Professional Services in the EU Internal Market

Quality Regulation and Self-Regulation

Tinne Heremans

• Publisher: Hart Publishing
• Year: 2012
• ISBN:
  9781847318800
• Edition: 1
• Topic: Law
• Subtopic: Commercial Law
• Index: Law

Professional services are a key component of the EU internal market economy yet also significantly challenge the legal framework governing this internal market. Indeed, specific professional regulatory structures, which are often the result of a blend of government and self-regulation, hold clear potential for conflict with EU free movement and competition law rules. Hence this book looks at the manner in which both free movement and competition laws might apply to such self- and co-regulatory set-ups, and at the leeway given to quality considerations (apparently) conflicting with free movement or competition objectives. In addition, since court action will seldom suffice to genuinely integrate a market, the book also explores those instruments of EU secondary legislation that are likely to impact the most on the provision of professional services. However, the book goes beyond a mere inventory to ask how EU Internal Market policy could contribute to the optimal legal environment for professional services. A law and economics analysis is employed to investigate the need for specific professional rules, the preferred type of regulator (self-, co- or government regulation), and the level - national and/or European - at which regulation should be adopted. As becomes clear, the story of the market for professional services is one of market and government failure; the author is thus left to compare imperfect situations where market failures compete with rent-seeking efforts, the tendency towards over-centralisation and national protectionism. This book offers both an in-depth legal analysis of the EU framework as it applies to professional services as well as a more normative evaluation of this framework based on insights from law and economics scholarship. It will therefore be a valuable resource for all practitioners, policy-makers and academics dealing with professional services, as well as, more generally, with questions of quality and self-regulation.

I

Conceptual and Theoretical Framework

1

Concepts

BEFORE COMMENCING THE investigation into the optimal provision of professional services in the European Internal Market, some of the key concepts used in this book should be clarified. More specifically, what is to be understood by ‘professional services’, ‘professional regulation’ and ‘professional bodies’?

It should be clear that the focus of this book is on the interaction of professional services with European law and policy. Given this broader objective, it was infeasible to undertake a genuine comparative analysis of these professions, their regulation and professional associations across the Member States. Therefore, in addition to a number of legal theoretical works, the existing analyses conducted by the Organisation for Economic Co-operation and Development (OECD), the European Commission and certain national competition authorities serve as the main source for deriving workable concepts and illustrations.

I LIBERAL PROFESSIONS OR PROFESSIONAL SERVICES

No one definition yet some ‘essential traits’: When attempting to analyse the impact of European action on the ‘liberal professions’ or ‘professional services’, a preceding clarification of these terms would seem indispensable. Nonetheless, it turns out that there simply is neither a universally or even European-wide accepted definition nor a reliable enumeration of all occupations falling within that class (open-ended category).¹ In fact, the types of activities identified as ‘liberal professions’ or ‘professional services’ differ across countries and over time.

Even so, many ‘descriptive’ attempts at identifying common traits in the occupations generally accepted as part of the liberal professions have been undertaken. For instance, at the European level, the recent Directive 2005/36/EC on the recognition of professional qualifications defines liberal professions as

those practised on the basis of relevant professional qualifications in a personal, responsible and professionally independent capacity by those providing intellectual and conceptual services in the interest of the client and the public. The exercise of the profession might be subject in the Member States, in conformity with the Treaty, to specific legal constraints based on national legislation and on the statutory provisions laid down autonomously, within that framework, by the respective professional representative bodies, safeguarding and developing their professionalism and quality of service and the confidentiality of relations with the client.²

It seems that among the most recurrent traits in these definitions are: ‘intellectual’, ‘independent’, ‘personal responsibility’, ‘public and client interest’, ‘specific regulation’, ‘professional body’, ‘deontology’, etc.³

The common feature most distinctive for occupations categorised as ‘liberal professions’, is probably the fact that they are governed by specific professional regulation in response to a (often intuitively) perceived insufficiency of the market and traditional legal mechanism⁴ to provide the framework for an adequate service provision.⁵ Hence, it would seem that something in the nature of these diverse services distinguishes them from traditional commercial services.

