Documents considered by the Committee on 1 March 2017 Contents

3Directive: proportionality test before the adoption of new regulation of professions

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee and the Exiting the European Union Committee

Document details

Proposal for a Directive of the European Parliament and of the Council on a proportionality test before adoption of new regulation of professions

Legal base

Articles 46, 53(1) and 62 TFEU

Department

Business, Energy and Industrial Strategy

Document Number

(38451), 5281/17 + ADDs 1–2, COM(17) 822

Summary and Committee’s conclusions

3.1Around 50 million people—22% of the European labour force—work in a regulated profession. Member States retain the competence to set national regulations governing professional qualifications. While many of the EU28’s over 5,500 national regulations on professional services may be justified, the European Commission argues that many regulations are disproportionate and create unnecessary regulatory obstacles to the mobility of professionals, lowering productivity.

3.2In 2013, Directive 2005/35/EC, the Mutual Recognition of Professional Qualifications Directive, was amended by Directive 2013/55/EU, which introduced a mutual evaluation exercise between the Member States of all their regulated professions. This exercise found that assessing the proportionality of new measures presented a challenge to many Member States, and had not prevented the introduction of new restrictive measures without an, or with only a very superficial, assessment of proportionality.

3.3On 10 January 2017, to address these concerns, the Commission proposed a Directive for a proportionality test to be conducted before introducing new national regulatory measures or amending existing provisions (hereafter ‘the Directive’), as part of a wider services package. The Directive only applies to those professions within the scope of the Professional Qualifications Directive (2005/36/EC).

3.4The main objective of the Directive is to introduce more clarity on the applicable criteria, to strengthen reliability, transparency and comparability across Member States, and to ensure that rules are applied in an equal manner so as to prevent further fragmenting of the Single Market.

3.5The proportionality test applies to newly introduced or reviewed requirements on access to or the pursuit of a regulated profession. Although the proposal consolidates the case law of the Court of Justice on the proportionality of requirements restricting access to regulated professions the decision of what to regulate, and how, is left to Member States.

3.6The test requires Member States to assess whether proposed legislative, regulatory or administrative provisions that restrict access to or pursuit of a regulated profession are necessary and proportionate. The competent authority will be required to consider factors such as an assessment of the risks to consumers, professionals and third parties; the links between any new reserved activities and the qualification required; the economic impact of the measure; and the possibility of using less restrictive means to achieve the same outcome.

3.7Relevant stakeholders must be given the opportunity to comment on the proposed regulatory provisions, and competent authorities are encouraged to discuss any proposed restrictions with their equivalents in other Member States. The results of any proportionality tests conducted should be entered into the database of regulated professions, and will thereafter be made publicly available by the Commission. Member States and other interested parties may then submit comments to the Commission or to the Member State which has notified the provisions.

3.8We thank the Minister (Lord Prior of Brampton, Parliamentary Under-Secretary of State) for his Explanatory Memorandum.

3.9We note his assessment that the UK has been a strong supporter of a liberalised EU services market “and, with other likeminded Member States, pushed for the Commission to make the proportionality test a binding Directive, rather than a recommendation”. However, his analysis suggests that there remain several areas of the proposal in which further clarification is necessary.

3.10We therefore ask the Minister:

3.11We also note that the Directive appears to be less specific in some of its requirements than the closely related notifications procedure Directive (5278/17). We therefore ask the Minister to clarify:

Brexit implications

3.12Regarding the implications of the UK’s decision to leave the EU in relation to the draft Directive, we ask the Minister to explain:

3.13The Committee retains the proposal under scrutiny. We request responses to the above questions as well as an update regarding negotiations in Council Working Groups by 22 March.

3.14We draw the Minister’s Explanatory Memorandum and our conclusions to the attention of the Business, Energy and Industrial Strategy Committee and the Exiting the European Union Committee.

Full details of the documents

Proposal for a Directive of the European Parliament and of the Council on a proportionality test before adoption of new regulation of professions: (38451), 5281/17 + ADDs 1–2, COM(17) 822.

Background

3.15Over 5,000 professions are regulated across the EU, with on average 186 regulated professions per Member State. There are, however, significant disparities between countries (from 72 regulated professions in Lithuania to 409 in Hungary). The health and social services sector accounts for 42% of all regulated professions, followed by business services (15%), public services and education (9%), transport (8.5%) and construction (6%). Differences in regulatory approaches within one and the same profession or differences in organising professions can be significant across Member States. They reflect the fact that Member States are entitled to establish safeguards to protect certain overriding reasons of public interest.

