EU services package

Evanna Fruithof, consultant director of the Bar Council’s Brussels office, looks at whether UK lawyers will have cross-border practice rights in the EU.

The European Union Internal Market for Services is in a constant state of evolution.  Within that, the lawyers’ regime is a particular success story, which the EU institutions are striving to replicate across other service sectors. The new EU Services Package forms part of that effort. 

Under the current framework, the legal services sector in the EU Single Market is a seamlessly functioning reality governed by three EU Directives: the Lawyers Services Directive 77/249/EC, the Lawyers Establishment Directive 98/5/EC and the non-specialist Mutual Recognition of Qualifications Directive 2005/36/EC, as amended in 2013. Indeed, the EU’s lawyers’ regime has long been held up as the benchmark for other regulated professions.

Lawyers’ cross-border practice rights currently include the right of establishment on a permanent basis in other Member States under the Establishment Directive 98/5/EC, which allows registration with the host State Bar and, after three years of effective and regular practice in the host Member State, permits an application to acquire the professional title of the host State without any further qualification requirements. A barrister may also re-qualify as a full member of the local Bar under the more general Directive 2005/36/EC (as amended by Directive 2013/55/EC), by taking an aptitude test. Under the Lawyers Services Directive 77/249/EC, lawyers are able to advise clients in other Member States, whether on issues of EU law, domestic law (including the law of the host Member State) or international law with no local registration requirement. The same directive allows lawyers to represent clients in the domestic courts and tribunals of other Member States, provided that advocacy is undertaken in conjunction with a host state lawyer. Lawyers may also advise and represent clients (UK or otherwise) in Commission investigations (most commonly competition proceedings), though in practice this is only possible for European Economic Area (EEA) qualified lawyers, since the EU rules only recognise legal professional privilege in relation to lawyers entitled to practise in a Member State. Lawyers who are authorised to practise before a court of an EU or EEA State may also represent clients before the European Courts in Luxembourg.

Brexit may bring the loss of the above regime. It is worth noting that the fluid functioning of the above regime is underpinned by the right of all EU / EEA nationals to provide such services between Member States without immigration or other comparable controls. For many UK lawyers Brexit will also mean the loss of an EU / EEA nationality and the freedom that goes with it. In the absence of an overarching EU-UK solution for legal services this is likely to be problematic.   

Returning to the main theme, the success of legal (and indeed financial) services as an iteration of the exercise of  the Treaty-enshrined Free Movement of Services is not reflected in other services sectors.  In recognising this lag behind goods, and the increasing importance of services to the EU economy, the EU has sought to correct that. A  major leap forward in the establishment of the wider Single Market for services came with the adoption of the Services Directive 2006/123/EC, with which Member States have had to comply since December 2009. The Directive aims to facilitate the exercise of the freedom of establishment for service providers and the free movement of services, for the benefit of service providers and recipients alike.  

The new regime brought with it a number of benefits, including the introduction of one-stop-shops for service providers to obtain information and complete administrative formalities online in all EU countries. This was later complemented by the online European Professional Card (EPC). The Services Directive also strengthened the rights of consumers and business receiving services in the EU and required EU countries to cooperate with each other and give mutual assistance in the supervision of service providers.  The Directive also introduced a procedure whereby EU countries must notify the Commission of new or changed regulatory measures affecting services, in order to allow for an assessment of whether such measures are justified and proportionate.

The Commission’s various reviews, studies and practical experience of the operation of the Services Directive (and related CJEU caselaw) exposed a number of practical difficulties. Crucial among these was the absence of a system  to ensure an effective preventive enforcement of the Services Directive, i.e. ensuring that all new and changed national regulation is non-discriminatory, justified and proportionate, without the Commission having to initiate legal infringement proceedings against already-adopted measures.

With a view to resolving these difficulties, the Single Market Strategy of 28 October 2015 foresaw  several actions to further develop the Single Market for Services, leading in January 2017 to the tabling of the new Services Package designed to make it easier for companies and professionals to provide services across the EU. The package covered all services, including the regulated professions. One of its central elements is a proportionality assessment of national rules on professional services, though always respecting the fact  that the competence to so regulate remains with the Member States. The package also included a Communication providing guidance for national reforms in the regulation of professions, and a proposal for a directive laying down an improved notification procedure to ensure that any new rules for the provision of a service introduced in a Member State are compatible with the Services Directive. That proposal allows for intervention by the Commission or other Member States before the notified national law is adopted.

The flagship Proportionality Test Directive EU 2018/958was formally adoptedin 2019. The deadline for Member States to transpose it into national law is 30 July 2020, meaning that the UK is bound to implement it.

In contrast, the notification procedure proposal is still pending, having been opposed by certain key Member States in Council on the grounds that it breaches the subsidiarity principle. As things stand, no acceptable compromise has been reached.

As to future developments in this field, the EU, including the Member States in Council Conclusions, has oft stated its commitment to further reduce barriers to the free movement of services. Reducing or even removing the regulation of professional services is one of its targets. We have already seen several indications of what may come. The 2016 Commission Communication on regulatory reform itself sets the scene. The Commission’s original proposal for the Services Directive imposed binding pan-European codes of conduct. This was dropped during its legislative passage but could be revived. Separately, the Commission continues to explore alternatives to regulation, such asthe application of nudge theoryinbehavioural economics. The Commission also made an initial, inconclusive foray into the effects of regulation on service quality, publishing a study on this in January 2019, and can be expected to pick up this thread in the future.

Attention should not be focussed on the Commission alone, however. During its last legislative mandate, the European Parliament’s Internal Market and Consumer Protection Committee launched an own-initiative procedure on the implementation of Directive 2005/36/EC, focusing on regulations and the need for reform of professional services. This may well be picked up again by the new European Parliament. Given that the new Commission President Ursula von der Leyen has promised to table proposals that are called for by a majority of the European Parliament, we may confidently expect these and related ideas to gain traction at EU level in the next five years.

The extent to which these EU policy shifts will have an impact on regulated services in the UK remains to be seen. With the UK having left the EU on 31 January 2020, it is clear that the parties have to sort out a future trade agreement in short order.

In terms of future market access for legal services, the ideal scenario for the future relationship would be for the UK to seek to retain the current legal services regime on the basis of reciprocity. The existing Services Package, and any future developments, would then need to be replicated in UK law. However, given the protracted and difficult Brexit negotiations, even were the UK government to ask for this (by no means a given at present), securing EU agreement looks difficult at best.

If that is not possible, we will need a Free Trade Agreement (FTA) with the EU that far exceeds any existing one (only the EU-South Korea FTA contains any meaningful provisions on legal services), covering at least GATS Mode 4 “Fly-in-Fly out” (FIFO) market access.  Reciprocity would again be the order of the day on services. For professional market access, mirroring EU rules such as proportionality of regulation, will surely be a sine qua non towards sealing a deal.

Ambitious though that undoubtedly is, even that would not be enough on its own, however.  As intimated above, effective Mode 4 supply relies on a light touch immigration regime on both sides, as well as reciprocity on relevant social security, tax and other provisions.

Absent any such EU-UK agreement covering market access for legal services, and at the time of writing there is little sign that the UK will be seeking same, at least in the first instance, we would in effect be facing a hard Brexit in that sector at the end of the transition period. The EU legal services regime as well as Directive 2005/36/EC on Recognition of Professional Qualifications will no longer apply in the UK or to UK nationals. The UK Legal profession has developed a paper that provides an overview of the various permutations, but broadly speaking, the exercise of legal services by practitioners who are UK nationals in an EU  Member State will be governed by the national policies and the rules of that Member State.

Pending a negotiated EU-UK solution such as that outlined above, practitioners are advised to have their qualifications and right to practice recognised, ideally by being called to the Bar in another Member State before the end of the transition period at the end of 2020. Ireland and Belgium have so far been the most accommodating jurisdictions, though sadly there are no guarantees that potential hurdles such as nationality or applicable immigration rules will be overcome longer term.

In the meantime, the Bar continues its efforts to find flexible, workable solutions to preserve market access for our practitioners, so that they may continue to serve their clients in the interests of justice. 

Evanna Fruithof is consultant director of the Bar Council’s Brussels Representation and is a Bencher of Middle Temple.