed of more than 25 km/h, or

- a maximum net weight of more than 25 kg.

b) any trailer to be used with a vehicle referred to in point a), whether coupled or un-coupled;

The proposal makes clear that any wheelchair vehicles exclusively intended for use by the physically handicapped would be not considered a 'vehicle' even if they met the characteristics set out above.

This definition has also taken into account an expected increase in light electric vehicles, with the mandate specifically stating that any of these vehicle which "do not meet the definition should be excluded from the scope of application of the Directive."

Motorsports

The proposals advanced by the Parliament had provided a blanket exclusion from the Directive for vehicles used in motorsports events – which was contained within the definition of 'in traffic'.

The Council's proposal is more nuanced, allowing motorsports vehicles an exemption from compliance with the Directive where "the Member State ensures that the organiser of the activity or any other party has an alternative insurance or guarantee policy covering the damage to any third party including spectators and other bystanders, and that the organiser has taken such an optional alternative insurance or guarantee policy."

Claims against insolvent insurers

The Council has also set out proposals for dealing with claims against insolvent insurers. The Council mandate states that in cases of cross-border provision of insurance services, "the compensation scheme in the victim's member state of residency should initially pay the claim of the victim". That compensation scheme would then be reimbursed by the compensation scheme from the insolvent insurer's home member state.

Brexit

The text of the Council paper proposes that the amended Directive be implemented 24 months after an agreement on amendments is reached. The UK will have left the European Union by that time, and will likely have come to the end of the transition period.

However, this does not mean that these proposals will not be of relevance of to the UK. Regulatory alignment in certain areas can be expected even after the UK leaves the EU, and the provision of road traffic insurance may be one of these areas. The Government showed a continuing willingness to ensure compatibility with EU law last year when amending section 152(2) of the Road Traffic Act.

The proposals of the European Council can be found here:

https://data.consilium.europa.eu/doc/document/ST-14645-2019-INIT/en/pdf