Following last week's European Commission conference in Brussels, Neil Rose looks at how liberalisation of professional services plays an important role in allowing the EU to attain the most dynamic and competitive economy in the world

Not all professions fear liberalisation.

At last week's high-level European Commission conference in Brussels on the regulation of professional services, representatives of Italy's National Movement of Free Pharmacists spoke passionately of the need to reform a system in their country they characterised as 'feudal'.

Lawyers may not be quite as angry or outspoken, but not all are happy about the commission's activities in this area.

The interest in professional services - specifically lawyers, accountants, engineers, architects, notaries and pharmacists - is driven by the target set by the European Council at its Lisbon summit three years ago to become the most competitive and dynamic knowledge-based economy in the world by 2010.

The process began in March, when the commission began what it called a 'stock-taking exercise' on the level of professional regulation imposed across the EU and the level that is required (see [2003] Gazette, 27 March, 6).

This took the form of a study on the economic impact of regulation carried out by the Institute of Advanced Studies in Vienna, followed by a request for comments from interested parties, and was all brought together in the conference last week.

The study found that the extent of regulation varies greatly across the EU, with Italy the most regulated country - and Ireland (followed by the UK) the least.

Greece has the most regulated legal profession and Finland - where there are no reserved activities - the least.

The Council of Bars and Law Societies of Europe (CCBE) has issued a critique of the study which, at its heart, argues that regulation of legal services cannot be judged by economic criteria alone given the profession's role in the justice system.

Nonetheless, the commission is pushing on undaunted.

Anne-Margrete Wachtmeister, head of the unit running the project, told delegates in Brussels that the study showed how 'the professions seems to operate effectively in the least-regulated countries'.

She said the most regulated countries have lower numbers of practitioners and lower levels of income and employment.

Notaries and pharmacists came out as the most regulated of the six professions.

Competition commissioner Mario Monti later told delegates that in Italy, professional services account for up to 9% of companies' costs.

'If the costs of professional services to businesses could be contained, the cost of their products to consumers could be cheaper,' he argued.

The commission's work currently focuses on six specific areas: entry and exclusive rights, price regulation, contingency fees, advertising restrictions, business structures and 'inter-professional co-operation', or multi-disciplinary partnerships (MDPs).

Mr Monti indicated that advertising restrictions and price regulation would be the two issues on which the commission would initially concentrate, neither of which holds many fears for lawyers in England and Wales.

They do in other countries, however.

For example, Greece bans lawyers from any advertising except business cards and plaques outside their offices, while Austria permits price fixing.

Mr Monti also highlighted MDPs.

But while the work may not have a huge effect on domestic regulation, at least until it gets to contingency fees and reserved work perhaps, liberalisation in other European markets should help English and Welsh firms export their services more successfully.

It seems likely that the commission will deal with these issues horizontally across the six professions.

But in the case of MDPs - which received support from City giant Clifford Chance among others - it does run into problems following a European Court of Justice ruling last year.

In Wouters, the court upheld the Dutch Bar's MDP ban, saying that anti-competitive restrictions can be objectively justified if they are in the public interest.

Mr Monti was at pains to stress that Wouters had not outlawed MDPs, but conceded: 'The issue of whether MDPs are a good thing should be further explored and probably decided on a case-by-case basis.'

But he had a broader message for Europe's governments and professional bodies.

He said the lack of consensus in support of the current professional rules, as shown by the commission's work so far, is enough to require them to justify those rules against competition principles.

This would mean that any anti-competitive rule would have to be abolished unless it can meet the kind of test set down in Wouters.

If it passes the test, such a rule would then have to impose the minimum restriction necessary to achieve legitimate public policy objectives.

For example, it may well be justifiable that prospective solicitors should have to undertake a period of study and training before qualifying - the question then is how long.

Mr Monti also asked whether rules that protect consumers should also apply to businesses.

This is a distinction the Law Society made when changing the rules to allow solicitors to cold-call businesses but not individuals.

The commission will issue a report in early 2004 that will contain the rationale for reforming some of the current rules and outline how European competition law should be applied.

Mr Monti made it clear that its next steps would find 'a balance between enforcement and advocacy' in pursuing reform.

This process of review has effectively begun in England and Wales.

David Clementi, the man charged by the Department for Constitutional Affairs with reviewing the regulation of legal services, has made it clear that he will be 'pro-competition'.

The Law Society had a three-strong delegation at the Brussels conference.

International director Alison Hook said the Society awaits the commission's report with interest, especially in relation to MDPs.

The Society and government may make further submissions to the commission ahead of it finalising the report, she added.

Jonathan Goldsmith, the solicitor secretary-general of the CCBE, confirms that Europe's bars and law societies 'have got the message of Mr Monti's speech'.

After further analysis and discussion, it will send members advice on how to proceed.

Whatever way you look at it, liberalisation is approaching fast.

That may be no bad thing to many lawyers, but even if it is, things could be worse - you could be an Italian pharmacist fighting back the serfs.