EUROPEAN NETWORK OF ECONOMIC POLICY RESEARCH INSTITUTES WORKING PAPER NO. 52/FEBRUARY 2007 ECONOMIC IMPACT OF REGULATION IN THE FIELD OF LIBERAL PROFESSIONS IN DIFFERENT MEMBER STATES IAIN PATERSON, MARCEL FINK, ANTHONY OGUS ET AL. ENEPRI Working Papers constitute dissemination to a wider public of research undertaken and already published by ENEPRI partner member institutes on their own account. This paper was originally published by the Institute for Advanced Studies (IHS) in Vienna as a Research Report, dated January 2003. It is reprinted by ENEPRI with kind permission of IHS. The views expressed are attributable only to the authors and not to any institution with which they are associated. ISBN-13: 978-92-9079-692-3 AVAILABLE FOR FREE DOWNLOADING FROM THE ENEPRI WEBSITE (HTTP://WWW.ENEPRI.ORG) OR THE CEPS WEBSITE (WWW.CEPS.BE) © COPYRIGHT 2007, IAIN PATERSON, MARCEL FINK, ANTHONY OGUS ET AL. Research Report Economic impact of regulation in the field of liberal professions in different Member States Regulation of Professional Services Iain Paterson, Marcel Fink, Anthony Ogus Section co-authors: Joachim Merz*, Felix Fink*; Helmut Berrer Final Report – Part 1 Study for the European Commission, DG Competition** January 2003 * (Case Studies: Germany, France) **The contents of the study do not necessarily reflect the opinion or position of the European Commission. Institut für Höhere Studien (IHS), Wien Institute for Advanced Studies, Vienna Contact: Iain Paterson : +43/1/599 91-152 email: paterson@ihs.ac.at email: paterson@ihs.ac.at Affiliations Anthony Ogus: Centre for Regulation and Competition, University of Manchester School of Law Joachim Merz, Felix Fink: Research Institute on Liberal Professions, University of Lüneburg Marcel Fink: Department of Government, University of Vienna Iain Paterson, Helmut Berrer: Department of Economics & Finance, Institute for Advanced Studies, Vienna Thanks go to the IHS project team members Niki Graf and Hermann Kuschej, and to the many correspondents at professional bodies, member states’ statistical offices and Eurostat. Part 1 - Main Report Contents Executive Summary ............................................................................................... 1 1. Introduction and Background ........................................................................... 7 1.1 Range of Professions/Professional Services in the Study............................ 9 1.1.1 Member states selected for Case Studies ....................................................... 9 1.2 Outline of the Methodology ........................................................................... 10 1.2.1 Survey Questionnaire.................................................................................... 11 1.2.2 Compilation and analysis............................................................................... 11 1.2.3 Pharmacy Services – retail trade................................................................... 12 1.2.4 Alternative approaches.................................................................................. 12 Structure of the report ......................................................................................... 12 2. Regulation of professional services – Theory and Publications .................. 15 2.1 Answers to the question “Why regulate professional services?” .............. 16 2.2 Answers to the question “Why is there too much regulation of professional services?” ............................................................................................................ 18 2.3 Empirical Studies on liberal professions ..................................................... 21 3. The Regulatory Framework of Liberal Professions in the European Union. 23 Introduction and Methodological Background .................................................. 23 3.1. Accountancy Services .................................................................................. 33 3.1.1. Organisation and market entry regulation..................................................... 33 3.1.2 Conduct regulation ........................................................................................ 39 3.1.3 Regulation Indices......................................................................................... 42 3.2. Legal Services ............................................................................................... 43 Lawyers ................................................................................................................. 43 3.2.1 Organisation and market entry regulation...................................................... 43 3.2.2 Conduct regulation ........................................................................................ 48 3.2.3 Regulation Indices......................................................................................... 50 Notaries ................................................................................................................. 51 3.2.4 Organisation and market entry regulation...................................................... 51 3.2.5. Conduct regulation ....................................................................................... 55 3.2.6 Regulation Indices......................................................................................... 57 3.3. Technical Services ........................................................................................ 58 Architects ............................................................................................................... 58 3.3.1 Organisation and market entry regulation...................................................... 58 3.3.2 Conduct regulation ........................................................................................ 62 3.3.3 Regulation Indices......................................................................................... 64 Engineers............................................................................................................... 65 3.3.4 Organisation and market entry regulation...................................................... 65 3.3.5 Conduct regulation ........................................................................................ 69 3.3.6 Regulation Indices......................................................................................... 71 3.3.7 Overall Regulation Indices for Technical Professions (Engineers + Architects)72 3.4. Pharmacists................................................................................................... 73 3.4.1 Organisation and market entry regulation...................................................... 73 3.4.2 Conduct regulation ........................................................................................ 77 3.4.3 Regulation Indices......................................................................................... 79 3.5 Summary of regulation across member states ............................................ 82 4. Overview of the Case Studies ......................................................................... 85 4.1 Legal Services ................................................................................................ 85 4.2 Accountancy Services ................................................................................... 87 4.3 Technical services.......................................................................................... 88 4.4 Pharmacy Services ........................................................................................ 