Latin American Capital Markets

PROMOTING REGIONAL CAPITAL MARKET INTEGRATION 175cide when use of the general good, and similarly the public policy clauses in the treatyand the mandatory requirements recognized by the European Court, may justify theestablishment of rules that restrict fundamental European freedoms. The principlesmay be denoted as nonharmonization, nondiscrimination, nonduplication, objectivejustification, and proportionality (Katz 1992; Van Gerven 1990).When these criteria are satisfied, the European Court has accepted that theprotection of consumers may justify national measures that restrict fundamental Europeanfreedoms. In the insurance sector; for example, the court has found that restrictiverules could be implemented because insurance was a "particularly sensitivearea from the point of view of the protection of the consumer both as a policy holderand as an insured person." 20 The sensitivity was said to arise because consumers haveto enter a long-term relationship with their insurers, because the timing of executionof an insurance contract is uncertain, and because consumers may not have enoughinformation to be able to gauge the long-term financial soundness of their insurers.The court did, however; recognize that the application of restrictive national laws tolarge and sophisticated institutions might not be justifiable on the grounds of the generalgood. 21Member states can frustrate the liberalizing intentions of the Single Marketprogram via both the implementation and enforcement processes. Member statesmight take extended periods of time to implement directives into national law and,once implemented, sometimes might not enforce them.One of the lessons that can be learned from the European Union experienceis that, where it has encouraged regulatory competition, this has led to better andcheaper regulation. Despite worries that there might be a race to the bottom interms of regulatory regimes, with regulators attempting to deliver lighter and lightersupervision at the expense of desired regulatory goals, this has not occurred. It is nota strategy that attracts private sector market participants.Lack of a theory of harmonization. Despite the centrality of the notion of harmonizationto the stated goals of the European Union Single Market program, neither thecommission nor the other European institutions have constructed a credible set ofcriteria to decide what should be harmonized at the European Union level and whatshould be left for member states to regulate.The need for such a theory is simple andcompelling. Without it, not only will any decision as to what to harmonize be arbitrary,but also there will be no reason why any act of harmonization should be expectedCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub20 Commission v. Germany.21 Buet, R, and Educational Business Services SARL v. Ministene Public.