Documents considered by the Committee on 13 November 2017 Contents

3Services package: proportionality test for professions

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested

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(16) 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, but the EU has sought to increase the mutual recognition of qualifications among Member States. The Professional Qualifications Directive (2005/35/EC) (PQD) provides a system of variable recognition of professional experience, across the EU, which is explained in detail in the Committee’s report of 1 March 2017.22

3.2Uneven implementation of the PQD led the Commission to launch a package of measures in 2013, which required the Member States to conduct a mutual evaluation exercise between 2014 and 2015.23 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, or with only very superficial, assessment of proportionality. Justification and proportionality considerations often varied widely among Member States for the same activity, with some relying on the functioning of the market and general legislation (such as consumer protection), while others introduced stringent professional regulation.

3.3On 10 January 2017, as part of a wider Services Package, 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’). The Directive only applies to those professions within the scope of the PQD. The Directive seeks to introduce more clarity regarding 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. The decision of what to regulate, and how, is left to Member States.

3.4On 30 January 2017 the Parliamentary Under-Secretary of State at the Department of Business, Energy and Industrial Strategy (Lord Prior) published an Explanatory Memorandum outlining the Government’s views regarding the proposal.24 He indicated that the UK had 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”, and was therefore supportive of the proposal. However, the Minister also suggested that there remain several aspects of the proposal where further clarification was necessary. On 1 March 2017 the previous European Scrutiny Committee requested further information regarding these aspects of the proposal, and the implications of Brexit for the mutual recognition of professional qualifications.25

3.5On 28 March 2017 the Minister provided detailed responses to most of the Committee’s questions.26 He noted that some Member States were seeking to “significantly weaken” the proposed text in negotiations, and outlined the exemptions which they sought. He reassured the Committee that “any new administrative costs incurred by the Government [implementing the proposal] will be minimal”. The Minister also said that the Directive did not require any specific action to be taken when a Member State or other stakeholder challenged a specific provision or test conducted by another Member State. However, he suggested that the mere process of requiring Member States to produce a proportionality assessment within a consistent framework would nonetheless improve compliance with existing obligations of EU law and justified the limited cost of implementing the proposal.

3.6Regarding Brexit, the Minister said that UK businesses and professionals would continue to benefit “from the removal of disproportionate barriers as they continue to trade with and work in EU countries post-exit, particularly where Member States’ professional regulation does not discriminate between EU and third country nationals”. A future UK-EU agreement on mutual recognition of professional qualifications would not need to be included in an FTA, on the basis that “Article VII of the General Agreement on Trade in Services permits World Trade Organization (WTO) members to conclude mutual recognition agreements, separate to FTAs, which establish the equivalence of standards or criteria for the authorisation, licensing or certification of services suppliers”. However, he noted that other associated provisions might necessitate an FTA.

3.7On 9 June 2017 the Minister updated the Committee that a General Approach was agreed at Competitiveness Council on 29–30 May 2017. This does not constitute a scrutiny override because the Committee granted the Government a standing scrutiny waiver for this file until the Committee was reappointed after the General Election.

3.8According to the Minister, the General Approach made it explicit that Member States “retain a margin of discretion when deciding whether and how to regulate a given profession, within the limits of the principles of proportionality and non-discrimination”. but “the core provisions of the proposal remain intact”. The Directive will now be considered by the European Parliament’s Internal Market and Consumer Protection committee. Andreas Schwab (EPP, Germany) is the rapporteur.

3.9We thank the Government for its thorough response to our questions regarding the proportionality test Directive, and its update regarding the General Approach agreed at Competitiveness Council. We request further information on the following points:

3.10We note the Government’s negotiation position paper, Safeguarding the position of EU citizens in the UK and UK nationals in the EU, which makes the following points in relation to the Government’s position on professional qualifications post-exit:

For mutual recognition of professional qualifications, the UK will seek to ensure that professional qualifications obtained prior to the date of the UK’s withdrawal from the EU continue to be recognised after the UK’s exit from the EU. The UK will also seek to ensure that where a person has begun an associated process that has not concluded by the withdrawal date, arrangements will be made to allow that process to continue. The UK will also give due regard to these professionals’ ability to practise without unfair detriment or discrimination.”27

Has the Government broached this subject with the European Union negotiating team? Does the EU team reflect the UK position on this issue or are there differences? Is the Government confident that the positions of both sides on this issue are such that it will be addressed to their mutual satisfaction within the Withdrawal Agreement?