89 4.5 Summary......................................................................................................... 90 5. A Benchmarking Survey of Professional Services ........................................ 91 5.1 Description of the Dataset ............................................................................. 91 5.2 Results of Benchmarking .............................................................................. 94 5.2.1 Legal Services............................................................................................... 95 5.2.2 Accountancy Services ................................................................................... 99 5.2.3 Technical Services....................................................................................... 103 5.2.4 Pharmacy Services ..................................................................................... 107 5.3 Hypotheses derived from the analysis ........................................................111 5.4 Findings revisited using GAP-Analysis...................................................... 115 5.5 Excursus: Scope for liberalisation by comparison with peers ................. 121 6. Summary and Conclusions ........................................................................... 125 Tables Table 3-1 Table 3-2 Table 3-3 Table 3-4 Table 3-5 Table 3-6 Table 3-7 Table 3-8 Table 3-9 Table 3-10 Table 3-11 Table 3-12 Table 3-13 Table 3-14 Table 3-15 Table 3-16 Table 3-17 Table 3-18 Table 3-19 Table 3-20 Table 3-21 Table 3-22 Table 3-23 Table 3-24 Accountancy Services: General........................................................... 36 Accountants: Qualification Requirements ............................................ 37 Accountancy Services: Scope of Activities........................................... 38 Accountancy Services: Conduct .......................................................... 41 Legal Services (Lawyers): General...................................................... 45 Legal Services (Lawyers): Qualification Requirements ........................ 46 Legal Services (Lawyers): Scope of Activities...................................... 47 Legal Services (Lawyers): Conduct ..................................................... 49 Notary Services: General..................................................................... 52 Notaries: Qualification Requirements................................................. 53 Notaries: Scope of Activities............................................................... 54 Notary Services: Conduct .................................................................. 56 Architectural Services: General ......................................................... 59 Architects: Qualification Requirements .............................................. 60 Architectural Services : Scopes of Activity ......................................... 61 Architectural Services: Conduct ......................................................... 63 Engineering Services: General .......................................................... 66 Engineers: Qualification Requirements .............................................. 67 Engineering Services : Scope of Activity ............................................ 68 Engineering Services: Conduct.......................................................... 70 Pharmacies/Pharmacists: General..................................................... 74 Pharmacists: Qualification Requirements........................................... 75 Pharmacists: Scope of Activity/Monopoly........................................... 76 Pharmacists: Conduct........................................................................ 78 Table 5-1 Table 5-2 Table 5-3 Table 5-4 Table 5-5 Table 5-6 Table 5-7 Table 5-8 Table 5-9 Overview – Legal Services 2000........................................................ 97 Overview – Accountancy Services 2000 .......................................... 101 Overview – Technical Services 2000................................................ 105 Overview – Pharmacies 2000 .......................................................... 109 Output measures and degree of regulation ........................................111 Productivity and Volume per capita growth in Spain .......................... 114 Spain, Technical Services ................................................................. 114 Embedding of surveyed professions within the K74-sector ............... 115 GAP-Analysis Table .......................................................................... 117 Charts Chart 5-1 Chart 5-2 Chart 5-3 Chart 5-4 Chart 5-5 Chart 5-6 Chart 5-7 Chart 5-8 Chart 5-9 Chart 5-10 Chart 5-11 Chart 5-12 Chart 5-13 Distribution of Key Ratios in EU Member States - Legal Services .......... ........................................................................................................... 98 Distribution of Key Ratios in EU Member States - Accountancy.............. ......................................................................................................... 102 Distribution of Key Ratios in EU Member States - Technical Services106 Distribution of Key Ratios in EU Member States – Pharmacies ........ 110 Productivity vs. Regulation Index - Legal Services ........................... 112 Productivity vs. Regulation Index - Accountancy Services................ 113 Productivity vs. Regulation Index - Technical Services ..................... 113 Productivity vs. Regulation index (legal+accountancy+technical) ..... 118 Relative number of firms vs. Regulation Index – Technical services . 119 Volume per firm in 1000 EUR vs. Regulation index – Legal services 120 Volume per firm in 1000 EUR vs. Regulation index –Technical services 120 Scope for reducing regulation – assuming constant returns-to-scales (legal services, illustrative) ............................................................... 121 Scope for reducing regulation – assuming decreasing returns-to-scales (legal services, illustrative) ............................................................... 122 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 1 Executive Summary This study presents a comparison of the legislation, regulations and codes of practice governing the practice of a range of professional services across member states of the European Union. The professions covered by the study are legal services (lawyers and notaries), accountancy services (accountants, auditors and tax advisers), technical services (architects and consulting engineers) as well as pharmacy services (community pharmacists). While there is a body of theory concerning regulation, in particular concerning the selfregulation of liberal professions, most comparative empirical studies of outcomes have been carried out in the context of state comparisons in the USA. We distinguish between theories that give answers to the question ‘why regulation of professional services (at all)?’ and those that offer answers the question ‘why is there often too high a degree of regulation?’ This distinction is made because a specific regulatory base exists for all the four professional services fields in all member states, but the range of regulatory scope and intensity varies considerably throughout the Union. This fact gives rise to the basic research questions posed in the study, namely whether, to what extent, and in which areas, regulation differs between countries, and in particular to identify the economic effects of different degrees of regulation in member states. The approach used in the study is comparative, and draws on as much information about the liberal professions in member states as exists and has been made available for the study. No adequate knowledge base of regulations or outcomes was previously in existence, so questionnaires were sent to professional bodies in each of the fields covered in all member states, and additionally to European professional umbrella organisations, as well as to some relevant Government departments. The questionnaires sought details of market entry and conduct regulation, recent changes in regulations, and basic economic data of the market for each profession. In addition, detailed accounts of the regulatory features and economic outcomes of specific professions in specific member states are contained in the 17 case studies in Part Two of the report. Comparative analysis requires comparable data: regarding regulation, this was achieved by our development of special regulation indices; regarding market outcomes, the main source of data was obtained from Eurostat and, where compatible, from member states’ statistical offices. The data is usually restricted to volumes of business and employment (of professionals and generally). Further relevant economic data would have included prices, costs, and earnings. Obtaining such data for even one country on these variables is fraught with difficulties, including non-availability as a time-series (or in most cases, at all) and non- 2 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S disclosure policies. Nevertheless, the study has been able to demonstrate the existence of trends from the data at the level available. The study of professional regulatory systems in member states differentiates between two large groups of regulations: regulations on market entry and regulations on “market behaviour” or conduct. Typical market entry regulations are qualification requirements (formal certificates of qualifications – i.e. university degrees, length of practice and/or professional examinations), registration or membership in a professional body, rules on areas of reserved practice (i.e. exclusive rights for one – or sometimes more – professions to offer specific services or goods on the market), and in some cases economic needs tests. Typical conduct regulations are regulation of prices and fees (fixed prices, minimum and/or maximum prices etc.), regulation of advertising and marketing, regulation of location and diversification (geographical restrictions on offering services, restrictions on establishing branch offices), restrictions on interprofessional co-operation or e.g. restrictions on forms of business (e.g. whether incorporation is allowed and under what preconditions). To simplify the rather complex picture of different forms of regulations on different professions in different countries, a regulation index each for market entry and for market conduct has been computed for each profession/professional group and member state. Subsequently the respective indices for market-entry and market-conduct were combined into an overall regulation index for each profession/professional group. The table below shows figures for the overall regulation indices, for all the professions/professional fields where one has been calculated (N.B. excluding notaries). The higher the degree of regulation (intensity), the higher the respective figure (within a range from 0 to 12). All the regulation indices with a value of 5 or higher are shown in black boxes, indices between 2.5 and 4.9 are in grey boxes, and. those below 2,5 have a white background. Countries with a high degree of regulation intensity for all professions are Austria, Italy, Luxembourg and, with some exceptions in the field of technical services, Germany as well as France (and possibly Greece). Belgium, Spain (and possibly Portugal) appear to be in the medium category, whereas UK, Sweden (with the exception of pharmacists), the Netherlands, Ireland, Finland and Denmark (the latter again with the exception of pharmacists) show rather liberal regulatory regimes (at least from a comparative point of view within the EU). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 3 Total IHS regulation indices for different professions Accountants Legal Architects Engineers Pharmacists Austria 6.2 7.3 Belgium 6.3 4.6 5.1 5 7.3 3.9 1.2 Denmark 2.8 5.4 3.0 0 0 Finland 5.9 3.5 0.3 1.4 1.3 7.0 France 5.8 6.6 3.1 0 7.3 Germany 6.1 6.5 4.5 7.4 5.7 Greece 5.1 9.5 n.a. n.a. 8.9 Ireland 3.0 4.5 0 0 2.7 Italy 5.1 6.4 6.2 6.4 8.4 Luxembourg 5 6.6 5.3 5.3 7.9 Netherlands 4.5 3.9 0 1.5 3.0 Portugal n.a. 5.7 2.8 n.a. 8 Spain 3.4 6.5 4.0 3.2 7.5 Sweden 3.3 2.4 0 0 12 UK 3.0 4.0 0 0 4.1 With regard to the various professional fields the most extensive/restrictive regulation can be found in regards of pharmacies/pharmacists. Only Ireland, the Netherlands and the UK show comparatively low regulation indices. In architectural and especially in engineering services the situation is rather bi-polar: in respect of market entry some countries show rather restrictive licensing models (especially Austria, Germany, Italy, Luxembourg), in others certification without or with only very limited exclusive tasks reserved to the professions is the standard model (e.g. Sweden, UK, The Netherlands, Finland, Denmark). The conduct regulations for architects and engineers are – compared to those of other professional groups – rather less restrictive in most of the countries. This applies even in those cases where high levels of regulation on market entry exist. In legal services (lawyers) one can observe all degrees of market entry regulation. The same is true for conduct regulation. This leads to a high level of diversification in the overall regulation indices: from very low (Sweden, Finland) to very high (Greece, Austria, France, Spain, Germany and others). For accountancy services market entry in all countries exhibits some type of licensing model, but the scope of exclusive rights to offer services varies considerably. The same is true – albeit to a lesser degree – regarding qualification requirements. Together with variations in the degree of conduct regulation this leads to a rather high intensity of regulation in e.g. Belgium, Austria, Germany, Italy, France, Greece and Luxembourg. In all the other countries regulation lies in the medium category. Interestingly it appears that a high degree of regulation in accounting professions very often goes hand-in-hand with similar structures in the field of legal professions (lawyers). In addition to the general overview of the regulatory systems of liberal professions in all member states of the European Union, the study also provides detailed case studies for 4 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S each profession. These include a mix of countries with low and high levels of regulation. The subset of member states includes: for legal services (lawyers, notaries): - Denmark, UK/England and Wales, Italy, Germany, and France; for accountancy services (accountants, auditors and tax advisers) - Italy, Netherlands, Germany, France; for technical services (architects and consulting engineers) - Austria, Finland, France, Spain; and for pharmacy services (community pharmacists) - Ireland, Portugal, Sweden, Germany. The case studies aim not only to analyse the functionality of different types of regulatory regimes, but also to detect and comment on trends in regulatory reform. What is evident in this respect is a high degree of “system-stability”. In this