Specific professional regulation in response to the specific nature of the services? Among the traits commonly considered as typical, some do indeed seem to relate to the nature of the service itself. For one, professional services are generally defined as intellectual and complex in nature, requiring specialised skills obtained through intense training and maintained through permanent education. Second, they will often be of a personalised rather than a standardised nature, thus requiring a certain discretionary judgment. In addition, many of these services seem to be concerned with essential rather than marginal needs of individuals, such as health, legal rights, security of building structures, etc.⁶ Moreover, an optimal service provision will frequently call for a climate of trust and cooperation between the professional and his or her client.⁷ Also, aside from the client’s interest, the service provision is often deemed to affect the ‘public interest’ in some way.

The other traits commonly identified do not so much concern the nature of the service itself but rather the manner in which it is thought that these services should be provided given their specificity. Indeed, the requirement of independence from pressures of a legal, political and commercial nature, as well as the demand for personal responsibility, reflect the unusual character accorded to this service. Hence these ‘features’ will often be ‘installed’ as a result of some type of professional regulation. The extent to which these professional services do indeed differ from the traditional commercial services and thus necessitate specific regulation will be further examined in chapter two.

In conclusion, even though there is no such thing as a well-defined concept or category of liberal professions, these professions are ‘united in diversity’ by the fact that they are surrounded by specific professional regulation pertaining to correct the failing market mechanism⁸ and to complement the general legal framework.

II NATURE OF PROFESSIONAL REGULATION

What then is understood by such ‘professional regulation’?

In this book, professional regulation is taken to refer to those rules applicable to the liberal professions that go beyond the legal rules which typically streamline market transactions to include additional market corrective prescriptions.⁹

Entry regulation and rules of conduct: Based on the content of the professional rules, a broad subdivision can be made between (1) entry regulation and (2) rules of conduct.¹⁰ Market ‘entry regulation’ concerns preconditions which the professional needs to fulfil before being allowed to engage in a particular activity in the market. It can involve, among others, personal preconditions (nationality, good behaviour, etc), qualifications, obligatory registration, licensing as well as planning restrictions. ‘Conduct regulation’ attempts to influence the professional’s behaviour and includes, for instance, price regulation, advertising restrictions, restraints on inter-professional co-operation as well as rules on forms of business.¹¹ Although an exhaustive discussion of the various professional rules across countries and professions is clearly beyond the scope of this book, some of the most controversial ones will be considered in more detail in chapter two on the ‘Economic Analysis of Professional Regulation’.¹²

Deontology versus mere substantive disciplinary rules: The second category of rules, ie rules of conduct, is often equated with the concept of ‘deontology’. ‘Deontological rules’ are then ‘those rules who allow the service provider to disregard, as much as reasonably possible, his self-interest and to find a balance between loyalty to the client and responsibility towards third parties and society at large’.¹³ However, Geens points out the need to distinguish these ‘true’ deontological rules as defined above, from conduct rules which are merely (substantive) disciplinary rules aiming to ‘maintain the internal cohesion of the profession as well as protect its external reputation’.¹⁴ As will be discussed in more detail in chapter two, such ‘true deontological rules’ concern the relationship of the professional with his or her clients, as well as society at large and could in fact be understood as attempting to correct the failure of the market and the general legal framework.¹⁵ ‘Pure substantive disciplinary law’ however, is then thought to be solely concerned with the rapports between the professionals themselves or with their professional body.¹⁶ Hence, its objective will be not so much the correction of market and law failure, but rather the upholding of the ‘honour and dignity’ of the profession and will thus be solely in the interest of the group.¹⁷

Disciplinary proceedings enforcing deontological rules? An important criticism on the professional disciplinary proceedings has been the fact that they were, and sometimes still are, too concerned with this second type of conduct rules and thus with the interest of the profession rather than the clients or society.¹⁸ However, attempts seem to have been made to correct this situation.¹⁹ Even though many of these substantive disciplinary rules are in fact harmless, for example the prohibition for lawyers to send each other registered letters²⁰, some of them are clearly corporatist in nature and thus exacerbate rather than correct the failure of the market.