The Professional Qualifications Directive

3.16The Professional Qualifications Directive provides a system of recognition of professional experience across the EU.13

3.17Under the Directive seven so-called sectoral professions receive automatic recognition following an application and proof of their qualifications, based on harmonised minimum training requirements. These are:

3.18Professionals working in the craft, commerce or industry sectors may also qualify for automatic recognition of a professional qualification in another EU country. The required minimum duration and nature of the professional experience are laid down in the PQD, although in some cases applicants may have to go through the ‘general system’.

3.19Under the general system, professionals who want to move to another EU country need to apply to the competent authority in the EU country they are moving to have their qualifications recognised. Competent authorities look at the length and content of the training followed to see if there are substantial differences between this training and the qualifications required in the host EU country for that profession. If there are major differences, competent authorities can impose ‘compensation measures’ on the applicant. This means they might have to sit an aptitude test or complete an adaptation period.

3.20Additional professions that fall under specific legislation other than the PQD are:

3.21Uneven implementation of the PQD led the Commission to launch a package of measures in 2013, which sought to modernise the Directive and improve its implementation.14

3.22This involved the creation of a regulatory committee, to assist the Commission in implementing the directive in Member States, and a Group of Coordinators which monitors policies related to qualifications for regulated professions and helps national authorities exchange experiences and best practice.

The mutual evaluation exercise

3.23The 2013 amendment of the Professional Qualifications Directive also required the Member States to conduct a mutual evaluation exercise between 2014 and 2015. This exercise highlighted that many professions which should be considered as regulated were not notified as such.

3.24The mutual evaluation process also brought to light that the justification and proportionality of the national regulations were not always properly assessed. Justification and proportionality considerations often vary widely for the same activity, with some Member States relying on the functioning of the market and general legislation (such as consumer protection), while others argue for stringent professional regulation.

3.25The review also concluded that the observed differences in the ways countries regulate the same or similar professions showed that there is room for considering reform beyond the cross-border context; evidence consistently showed that performance of national markets is adversely affected by too stringent access requirements which allocate resources inefficiently, limited consumer choice, raised prices and reduced the number of people being able to enter the market.

The Single Market Strategy

3.26On 28 October 2016, the European Commission adopted a new Single Market Strategy to deliver a deeper and fairer Single Market.15 As part of this Strategy, it proposed to set out an analytical framework for Member States to use when reviewing existing professional regulations or proposing new ones. It stated:

“This framework will contain a methodology for comprehensive proportionality assessments of professional regulations. Member States will need to demonstrate that public interest objectives cannot be achieved through means other than limiting access to, or conduct in, the professional activities in question”.

The Government’s view

3.27The Minister (Lord Prior of Brampton, Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy) is broadly supportive of the Commission’s proposal. He states that the UK has been a strong supporter of a liberalised EU services market “and, with other likeminded Member States, pushed for the Commission to make the proportionality test a binding Directive, rather than a recommendation”. In the Minister’s view, a substantial barrier to cross-border trade can be removed by ensuring a more transparent and thorough process of evaluation when making new regulations restricting access to a profession.

3.28Although broadly supportive of the proposed Directive, the Minister identifies a number of areas where further clarification is required. He states that:

3.29On subsidiarity, the Minister supports the need for EU action on this issue. He states that the current uneven scrutiny of the proportionality of regulation of professions across the EU has a negative economic effect, and that “an EU approach would thus enable national authorities to perform comprehensive and comparable proportionality checks through creating a transparent and predictable legal framework to assess barriers to regulated professions”.

3.30Regarding Brexit, the Minister states only that “until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the Government will continue to negotiate, implement and apply EU legislation”.

3.31In terms of the Directive’s impact on UK law, the department’s analysis concludes that Government will need to draft secondary legislation to implement the Directive. The Statutory Instrument will have to set out what competent authorities are required to do in terms of conducting a proportionality test when new regulatory provisions are proposed or where amendments are sought to existing provisions.

3.32The Minister envisages that the Maltese Presidency will take the proposal forward through working groups scheduled for February and March. He notes states that “it is possible that there could be a general approach as soon as the May Competitiveness Council, although it may also fall to the Estonian Presidency”.

Previous Committee Reports

None.


13 Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32005L0036&from=EN.

14 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’ ) Text with EEA relevance http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013L0055&from=EN.

15 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘Upgrading the Single Market: more opportunities for people and business’ COM/2015/0550 final http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52015DC0550&from=EN.




3 March 2017