context we did not find any complete system change (from a licensing model to certification model or in the other direction) and it only rarely occurs that exclusive tasks reserved to one or more professions are opened to other service providers. However, frequent changes in the regulatory framework can be observed in the field of conduct regulations. These changes in almost all cases have taken the form of liberalisation (e.g. in respect of price regulation, advertising, form of firm, interprofessional co-operation). Such liberalisation is seldom accompanied by the introduction of tighter regulation in the field of market entry. Apart from traditional, somewhat ‘defensive’ forms of regulation (on market entry and conduct) in some (but not all) countries, there is a trend to more pro-active forms of consumer protection and quality management, which implies a lower degree of anti-competitive effects. For several professions in several countries in recent years, for example, professional indemnity insurance has been made obligatory (or, if already in existence, broadened). Other examples are the introduction of obligatory continuing education, facilities for specialisation, or in some cases, specific voluntary certification and/or benchmarking systems. The report also provides a benchmarking analysis of the professional services. Tables of distribution of key ratios (by country and by profession) professional density (per million of population), sector turnover per capita in the population and per person active in the branch (adjusted by prices and level of GDP) are evaluated to identify high, medium and low levels of relative performance. The performance levels in terms of outcomes are set against the degree of regulation in each country and professional field, as determined by the regulation indices. Some general trends have been indicated by the benchmarking and analysis of the legal, accounting, technical and pharmacy professional services, summarised as follows: • Relatively high volumes of turnover from revenues (fees) compared to the number of practising professionals in countries with high degrees of regulation (conduct and entry). A connection may be surmised between volume of business per professional and excess profit (compared with the outcome under less restricted competition), albeit indirectly, in the absence of specific profit data. It seems unlikely that this effect is due to differing technologies, or other factors that would engender productivity advantages. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 5 • Lower volumes of turnover from revenues (fees) - only in proportional relation to the number of practising professionals - in countries with low degrees of regulation (conduct and entry). This finding applies indeed also to professions and countries where the overall level of business is in fact higher. That is, we may surmise that low regulation is not a hindrance, but rather a spur, to wealth creation. • A tendency towards market ‘shake-out’ in professions and countries with a low level of regulation, allowing the formation of larger enterprise units. In the professions studied this effect is not associated with a higher than usual level of business (volume per capita), and high market concentration, except in accountancy services. • A negative correlation between degree of regulation and productivity for the case of legal, accounting and technical services. Since the measure of volume factors out differences in price levels and overall output levels of the economies, and since neither technological differences between countries nor lower employment levels are apparently the decisive source of higher productivity here, the correlation may also indicate a shortfall in potential output among highly regulated countries and professions. It should be borne in mind that such effects as described above are not necessarily an automatic result of regulation. However the existence of certain types of restrictive anticompetitive regulation undoubtedly lends credence to the view that such regulatory structures can, and in many cases are, used by the professions to obtain economic results that are in their favour, but contrary to the needs of, and against the interests of consumers as a whole. These empirical findings point in the direction of effects predicted by the ‘private interest’ theories of regulation, particularly in those aspects that are termed by economists as being ‘rent-seeking’. Whereas more detailed economic analysis would be needed to measure the strength of these effects, and establish statistical significance - the data for such an analysis simply is not available at this juncture – we may at least regard these effects as more than working hypotheses. We are unable, from the data, to estimate the impact of the differences between regulatory regimes on the quality of services provided for consumers in detail, but there have been no apparent signs of market breakdown in those member states which we have shown to be less regulated. There is thus no basis for questioning the high quality and essential values of existing professional services, regardless of the presence of high or low levels of regulation. Nevertheless, assuming a reasonable homogeneity of quality in the services we have studied and recent trends towards liberalisation notwithstanding, the available empirical evidence points in the direction of regulatory induced suboptimal outcomes from the point of 6 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S view of the whole economy (and from the viewpoint of consumers in particular) being present to varying degrees in legal, accounting, technical and pharmacy fields in many member states of the European Union, particularly in those countries with restrictively regulated professional services. We are led by this study to the overall conclusion that the lower regulation strategies which work in one Member State might be made to work in another, without decreasing the quality of professional services, and for the ultimate benefit of the consumer. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 7 1. Introduction and Background Professional services, such as legal services, accountancy services, technical services and pharmacy services are distinguishable from the general category of services in the economy, even from the more apposite category of business services, to which the first three mentioned belong. The distinction rests primarily on the historical development of the occupations at the heart of these services. These came to be known as ‘liberal professions’, with whom particular groups of individuals are identified as practitioners. Indeed, one may often refer to ‘members’ of a liberal profession, due to their qualification, and acceptance by a recognised professional body, drawing a clear distinction with other non-members. Within each field of professional services there may be several liberal professions. In this study, legal services comprise lawyers and notaries, ‘accountancy’ includes auditors and (sometimes) tax advisors as well as accountants, technical services are those of architects and consulting engineers, and pharmacy services refers to the activities of dispensing chemists (and thereby excludes clinical pharmacists). Each of the professions has a long tradition particular to each member state. Separate historical development of professions within each field (legal, accounting, technical, and pharmacy services) have produced different characteristics in respect of form and organisation