Reviewing entry restrictions and reserved activities of European professions

Transparency for Europe’s professions

Under the amended Professional Qualifications Directive 2005/36/EC Member States have a duty to review their  legislation and regulations dealing with access to and pursuit of their professions. The review must examine the justifications for limiting access to perform reserved activities to a particular professional group, against permissible criteria. The Member States are also supposed to analyse the barriers to entry to any profession and to consider alternative less restrictive regulatory mechanisms to protect the interests that the barriers are designed to serve. This will involve a profession by profession analysis of the regulations that restrict access to that profession. Issues such as the scope and number of reserved activities will be analysed in these reviews. These requirements are set out in the new Article 59(3) (introduced by Directive 2013/55/EU):

Article 59 (3) of Directive 2005/36/EC

 Member States shall examine whether requirements under their legal system restricting the access to a profession or its pursuit to the holders of a specific professional qualification, including the use of professional titles and the professional activities allowed under such title, referred to in this Article as ‘requirements’ are compatible with the following principles:

(a)

requirements must be neither directly nor indirectly discriminatory on the basis of nationality or residence;

(b)

requirements must be justified by overriding reasons of general interest;

(c)

requirements must be suitable for securing the attainment of the objective pursued and must not go beyond what is necessary to attain that objective.

These reviews are supposed to be completed by 18 January 2016. Once the national reviews are complete each Member State sends its report to the European Commission with an explanation and justification for any reserved activities/entry barriers. There is an on-going notification requirement of any new restrictions in the future (every two years).

These national reports will be sent to all the other Member States who will have six months to comment and the European Commission will then consult the professions concerned (probably in the case of lawyers via the CCBE – the Council of Bars and Law Societies of Europe).

In fact this process was kick started in November 2013 when the European Commission started a process of evaluation of entry requirements to the professions. Each Member State (MS) was supposed to have a national action plan in place by April 2015. These plans will review, at the national level, qualification requirements imposed on those wishing to join any regulated professions.

Since then the European Commission Communication on Upgrading the Single Market: more opportunities for people and business specifically refers to this mutual self-evaluation noting that

the regulation of similar professions varies substantially between Member States, as do reserves of activities.

It is expected that professions with major entry barriers or large areas of reserved activities will be under pressure to reform their regulatory systems. The European Commission noted that a major difference was that some States relied more on consumer protection guarantees, whilst other preferred regulatory controls on entry and reserved activities.

This European process may, in part,  have prompted the HM Treasury’s review of regulation in the UK where they say, of legal services:

The government will further reduce barriers so that it is easier for alternative business structures, such as supermarkets and estate agents, to offer legal services like conveyancing, probate and litigation in England and Wales. (A better deal: boosting competition to bring down bills for families and firms p.6)

The UK Government plans to launch a consultation by spring 2016 on

removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies. This will create a fairer, more balanced regulatory regime for England and Wales that encourages competition, making it easier for businesses such as supermarkets and estate agents among others, to offer legal services like conveyancing, probate and litigation. (A better deal p.12)

We shall see what comes of it and whether these national reports and reviews will be published and accessible in a timely fashion.


Text of Article 59 of Directive 2005/36/EC

Article 59 Transparency

  1. Member States shall notify to the Commission a list of existing regulated professions, specifying the activities covered by each profession, and a list of regulated education and training, and training with a special structure, referred to in point (c)(ii) of Article 11, in their territory by 18 January 2016. Any change to those lists shall also be notified to the Commission without undue delay. The Commission shall set up and maintain a publicly available database of regulated professions, including a general description of activities covered by each profession.
  2. By 18 January 2016, Member States shall notify to the Commission the list of professions for which a prior check of qualifications is necessary under Article 7(4). Member States shall provide the Commission with a specific justification for the inclusion of each of those professions on that list.
  3. Member States shall examine whether requirements under their legal system restricting the access to a profession or its pursuit to the holders of a specific professional qualification, including the use of professional titles and the professional activities allowed under such title, referred to in this Article as ‘requirements’ are compatible with the following principles:
(a) requirements must be neither directly nor indirectly discriminatory on the basis of nationality or residence;
(b) requirements must be justified by overriding reasons of general interest;
(c) requirements must be suitable for securing the attainment of the objective pursued and must not go beyond what is necessary to attain that objective.
  1. Paragraph 1 shall also apply to professions regulated in a Member State by an association or organisation within the meaning of Article 3(2) and any requirements for membership of those associations or organisations.
  2. By 18 January 2016, Member States shall provide the Commission with information on the requirements they intend to maintain and the reasons for considering that those requirements comply with paragraph 3. Member States shall provide information on the requirements they subsequently introduced, and the reasons for considering that those requirements comply with paragraph 3, within six months of the adoption of the measure.
  3. By 18 January 2016, and every two years thereafter, Member States shall also submit a report to the Commission about the requirements which have been removed or made less stringent.
  4. The Commission shall forward the reports referred to in paragraph 6 to the other Member States which shall submit their observations within six months. Within the same period of six months, the Commission shall consult interested parties, including the professions concerned.
  5. The Commission shall provide a summary report based on the information provided by Member States to the Group of Coordinators established under Commission Decision 2007/172/EC of 19 March 2007 setting up the group of coordinators for the recognition of professional qualifications, which may make observations.
  6. In light of the observations provided for in paragraphs 7 and 8, the Commission shall, by 18 January 2017, submit its final findings to the European Parliament and the Council, accompanied where appropriate by proposals for further initiatives.

