Cutting red tape in Europe

Whilst the business of the European Union is notoriously quiet between Christmas and New Year, with “Brussels” shutting down for the festive season, a major reform is due to take place on 28 December when Directive 2006/123 on services in the internal market (the Services Directive) comes into force in national law. The UK Government is implementing the Services Directive through the Provision of Services Regulations 2009 (draft at www.opsi.gov.uk/si/si2009/draft/ukdsi_9780111486276_en_1), which apply UK wide. It published a note titled “Guidance for Business on the Services Regulations” in October: www.berr.gov.uk/files/file53100.pdf .

Barriers remain

The Services Directive is designed to simplify provision of services across borders by removing legal and administrative barriers to trade in this sector. According to recent statistics the services sector is the largest, most dynamic economic sector in the EU, accounting for around 70% of both output and employment. However, as the UK Government note shows,

it yields relatively low shares of intra-EU trade (24%) and investment.

Seeking to give full effect to the Internal Market for services, the Services Directive requires each member state to remove unjustifiable or discriminatory requirements affecting the setting up or carrying on of a relevant service activity in that country. It also facilitates co-operation between regulatory authorities; sets up “one stop shops” for services providers to find information and complete the necessary formalities in one place (Single Point of Contact); imposes a general obligation for procedures to be electronic; and sets out quality of service provisions.

It applies to a whole raft of service providers from professional services such as lawyers, accountants and actuaries to consumer services such as tour operators, travel agents, plumbers etc; but not to notaries, financial service providers, electronic communication providers, or health services.

Legal profession: topping up

Cross-border supply of services is not new to the legal profession, one of the key professions already taking advantage of the right to free movement in Europe. Indeed, the Services Directive affects the legal profession only to the extent that it does not conflict with the provisions of the legal professions’ “own” directives, Services of Lawyers (Directive 77/249) and Establishment (Directive 98/5). The former gives an EU lawyer the right to practise on a visiting or temporary basis in a member state other than that in which the lawyer qualified, and the latter gives an EU lawyer the right to practise on a permanent (“established”) basis under the lawyer’s home state title in a member state other than that in which the lawyer qualified. In practice this means that the provisions of the Framework Services Directive will top up the provisions of the two lawyers’ directives.

It is actually the competent authorities, the regulatory bodies, who are impacted by the Services Directive to a large extent. The obligation to co-operate with other regulatory bodies ramps up the informal co-operation and liaison to date. It does so by setting up an electronic information exchange – the Internal Market Information System (IMI). Within this exchange the Law Society of Scotland will be able to ask the Paris Bar Association whether Ms Avocat has qualified to practise, whether she has any disciplinary findings against her and for evidence of her practising certificate. This can all be done through pre-translated tick boxes and transmitted directly from Edinburgh to Paris and back. Moreover, the emphasis on electronic communication leads to the obligation for all applications to be processed electronically.

Now this has caused something of a headache as most regulatory bodies do not yet have fully automated processes for applications for entry into the profession or renewals. In addition the UK regulatory bodies have maintained that original copies of certificates must be provided and it is in the public interest for this requirement to be maintained.

A further issue for the legal profession is the question of deemed authorisation. Again the emphasis on swift access to markets led to a provision in the Services Directive, whereby if an individual (e.g. a tour operator) had completed the relevant formalities to supply their service and the deadline for responding had passed, that individual would be deemed to be authorised to supply their service in the UK. However, the Law Society of Scotland had argued that this is not appropriate for the legal profession and, along with the Solicitors Regulatory Authority for England & Wales, lobbied the Ministry of Justice for a system of deemed refusal justified on overriding reasons of public interest.

States of readiness

Given the scale of reforms, there is concern that a number of member states may not have their implementing provisions in place in time. Business organisations are concerned about this leading to a patchwork of rules and systems, the very thing the Services Directive was due to combat. However, the UK intends to meet the deadline and the legal profession, consumers and business should be ready for it.

Julia Bateman is Head of the Law Societies Joint Brussels Office.  e: Julia.Bateman@lawsociety.org.uk