of the profession. Arguably, however, allowing for such variances, each profession performs a similar basic function in the society of each country. Nonetheless, it is the differences between member states in the regulation of the profession (professional field) and in economic outcomes that is the theme of this report. In spite of the supposed and existing ‘special’ character of liberal professions, in respect of their relationship with clients, and responsibilities vis a vis the system of law, and/or governments, the approach taken here is primarily to regard the professions in their role as actors – in equal treatment along with other branches - in the wider economy of each member state, and also, of course, of that of the European Union. Such an approach can be found in a wide range of economic literature, more recently in the field of ‘law and economics’. This theoretical (and empirical) background is summarised in the report, and the results of our own empirical findings are set against this body of knowledge. The term ’economic’ here includes not only those aspects for which quantitative data can be collected, but also the set of organisational rules, that is to say, regulations, by which the economic activity of the liberal professions are bound. The first section of the report is devoted to establishing a consistent framework for analysis of these regulations. A classification scheme is constructed which enables a concise overview of the regulatory structure, and delivers a ‘compendium’ of the state of present regulation, in member states. 8 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Going one step further, we introduce an Index of Regulation for each Profession/Professional field, in order to be able to benchmark the degree of economic restrictions applying to each of the four professional areas separately. More detailed information about particular professional services, and the individual professions, in a limited number of countries is presented in case studies, along with a closer look at economic characteristics of each branch. The subset of member states was chosen in order to cover a spectrum of regulation-system types. As such, although the details in case studies are specific to the countries involved, certain insights may be gained that may be relevant to other member states, not treated here in depth, but whose regulation of professional services is similar. Economic statistics are available, albeit for a limited range of characteristics, for nearly all member states in each professional field. These are examined comparatively across member states, and the results are evaluated with respect to knowledge about degree of regulation, as summarised succinctly by the regulation indices. Regulations represent, in general, restrictions to competition between professionals and their enterprises. This is not in itself necessarily a value judgement. The relevant question to be answered is always whether the advantages of overall ‘mix of regulation’ (economic or otherwise) outweigh the disadvantages (economic or otherwise) or not. By comparing member states, we are able to make observations based on information about their peers. It is not necessary, in this approach, to posit questions regarding further novel steps towards reducing (the mix of) regulation - it suffices to compare the existing regimes. For that reason, we do not need to address, in this study at least, factors outwith the known spectrum of professional regulation in the EU, which might impinge on those aspects of regulation that are sometimes claimed as being unique to a profession. That is to say, we take the standpoint that each profession studied in this report shares the same ‘core values’ in every member state, regardless of whether they exhibit greater or lesser degree of regulation. Notwithstanding an awareness that particular regulations should not be taken in isolation, but regarded as an entire set applying in a particular country, it is thus feasible and desirable to examine the regulation mixes while attempting to answer two basic questions: - do lesser degrees of regulation (that lead to more competition) exist in other member states (peers)?, and - are the outcomes in such peer member states at least as, or even more, favourable than in member states where the respective professional is more restrictively regulated? This is the essence of the comparative benchmarking approach of this study. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 9 1.1 Range of Professions/Professional Services in the Study The Institute of Advanced Studies (IHS) carried out a study in 2002 for the European Commission, Directorate-General for Competition1, into the regulatory structure and economic impact of various Professional Services / Liberal Professions. The professions covered at present are all those belonging to Legal Services, Accountancy Services, Technical Services, and Pharmacy Services. The professions that are included in these four areas of professional services are: Legal Services – Lawyers and Notaries Accountancy Services – Accountants, Auditors and Tax Advisers2 Technical Services – Architects and Consulting Engineers Pharmacy Services – Pharmacists in retail business. A knowledge base of types of regulation has been constructed encompassing (as far as possible) all 15 member states of the EU at present. Similar types of regulation – in terms of their economic impact - have been grouped together to form a basis for classifying the extent and type of regulation in each member state. A note on terminology: at various parts of the study we refer to the ‘number of professionals’ or ‘number of practising professionals’ in particular professional services. These terms refer to individuals who hold the appropriate professional qualifications in a member state and are thus authorised to participate freely in all aspects the profession. Thus, individuals with the equivalent of ‘trainee’ status may indeed already be highly qualified and practising professionally, but are not included within our narrow definition, if for example, they are not free to establish a firm in their own name. A measure of individual ‘professionalism’ may not be construed through this usage. This terminology has been chosen ahead of ‘members’, in the sense of ‘members of the profession’, on account of confusion with membership of a professional association or chamber etc., which may or may not be mandatory, or because there may be a plurality of possible ‘memberships’. Specific definitions for each profession are given in Chapter 4. 1.1.1 Member states selected for Case Studies It was necessary to choose a subset of countries for which to carry out more detailed analysis – comprehensive coverage of all member states at this stage was not feasible. 1 2 Contract No. COMP/2002/D3/S12.334490. in those member states where tax advising is a liberal profession. 10 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Therefore it was decided that the widest coverage could be obtained by examining a different set of countries for each of the four different professional fields. The following criteria were taken into account in making the choice: 1. geographical balance; 2. balance between countries which have more and less liberal regimes in professional services (on the basis of prior knowledge); 3. size of countries; 4. availability of information. The following member states were selected for case studies in the respective fields of professional services: Legal Services: – Denmark, Germany, UK/England and Wales, Italy, France Accountancy Services: – Italy, Netherlands, Germany, France Technical Services: – Austria, Finland, France, Spain Pharmacy Services: – Ireland, Portugal, Sweden, Germany representing a total of 17 case studies altogether at the level of professional field, and approximately double that number at the level of liberal profession (as referred to above). 