Directive 2013/55/EU of the European Parliament and of the Council of 20 November 2013 amending Directive 2005/36/EC on the recognition of professional qualifications and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System ( ‘the IMI Regulation’ )

UK HM Treasury Paper, A better deal: boosting competition to bring down bills for families and firms (Cm 9164, November 2015)

European Commission, Upgrading the Single Market: more opportunities for people and business  COM(15) 550 final

European Commission, Transparency and mutual evaluation of regulated professions,  See diagram below.

 

timetable-for-the-transparency-and-mutual-evaluation_en

Julian Lonbay

Advertisements

Activity-based authorisation of legal practice in Engand and Wales – thoughts on an LSB Seminar

So I attended the Legal Services Board (LSB) Seminar at the University of Warwick on Activity-based Authorisation (18 April 2012) where Professor Julian Webb, Professor of Legal Education at Warwick School of Law (and LETR lead), and Crispin Passmore, Strategy Director at LSB joined by Samantha Barrass, Executive Director Education and Training, Supervision, Risk and International Affairs, Solicitors Regulation Authority and Professor Richard Moorhead, Deputy Head of School, Cardiff Law School gave a series of short presentations, followed by discussion and questions. The LSB had published Education and Training: Its Role in Regulation?  in advance of the seminar series.

Liberalisation of the legal services market in England and Wales does not mean that consumers of such services do not still want good quality legal advice/services that is not too expensive and which represents good value for money. This means that some method of ensuring the competence of legal services providers is still required to avoid excessive risk to consumers.  This will increase the cost of the service. Legal education and training are only one of the possible tools available to regulators to ensure competence. Others include codes of business conduct etc. If legal activities are to be cut loose from being reserved to members of the legal professions and instead be deliverable by others,  should some form of standards be imposed, and if so what should they be (uniform across the whole spectrum or variable according to regulator) and imposed by whom, how?(Webb/Passmore)

If the service is not regulated or reserved the highly competent, lengthily trained lawyer will be competing with others who may or may not have the competence, but they will lack the professional reputational benefits and ethical restraints of belonging to a professional body that is (?) well regarded. There is a risk that such non-lawyer competitors may not appreciate the forest as they decide which tree to cut down. There may not be the red light – alarm bells going off – that signal mechanism that helps lawyers protect consumers from the unexpected sidewinds of the law.

Of course in England and Wales the legal services market is already very open when compared say to the US market or some of the continental European markets where the practice of law is reserved to lawyers alone. In England and Wales those that consume the services are accustomed to relying on the professional titles (solicitor / barrister /licensed conveyancer etc ) as a guarantee of professional competence. If particular aspects of legal work (legal activities)  (See Legal Services Act 2007 S.12(3)) are to be reserved and licensed to non-lawyers and lawyers alike what standards if any should be applied? This issue was debated but not answered in the seminar.

Why should anything be reserved?

One question that can be  raised is why should anything be reserved to ‘qualified suppliers’? In the Scandinavian countries very little is reserved to the official lawyers except their title. (See further Finland, Sweden) Why should conveyancying for example be reserved? At the seminar an intervener opined that conveyancing was very much carried out by non-lawyers under supervision,and, of course, by licensed conveyancers..

What basis is there for regulating non member individuals who are not part of a regulated entity?

Another issue raised by me, was ‘by what right would existing frontline regulators regulate individuals who were not already members of their professions or part of a regulated entity?’

Central or variable standards?