3.11We retain the proposal under scrutiny and request that the Government provide the Committee with its responses and a further update on any progress that has been made by 6 December 2017.

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(16) 822.

Background

3.12In 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.28 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, or with only very superficial, assessment of proportionality.

3.13On 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.

3.14The 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.

3.15The 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.

3.16The 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.

3.17Relevant 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.

3.18The Committee noted the Minister’s 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, the Committee also noted that the Minister believed further clarification was needed regarding the implications of aspects of the proposal.

3.19The Committee asked the Government:

3.20The Committee also asked:

3.21On Brexit for this issue, the Committee asked:

3.22The Committee retained the proposal under scrutiny and requested responses to the above questions as well as an update regarding negotiations in Council Working Groups by 22 March 2017.

3.23In correspondence before the General Election recess the Committee granted the Government a standing scrutiny waiver for this file in the Council of Ministers, until the Committee was re-formed post-election.

The Minister’s letter of 28 March 2017

3.24On 28 March 2017 the Minister responded to the Committee questions in a letter. Regarding progress in Council working parties, the Minister wrote that:

“Negotiations in working groups are proceeding rapidly, with the Presidency having now produced a number of compromise texts. Most Member States have been supportive of the proposal and text amendments to-date have largely been clarifying, rather than making fundamental changes to the Commission’s proposal. A few Member States continue to have more concern, however, and continue to seek significant weakening of the text. We understand that the Presidency hopes to reach a General Approach on the text at the Competitiveness Council in May.”

3.25The Minister’s responses to the Committee’s questions are provided below (questions are interleaved).

3.26The Minister replied:

“The Commission has stressed that while the requirement to conduct a proportionality assessment covers a wide range of potential regulatory changes, its intention is that the depth and comprehensiveness of such an assessment should be proportionate to the scale of the regulatory change envisaged. Member States including the UK have sought in working groups to clarify this point within the text and this is reflected in the text drafts currently being considered.”

3.27The Minister replied:

“Few Member States have sought to add specific further elements to the proportionality assessment, although some have sought to remove certain elements. There has been particular discussion on the following:

3.28The Committee also asked the Minister to:

3.29In response, the Minister wrote that:

“The Government already conducts proportionality testing that is broadly in line with the requirements of the proposed Directive. We have an excellent approach to domestic regulation due to our better regulation principles and independent Regulatory Policy Committee, which ensures that our regulation of services does not impose a disproportionate burden on business and therefore does not constitute a disproportionate barrier to trade. As such, any new administrative costs incurred by the Government will be minimal.

“Many of the requirements in the test already exist in Member States and under Court of Justice case law. This means that the devolved administrations and competent authorities throughout the UK will have processes in place to ensure that legislative, regulatory and administrative changes that restrict access to or pursuit of a profession are proportionate. For this reason, we do not expect administrative costs to increase significantly for either the devolved administrations or competent authorities, as the costs will relate largely to ensuring that the process in the Directive is followed.”

3.30The Committee asked the Minister to:

3.31The Minister replied:

“With regard to the status of patients under the proposed Directive, I am of the view that patients fall within the definition of ‘recipients’ or ‘consumers’ of health services, and so are already covered within the Directive, including in article 5 which covers legitimate public interest reasons for regulating. The Commission has also been clear in its view that patient safety would also be covered under public health. We have worked to bring further clarity on this point in working groups and will continue to be vigilant on this point.”

3.32The Committee asked:

3.33The Minister replied:

“Article 59 of Directive 2013/55/EU (the revised Mutual Recognition of Professional Qualifications Directive agreed in 2013) requires Member States to provide information to the Commission on new measures that restrict access to or pursuit of a profession to holders of a specific professional qualification. The Member State must provide the required information within six months of the new measure being adopted. Article 9 of this Directive as proposed by the Commission would require Member States to record the reasons for a provision being considered proportionate within the database the Commission set up under Article 59, although our understanding is that the Commission would envisage this to be a summary rather than a detailed assessment of proportionality.

“The Commission’s proposal would make information publicly available for stakeholder comment. Some Member States have raised concerns on this point although we have not been amongst them.