1.2 Outline of the Methodology In order to satisfy the aim of providing an up-to-date comparative analysis of the regulatory framework for each of the professions / professional services in all 15 EU member states, a survey questionnaire was used. By this means it was intended to acquire authoritative information and data at source, i.e. from professional bodies, to augment knowledge gathered from other sources, such as published reports, previous studies etc. Secondly, the availability of data on the professional services from sources, independent of the professions themselves was investigated. The most suitable data for comparative purposes are those from statistics bureaux at the member state and European levels. Data available at this level is incomplete for countries and years since 1990, but sufficiently available for certain comparative purposes. Detailed data for each of the professions, or professional fields, was also gathered for those countries selected for case studies. This data is perforce not structurable on a common, directly comparable, basis, but nevertheless contributes to an overall view of the outcomes in different countries. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 11 1.2.1 Survey Questionnaire Nearly 300 organisations (i.e. professional bodies, European umbrella organisations and relevant government Ministries) were sent a questionnaire. Over 100 specific professional bodies were considered as being essential for the purpose of obtaining a complete knowledge base of the regulatory structure in 15 member states Return of Questionnaires:. Returns from professional bodies remained far below 100%: eventually about 75% of the questionnaires from the essential professional bodies were returned. Most returned questionnaires responded to the first part –on regulations, some responded to part 2 – recent changes in regulation, while the response to part 3 – economic data – was seldom answered. Some professional bodies showed a high degree of interest in the subject of the questionnaire. However many organisations failed to respond, despite repeated efforts being made to obtain returns. An overview of the return of questionnaires is presented in the annexes, along with a synopsis of the types of questions which elicited more or less response. In view of the ‘gaps’ left by unanswered questionnaires – especially in countries, like Greece, where little or no previously published information on the regulation structure has been found to be available3, inevitably there are a small number of countries and professions which remain outwith the range covered in the study. 1.2.2 Compilation and analysis As mentioned in the introduction, the following tools and deliverables were developed: a compendium of regulations for each member state, covering market entry (including scope of activity) and conduct regulations, in the form of generalised tables indices of regulation (market entry, conduct, and combined) for several professions and each of the four professional fields case studies (see above) a comparative benchmarking and analysis of each of the four professional services in all member states4 relating economic outcomes with the degree of regulation (as per indices). a review of the concurrence of empirical evidence with theoretical considerations. 3 4 Correctly speaking, in English language. Subject to availability: the number of member states varies between 12 and 14. 12 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 1.2.3 Pharmacy Services – retail trade Products sold by pharmacists in dispensing chemists are produced by major pharmaceutical companies (and others) and distributed world-wide. The nature of this mass retail market and details of differences in pharmaceutical prices in EU member states is discussed prior to the case studies on pharmacy services. The availability of previous research about prices/demand in this branch is a prerequisite for interpreting information on economic outcomes. In particular, we calculate a turnover share of total net turnover attributable to the level of dispensing pharmacies, in order to have an equivalent measure of output volume to the data used in legal, accountancy and technical professional services. 1.2.4 Alternative approaches Other information than that presented here would be desirable for a complete picture of professional services /liberal professions. Unfortunately, the availability (in actual fact, lack of data) of data and information does not always match the resources of the study. Such areas are: Trade in Professional Services: The level of trade in professional services available from the OECD database contains information on only 3 member states for both legal services and accounting services, only one of which belongs to the subset of member states selected for the case studies in these professions – an inadequate basis for comparison. Price Comparisons of Professional Services: Comparison of fees and prices charged directly by professional services in different EU member states would be of great interest. The difficulties inherent in defining common and standard services on the one hand, and the relatively infrequent consumption of these services by individual consumers on the other hand (lack of mass market, except for pharmaceuticals), are among the reasons for the difficulty of obtaining useful information on this subject. An extensive search for sources of secondary information, including consumers rights/protection associations in EU member states, yielded no results. Primary investigation (market research) of such differences would entail a level of effort beyond the resources of the current study. Structure of the report The report is divided into three parts: the main report, of which this is the introductory first chapter, a report on case studies of particular countries/professions, and annexes. The next section of the main report, Chapter 2 contains, as a general background to this report, a review of literature relevant to our topic and a synopsis of arguments for and I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 13 against (different types of) regulation in the field of professional services that have been put forward by authors of various theoretical (and sometimes empirical) studies of the liberal professions/professional services. In the following chapter 3 we present an overview of the regulatory framework in each of the liberal professions in the legal, accountancy, technical and pharmacy professional services – for all EU member states. A characterisation of regulatory regimes existing in the EU follows, and this enables us to compile a compendium of reference tables in which groups of countries with similar regulation structures may be identified. Further, we develop and introduce a scalar index of regulation for market entry regulation, conduct regulation, and combined, for each liberal profession and professional services field. The case studies that are described in Part 2 of the report offer an in-depth account of regulation and economic characteristics of professions in several EU member states, for each of legal, accountancy, technical and pharmacy