Assuming that this issue is easily resolvable (but is it?) who should decide on the standards? Surely no-one would want innovation stifled by strict centralised regulations? If not then could each regulator set its own standards? This would unleash the regulatory competition that the Legal Services 2007 Act seems designed to promote, but at potential risk to consumers. Caveat emptor. (Regulatory objective of the LSA 2007, See LSB summary) Whatever standards are in place should be related to the risks that exist from that particular activity and should, in my view, be minimum standards so as to avoid both overpricing of the services and allowing for innovative methods of reaching an outcome to emerge.

Outcome based regulation

If the regulation is outcome based (as is the current preferred mode of regulation) then simply stated outcomes could be set, and individuals and entities (be they lawyers or not) would either individually have to show how they would met the required outcomes or if in an entity, then that entity would have to show how it would ensure the outcome. Again there is a risk of variable outcomes in such an approach, but innovation would not be stifled.

Specialisation

The discussion at one point turned to specialisation (Moorhead), considered by many to be a marker for quality. Does this need to be ‘regulated’ by competence assessment? If so, the same issues of by whom  and how arises. There are specialist professions (e.g. licensed conveyancers) without the generalist knowledge but with entry competence tests in their field of expertise and generalist solicitors who are de facto specialist or who have joined one of the panels of the Law Society for example. In non reserved areas non lawyers can build up quite an expertise that covers some aspects of legal work which are are not reserved – so a surveyor who mediates in construction disputes for example.

European dimensions

Specialisation:

Of course in the EU  Member States  matters are treated differently in each country. In the Netherlands, for example, lawyers have themselves created around 25 specialist associations, and some of them police entrants rigorously and ensure that they  maintain the high standards that help their business. The Bar does nor legislature have a hand in this – it is a matter of self-regulation by market forces. In Germany the Fachanwalt (specialist lawyer) accounts for about 20% of lawyers and there are strict regulations about experience and training that are applied. (Para 3 of the Fachanwaltsordnung). In a system, as in England and Wales, that admits non lawyers to legal practice, perhaps a market forces hands-off approach would appeal. Consumers can then choose a panel (or not) solicitor or some one else entirely. This is what currently happens in most cases. How to find appropriate advice is a problem for consumers, but an EU funded CCBE project on finding lawyers may provide some help.

Continuing Training

It was clear that post-entry maintaining of competence is under consideration; again at the European level there are a range of models to view and assess.

Entry Barriers

Competence at entry for all is not a model that works in a system where anyone can provide the service as they need not belong to a particular profession. If a series of legal activities are to be reserved to those licensed and the questions of the standards to be applied (linked to risk and outcome based)  and who will apply the standards are sorted out, then they are still other considerations to take into account. The restraint imposed must not breach competition law and the regime must be open to EEA nationals who must have their pre-existing qualifications recognised and taken into account. In creating new entry barriers European scrutiny on these two accounts is certain.

See related post on  Activity based regulation – EU perspectives on partial access to reserved activities

Activity based regulation – EU perspectives on partial access to reserved activities

Regulating legal services in England and Wales

The regulation of legal services is in England and Wales is in the process of major change. The Legal Services Board is considering whether certain ‘legal’ services (notably will-writing, estate administration and probate activities) should be reserved to persons with particular qualifications (or not). There are also LSB reviews ongoing regarding, for example, the regulation of immigration advice and services.  The current review of legal education in England and Wales, being undertaken by the LETR, will be assessing how the current regime of legal education in England and Wales is suited to the new post-Legal Services Act 2007 world, which will be allowing new modes of ownership of legal service providers, and is scheduled to recommend changes to meet the challenges at the end of 2012.

The LSB has oversight over eight types of legal actor in England and Wales that are authorised to practice the “reserved activities” in the legal sphere. Will there be consolidation or further fragmentation of the legal professions? What impact might there be on legal education?

The European Dimension

Naturally there is a European dimension to all of this ferment. For one thing many European trained legal actors (members of more than 26 professions) can freely practice law in the UK, and for another the authorised regulators of legal services in the UK (Competent Authorities in EU-speak) have an obligation to admit such professionals to practice, and, in some cases, admit them to their particular legal profession, and, if not admit them immediately, then assess their qualifications and indicate missing elements of knowledge of competence that must be made up before joining the relevant legal profession.

Moreover the European Commission has recently published a review of the economic impact of reserved activities (in the legal and other sectors) and legal services directives themselves are currently under evaluation.

Recognising competence to perform legal activities

This assessment of continental legal professionals by UK regulators is mandated by the Lisbon Treaty single market provisions and, in particular, for our current concern, by Directive 2005/36/EC. This Directive, which consolidated 15 earlier Directives, is now itself subject to revision. When Directive 2005/36/EC itself was initially proposed, it included a provision allowing for access to practice part of the professional activities of a profession by incoming migrants, without joining the profession itself. This did not survive the negotiating process and was dropped. The new proposal revives the idea of partial access. This potentially means that UK legal regulators may have to give access to reserved legal sector activities to persons not belonging to a UK legal profession.