Sources of professional rules: An eye-catching feature of many professional rules is their origin in some degree of ‘self-regulation’ by a professional association. Nonetheless, various professional rules in fact emanate from pure government regulation in the form of special legislation²¹ and criminal law.²² The source of these rules will be of importance in determining the ‘point of contact’ with European law. Indeed, as we will see, the nature of the rule, ie government regulation versus self-regulation, still plays a non-negligible role in establishing the applicability of the various branches of EU law.

III PROFESSIONAL BODIES

One of the most visible traits of the liberal professions is their tendency to organise themselves in professional bodies or associations. Even though much variety exists in terms of the status, tasks or composition of such bodies, there are some features which seem to be shared by most. Indeed, the majority of associations for the liberal professions can be seen to be in some way involved in regulating (even if only in an advisory capacity), monitoring and/or disciplining the profession.²³ Hence the ‘specific legal framework’ of most liberal professions will contain some degree of self-regulation.²⁴ In other words, the powers and activities of professional bodies will generally go beyond the mere representation of their members. Most associations of the liberal professions typically enjoy some type of official recognition or other form of close relations with government conveying a degree of authority on their actions.²⁵ Moreover, often they will have the monopoly power over regulating a profession.

A Status and Composition

From a privileged relationship with government to a public law body: As mentioned, most professional bodies are either officially recognised or have another type of ‘special relationship’ with the government authorities.²⁶ However, some even have the ‘privileged’ yet somewhat indefinite status of a public law body indicating that they have been set up by means of a special statute, law or decree.²⁷ Ideally, these decrees also determine the powers of the professional body as well as its composition.²⁸ Nonetheless, as will be seen, the European Court of Justice refused to attach any consequences to this national classification and thus countered the attempts to derive some sort of immunity or ‘special legal position’ in respect of EU law from this public law status.²⁹

Composition: Despite their special status and tasks, professional bodies are traditionally largely composed of practitioners from the relevant profession. Hence a clear separation between the association’s representative and regulatory (and sometimes even disciplinary) function is usually seriously lacking.³⁰ Moreover, the same professionals sometimes staff the rule-making as well as the disciplinary organs,³¹ thus ignoring any type of separation of powers’ logic. This lack of independence of the regulator/adjudicator from its regulated or disciplined subjects has been heavily criticised and many have advocated the inclusion of more independent experts or even consumers in these bodies.³²

B Tasks

Admittance into the profession: Generally, the professional bodies are granted the power to check whether someone has the necessary qualifications and capacities to be admitted to a particular profession (with reserved tasks or title).³³ Hence, in order to be allowed into the profession the practitioner will often need to become a member of that professional association.³⁴ Also, in the specification of these educational or training requirements, the professional bodies are often given an important say.³⁵

Laying down deontological rules: Many professional bodies have, either de facto or de jure,³⁶ been delegated the task of drawing up deontological rules for the exercise of the profession.³⁷ Most commonly, the codes they adopt will only become binding after they have been approved by government. The extent to which this endorsement amounts to a genuine (preventive) administrative oversight on this delegated regulatory activity varies greatly but has, as will be shown in chapter seven, proven of great relevance in respect of the applicability of the European competition law rules.³⁸ Indeed, even if administrative oversight is provided for, it can differ in the sense that the Government might only be able to reject the code³⁹ or might actually have the power to amend it. Moreover, the substance of the governmental scrutiny can also differ.⁴⁰ Some associations, however, have explicitly been delegated the power to adopt binding codes.⁴¹ In that case oversight can only be exercised ex post and potentially result in the suspension of the professional code.

Enforcement of rules through disciplinary proceedings: Notwithstandin...