“It should also be noted that some provisions that fall under this Directive may also fall under the Services Directive and the provisions for notification that are contained there (and which are currently being re-negotiated as part of a separate legislative proposal). Where such an overlap exists, the Commission’s intention is that the specificities of the notifications procedure will apply.”

3.34The Committee asked:

3.35The Minister said that “The Directive does not require any specific action to be taken”. Asked whether (in light of this fact) the Directive added sufficient value to justify the administrative cost of implementing it, the Minister said that:

“I believe this Directive will improve compliance with existing obligations of EU law that require regulation to be proportionate and necessary. Part of the value of the proportionality Directive lies in the process: by requiring states to conduct proportionality assessments within a consistent framework, the attention of policymakers will be directed towards avoiding unnecessary regulation in the first instance. This is therefore a significant enough benefit to justify the administrative costs of implementation which, as I outlined above, we expect to be low in the UK.”

3.36The Committee asked:

3.37The Minister responded that:

“There is the potential for the directive to, indirectly and positively, affect the restrictiveness of access to certain professions for third country nationals. UK businesses and professionals will also benefit from the removal of disproportionate barriers as they continue to trade with and work in EU countries post-exit, particularly where Member States’ professional regulation does not discriminate between EU and third country nationals.”

3.38The Committee also asked a number of questions regarding the implications of Brexit in this policy area. It asked:

3.39The Minister replied that:

“At this moment, it is not possible to reach a definitive judgement on this issue. Discussions in working groups are proceeding rapidly, but it cannot yet be foreseen how quickly the European Parliament will act and when the Directive will therefore enter into force. The timetable for transposition of the proposed Directive remains a matter for negotiation; the Council working group appears to be heading towards a deadline of 24 months from the date of its entering into force, but the European Parliament may push for a shorter period. The UK remains a member of the EU until two years after the date Article 50 is triggered, unless an extension is agreed by the negotiating parties, and will continue to meet its obligations under EU law until it is no longer a member.”

3.40The Committee asked:

3.41The Minister replied:

“Bilateral agreements governing the mutual recognition of professional qualifications do not need to be included in a bilateral FTA. Article VII of the General Agreement on Trade in Services permits World Trade Organization (WTO) members to conclude mutual recognition agreements, separate to FTAs, which establish the equivalence of standards or criteria for the authorisation, licensing or certification of services suppliers. However, other associated provisions may need to be included in an FTA.”

3.42The Committee asked:

3.43The Minister replied:

“It is not possible to comment on the details of the Government’s negotiating position with the EU at this stage. The Government has been clear that we do not seek membership of the Single Market. Instead we are seeking an agreement that allows for the freest possible trade in goods and services between the UK and EU Member States. The precise form of that agreement will be subject to negotiations and the Government is looking at all possible options.”

The Minister’s letter of 10 July 201729

3.44The Minister has provided the Committee with an update on negotiations in the Council of Ministers regarding the proposed Directive. He states that “I am pleased to report that a General Approach was agreed on both the notifications and proportionality test Directives at Competitiveness Council on 29–30 May 2017”.

3.45The Minister adds:

“On the proportionality test proposal, there were some differences amongst Member States but a compromise position was eventually reached. This was achieved by making it explicit that Member States retain a margin of discretion when deciding whether and how to regulate a given profession, within the limits of the principles of proportionality and non-discrimination.

“Although these compromise positions (in particular on the notifications Directive) represent a reduction from the original ambition, the UK welcomed the achievement of a General Approach on both Directives, as the core provisions of the proposals remained intact.

“The notifications and proportionality test Directives will now be considered by the European Parliament and, in particular, by the Internal Market and Consumer Protection committee. The rapporteurs are Sergio Prieto Gutiérrez (S&D, Spain) for the notifications proposal and Andreas Schwab (EPP, Germany) for the proportionality test proposal.”

3.46The Minister also undertakes to provide further updates in due course.

Previous Committee Reports

Thirty-third Report HC 71–xxxi (2016–17), chapter 3 (1 March 2017).


25 Thirty-third Report HC 71–xxxi (2016–17), chapter 3 (1 March 2017).

26 Letter from Lord Prior to Sir William Cash (28 March 2017) .

28 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. 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.




20 November 2017