Partial Access to reserved activities

The new provisions on partial access are more carefully drafted than their predecessors. They follow the lead of the CJEU in the Colegio case (C-330/03 Colegio de Ingenieros de Caminos, Canales y Puertos).

A revised Article 1 indicates the migrants will have ‘partial access to a regulated profession’ and a new Article 4(1) indicates that they will be able to gain access to ‘part of the same profession’, but the new Article 4f is more accurate in indicating that ‘The competent authority of the host Member State shall grant partial access to a professional activity in its territory…’ (my emphasis) if certain conditions are fulfilled. So here we have the separation of the host State profession from the host State professional activity. The activity in question must be lawful in the home State and should be able to be ‘objectively be separated from other activities falling under the regulated profession in the host Member State’. If the activity is autonomously exercised in the home State that would be sufficient to fulfil this criterion. Partial access by a migrant can be rejected if there are sound proportionate public interest reasons to do so.

Partial access is only to be granted where:

‘differences between the professional activity legally exercised in the home Member State and the regulated profession in the host Member State as such are so large that in reality the application of compensatory measures would amount to requiring the applicant to complete the full programme of education and training required in the host Member State to have access to the full regulated profession in the host Member State’.

Professional Identity

Persons permitted to access a reserved activity by these new provisions will normally do so under their home State professional title. So at one level we could say, so what, this is nothing new, already EU lawyers can practice law in the UK under their home State professional titles, but, one difference is that they are currently regulated by the UK professional bodies with whom they must register when they establish. [By virtue of Article 5 of Directive 2005/36/EC lawyers providing services will do so though operation of the provision of Directive 77/249/EEC and Directive 2005/36/EC will not apply.]

Lawyers, or others, seeking partial access to aspects of legal practice on a more permanent basis will be able to use the establishment provisions of the revised Directive should the proposal become EU law. The Member States could argue that regulation would be required by the host State regulator, but, as the new entrants would not necessarily be members of the host State profession so which professional rules and obligations woud apply to them, and how? There will clearly be pressure to atomise professional rules so that individual reserved activities can be effectively autonomously regulated. This disaggregation of professional activities could weaken professional identity. If an EU citizen can use EU law to access a reserved activity in another Member State without joining a host State profession then why logically should a UK national not be able to do so?

See further

See Lonbay, J, ’Assessing the European Market for Legal Services: Developments in the Free Movement of Lawyers in the European Union’, Fordham International Law Journal 1629.

Details of proposed amendments to Directive 2005/36/EC regarding “partial access” to reserved activities

Details of proposed amendments to Directive 2005/36/EC regarding “partial access”

Article 1 of the Directive will have a second paragraph added:

This Directive also establishes rules concerning partial access to a regulated profession and access to and recognition of remunerated traineeships pursued in another Member State. (My emphasis)

Article 4(1) is replaced as follows:

The recognition of professional qualifications by the host Member State shall allow the beneficiary to gain access in that Member State to the same profession or, in the cases referred to in Article 4f, to part of the same profession, as that for which he is qualified in the home Member State and to pursue it in the host Member State under the same conditions as its nationals.” (My emphasis)

Article 4f is the main new provision on partial access. It provides:

Article 4f

Partial access

1. The competent authority of the host Member State shall grant partial access to a professional activity in its territory provided that the following conditions are fulfilled:

(a) differences between the professional activity legally exercised in the home Member State and the regulated profession in the host Member State as such are so large that in reality the application of compensatory measures would amount to requiring the applicant to complete the full programme of education and training required in the host Member State to have access to the full regulated profession in the host Member State;

(b) the professional activity can objectively be separated from other activities falling under the regulated profession in the host Member State.

For the purposes of point (b), an activity shall be deemed to be separable if it is exercised as an autonomous activity in the home Member State.

2. Partial access may be rejected if such rejection is justified by an overriding reason of general interest, such as public health, it would secure the attainment of the objective pursued and it would not go beyond what is strictly necessary.

3. Applications for establishment in the host Member State shall be examined in accordance with Chapters I and IV of Title III in case of establishment in the host Member State.

4. Applications for provision of temporary services in the host Member State concerning professional activities having public health and safety implications shall be examined in accordance with Title II.

5. By derogation from the sixth subparagraph of Article 7(4) and Article 52(1), the professional activity shall be exercised under the professional title of the home Member State once partial access has been granted.

%d bloggers like this: