Slide 1 Recognition of Professional Qualifications in the European Single Market for Services Henri Olivier FEE Secretary General FEE (Fédération des Experts Comptables Européens - European Federation of Accountants) ROAD TO EUROPE – PROGRAM OF ACCOUNTING REPORTING AND INSTITUTIONAL STRENGTHENING

Slide 2 Recognition of Professional Qualifications in the European Single Market for Services AGENDA 1.Background:  the European Single Market for Services  Free Movement of Professionals 2.Technical Aspects:  Establishment  Provision of Services  Restrictive trade practices

Slide 3 1. Background  The European Treaties include 3 essential liberties:  Free movement of goods,  Free movement of capital,  Free movement of people.  One of the objectives pursued is the establishment of a single market for goods, services and finance.  If this is close to a reality for products, there is still some way to go for services and capital markets.

Slide 4 1. Background  EU Heads of State and Government agreed on the objective of making the EU the most competitive and dynamic knowledge-based economy in the world by 2010 at the EU March 2000 Summit in Lisbon. (Lisbon Strategy)  Completing the Single Market, particularly in the area of services, regulated professions and financial services remains a crucial task in order to achieve this objective.

Slide 5 1. Background  Free movement of professionals and free provision of professional services raise the question of equivalence of migrants’ qualifications.  This is because entry requirements to a profession is supposed to protect consumers by ensuring quality of services.  Removal of other barriers to trade in services in the EU (price restrictions, advertising, insurance, etc.) needs also to be addressed.

Slide 6 1. Background  EU Treaties distinguish between:  Establishment - the professional has an infrastructure in the host member state; either he wants to transfer his main establishment in the host member state or he wants to have a secondary establishment.  Cross-border provision of services - services are provided on a temporary and occasional basis (assessed in relation to duration, frequency, regularity and continuity of services).

Slide 7 1. Background  For many years, establishment has been regulated by Directives on mutual recognition of qualifications.  Many professions are regulated by Directives addressing their specific sector of activity. Accountants and auditors do not have any sectoral Directive.  The Eighth Directive on the qualification of statutory auditors (84/285/EEC) established minimum rules on education. However this Directive is not aimed at promoting free movement of persons.  Directive 89/48/EEC provides a general system applicable to all non-regulated professions. This applies to accountants and auditors

Slide 8 1. Background  The Eighth Directive on qualification of statutory auditors was very helpful to organise the registration of auditors in another Member State. In practice, many EU member states apply the same system to accountants who are not registered auditors. (See FEE study on Admission to the Profession – 2002)  However no detailed regulation exists for  Cross border provision of services  Free movement of professional firms.

Slide 9 1. Background  A new Directive on recognition of professional qualifications has been approved recently, which will coordinate and improve the existing system  The Eighth Directive on qualification of statutory auditors will be replaced shortly by a new Directive, which will cover broadly all aspects of this activity, including free movement of auditors throughout the single market

Slide Background  The European Commission has issued a proposed Directive on services in the internal market, which intends to eliminate barriers to trade in services; this includes at least some aspects of accountants’ activities.  The European Commission is considering restrictive practices by liberal profession as part of its competition policy and has issued a communication on the issue.

Slide Technical Aspects  Recognition of professional qualifications: essential principles for establisment 1.The host Member may verify the qualification of accountants establishing on its territory. 2.The host Member recognises the equivalence of the qualifications delivered in the member state of origin but it may impose compensation measures when substantial differences are present.

Slide Technical Aspects  Compensation measures can be:  an aptitude test with the aim of assessing the ability of the applicant to pursue a regulated profession in the host member state; it must take into account the fact the the applicant is a qualified professional in his home country.  An adaptation period under the supervision of a qualified professional in the host member state; maximum 3 years, possibly accompanied by practical training and subject to an assessment.

Slide Technical Aspects  Most EU member states where the accountants profession or some activities are regulated have applied the system of an aptitude test, which is less burdensome.  In most cases the substantial differences result from differences in laws and regulations (company law – tax laws – insolvency laws, etc).  Difficulties may result from the differences in the scope of activities provided by accountants in the member states.

Slide Technical Aspects Recognition of professional qualification: essential principles for provision of services  Evidence of qualification in the host member state must be available.  Qualification of service providers can be addressed a posteriori; unqualified professional may be prevented from delivering services in the host member state.  Cross-border provision of accountancy services is not totally deregulated. Home and host member state must co-operate in ensuring quality of services.

Slide Technical Aspects  Use of the title of the country of origin  Information of the authorities in advance or pro-forma registration (optional)  Application of the host country rules on definition of the profession, use of titles and professional malpractice  A posteriori control in the host country

Slide Technical Aspects Eliminating barriers to services and restrictive practices are objectives of the proposed Directive on Services. Essential principles are:  Restriction of authorisation procedures.  Prohibition of requirements based on nationality or preventing accountants from having an establishment in another Member State.  Some restrictive practices must be evaluated to assess their compatibility with the objective of a single market.

Slide Technical Aspects  Requirements to be evaluated  Specific legal form;  Minimum capital for accountants firms;  Limitation on number of establishments;  Minimum or maximum tariffs;  Obligation to provide services jointly;  Rules on commercial communication;  Professional insurance and guarantees;  Multidisciplinary activities;  Etc.

Slide 18 Conclusions  The objectives of the European Union, which include ensuring free movement of professionals throughout the Community fully apply to accountancy services.  To be acceptable, restrictions must be based on public interest and/or consumer protection.  Substantial differences in education requirements can be a problem but compensation measures must remain proportionate