services. The insights gained from these case studies, additional to our assessment of the overall degree of regulation reported in Chapter 3, are summarised for each professional services field in the fourth chapter of the main report (Part 1) and recent trends in liberalisation in the liberal professions are also reviewed. Chapter 5 (benchmarking and analysis) comprises an examination of basic data concerning the economic branches in which the four professional service fields in this study are located. Ratios of key economic variables may be viewed across member states, allowing a broad comparison of high, medium and low relative performance and identification of groups of countries with similar patterns of outcomes. We draw on the regulation indices already introduced in the third chapter in carrying out a cross-comparison of economic outcomes with the degree of existing regulation over a wide range of EU member states. Indications pointing to a possible relationship between regulation intensity and productivity are scrutinised in greater detail, by filtering out the effects of ‘localised’ country effects. In the last section, Chapter 6 of the main report, we present a summary of the main findings. Conclusions are drawn from interpretation of the results against the background of ideas dealt with in the second chapter. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 15 2. Regulation of professional services – Theory and Publications Nearly all of the professions covered in this survey – lawyers, notaries, accountants, auditors, consulting engineers, architects, and non-clinical pharmacists – are subject to degrees of (self-)regulation to a greater or lesser extent. The ‘self’ in self-regulation is not used in the literal sense, but connotes some degree of collective restriction, other than constraints emanating from the government or state, to effect outcomes that would not be obtained by individual market behaviour alone.1 Although some aspects of self-regulation have their origins in spontaneous ordering from within a profession, more often it may be regarded as a deliberate delegation of the state’s law-making powers to an agency, whose membership is composed of representatives of the profession themselves. Such arrangements are particularly in evidence in EU member states among lawyers’, notaries’, statutory auditors, and pharmacists’ professions. Licensing of professionals, based on laws and regulations strictly limiting the supply of services to authorised individuals, is a more stringent form of self-regulation than certification of members of a professional body, where the latter function is voluntary, and does not hinder access of non-certified individuals to the market. There are two lines of argument followed by economists which follow from theories applicable to the professional services. These are often referred to in overall terms as being pro and contra higher degrees of regulation. Here we will rather distinguish between theories that answer the question ‘why regulation of professional services (at all)?’ and those that answer the question ‘why is there too high a degree of regulation?’, because (as was shown in previous chapters) many aspects of regulation can be, and have been in certain countries, reduced in degree, particularly in recent times. The reference to degrees of regulation rather than ‘no regulation’ versus ‘regulation’ indicates that there is usually a common denominator of regulated areas to be found in practice in the professional services. The denominator is, however, placed at a different point on the ‘scale’ of regulation, as is made transparent by the regulation indices developed for the professions and professional fields in part 3 of this study. In rough terms the denominator is traditionally lowest in the field of technical services, followed by accountancy, legal, and pharmacy. Even the denominator may be lowered in time, however, as has occurred recently in the pharmacy profession (see part 3). 1 Black (1996), Ogus (2000). 16 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 2.1 Answers to the question “Why regulate professional services?” The starting point for the pro-regulation theories is the listing of those characteristics that apply to the markets for professional services, and which differentiate these markets from the economist’s ideal conception of perfect competition. In the equilibrium predicted under unrestricted competition the welfare of producers (producer surplus) can not be increased without a detriment to consumer surplus, or vice-versa.2 The extent to which familiar conditions leading to market failure may be present in liberal professions is discussed here briefly: Regarding the type of competition in professional services markets – traditionally there have been many small producers, and no a-priori grounds for expecting cartel formation or oligopolies (prior to the formation of self-regulating bodies), so that, despite the heterogeneous nature of services provided, and traditional localisation of providers, this is not of great concern. Regarding the provision of public goods – the professional competence of lawyers, accountants, engineers, pharmacists, etc. takes mostly the form of provision of information. Information generally satisfies conditions of non-rivalry and non-exclusivity, as it can in principle be supplied to third parties without incurring extra costs. Due perhaps to the relevance of particular information to the professional’s clients (heterogeneity) this feature is also of lesser concern Nevertheless it is arguable that the proper functioning of the law and of the accounting system, and also of the health-care system, is an essential feature of the infrastructure of society and therefore constitutes to some degree a public good. Regarding externalities – a traditional concern in the professions is the effect that provision of low quality might have on third parties (as opposed to lower quality demanded by the market by being acceptable in relation to price). Not only, but especially in medical professions, are the negative consequences of poor advice potentially deleterious for other members of society than the client him/herself. This deficiency of the market may apply in particular in our study to pharmacists, engineers and notaries. The common existence of academic education, training periods and experience in the professional services are the first line of defence against such deleterious consequences. Immense importance in this connection must be attributed to the individual liabilities of the professions in private law. 2 I.e. a Pareto-efficient situation. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 17 Regarding access to information concerning the characteristics and prices of services and goods being equal for consumers and producers – the markets for professional services exhibit perhaps their greatest potential problems. The problem of asymmetric information between the agent (lawyer, accountant, architect, pharmacist etc.) and the less-informed principal (the customer/client) is manifest. In addition, professional services are often regarded as being credence (or trust) goods, meaning that consumers may not be able to assess the quality of the service provided before purchasing, or even after consumption, due to the information/knowledge deficit, compounded by a probable lack of experience in making repeat purchases. Two aspects of information asymmetry are considered as being potentially deleterious: first, an adverse selection resulting from declining quality of services. The argument runs that the opacity of the market services to customers could result in their only being prepared to pay an average price for an unknown (hence presumed average) quality, discouraging producers of higher quality services, who expect corresponding higher prices, to exit the supply side, thus reducing average quality supplied by those remaining in the market. The net effect would be a ‘downwards spiral’ of quality and prices. This argument is taken by analogy from the well-known discourse on sellers of used cars.3 Secondly, professionals are said to be faced with a moral hazard problem when their own income generating goals and practices run counter to the objectives of the client, and where the asymmetry of information on the price-quality relationship stands in the way of fair bargaining. In such a situation there is a risk that the professional over-supplies the service to the client, or supplies a higher quality than necessary satisfying the client’s needs , so that higher prices are charged to the customer than he/she could have achieved were he/she fully informed. This line of argument is connected to the contention that many consumers are unable to make informed decisions and need to be protected against malpractice. Such reasons, as discussed above, advanced in favour of regulation are known as public interest theories, as opposed to the private interest approaches, which may generally be regarded as contra-regulation.4 Before turning to these latter, it is salient to point out some of the remedies that have traditionally been adopted in most countries, foremost being licensing and certification. 3 4 Akerlof (1970) Maks and Philipsen (2002) 18 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Both licensing and certification are ex-ante quality control mechanisms, with licensing exerting a significantly higher degree of control. Licensing means that only professionals gaining the license may interact in the market for services. It is a barrier to entry. This barrier goes a stage, or more than one stage further than the quality instrument of academic study. As we will document later in this study, there is a wide range of restrictions to entry based on training periods, professional examinations, and years of experience. The problem of information asymmetry has traditionally been used as a justification for various kinds of fee settings or price controls, whether implying, fixed minimum, maximum, or recommended tariffs. As we have seen, there has been a considerable degree of movement away from such restrictions in the professional services, in many, although by no means all member states. Prohibitions on advertising have often been justified by professional bodies in the past as being inappropriate for the markets for experience goods (services). The lack of consumer information on quality could lead to a competition purely on price, leading to decrease in quality along the lines of the ‘used car’ argument cited above. Given the changes in technology in recent years, which have enabled the smallest of firms to publish openly, electronically, information designed to signal quality or reputation, it is not surprising that there has been a definite trend away from advertising bans. Recent research5 reports general evidence that restrictions on advertising of professional services increase the fees charged for professionals’ services and that more advertising leads to lower fees. In fact, the weight of opinion in most societies and professions has probably now tipped the scales in favour of regarding liberalisation of advertising as being the cure for the ‘remedy’. 2.2 Answers to the question “Why is there too much regulation of professional services?” The theoretical arguments rehearsed in the previous section have the disadvantage of not providing a means to compute whether particular instruments of regulation would lead to a net gain in welfare, for producers and consumers, over the claimed loss in welfare, also known as market failure. Hence it is quite possible that the practices adopted by selfregulating professions result in regulatory failure – not regulatory failure in the technical sense of non-compliance with regulations, but in the economic sense of decreasing welfare by more than would be necessary to obtain otherwise acceptable market outcomes. 5 Stephen and Love (1999). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 19 Indeed theoretical private interest approaches postulate that professional bodies will advance their (members’) interests beyond the minimum level required to the detriment of consumers – i.e. rent-seeking behaviour will occur. The term ‘rent‘ is used in the sense of microeconomics to denote the difference between revenue and cost of producing services. The existence of competition dissipates rents in general market behaviour: on the other hand a decrease in levels of competition will lead to wealth transfer from consumers to producers. Restrictions on using advertising and of the choice to set tariffs in order to attract customers are regarded as deleterious to the beneficial effects of competition for services. Restrictions on forms of association (lawyers with accountants, for example) are also seen as imposing a burden on consumers, who might otherwise benefit from economies of scope and ‘one-stop shops’. According to ’public choice’ lines of argumentation6 professional bodies are in a strong position to lobby governments in order to influence the outcomes of regulations and statutes. Since elected politicians seek re-election they have to address the attentions of influential interest groups, particularly those composed of important opinion leaders in society. Even worse, from this perspective, self-regulation itself may represent the ultimate form of regulatory ‘capture’7, and professional bodies can in practice be acting the part of a legitimised cartel, with wide ability to determine or influence the regulatory framework to the main benefit of producers. In particular professional bodies may exert excessive control over entry conditions to the profession. The preconditions for the most restrictive market entry regulations are given when the benefits are concentrated among a relatively small group of producers, when the costs of professional organisation are relatively low, and where costs are spread across a large population (which then meet with less organised opposition from consumers’ groups).8 It has been argued, in contrast, that the specific knowledge9 of professional bodies, especially concerning the risk of services being of poor quality, and their ability to react flexibly, will therefore lead to the costs of self-regulation being lower than the costs of governments themselves regulating, or setting up an independent body to carry out regulation. Be that as it may, it begs the question of just how much regulation is necessary, and in which areas of service provision. 6 Van den Bergh and Faure (1991). Kay (1998); Capture theory, Posner (1974). 8 Stigler (1971) ; Peltzman (1976) 9 Miller (1985). 7 20 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Economic rents in the form of excess revenues will result, according to the ‘private interest’ theories, when the self-regulating higher professional body has a monopoly right over a professional service and does indeed exercise a restricting influence over entry to the profession. Such behaviour will artificially keep the supply of service providers below the level it would reach in an unrestricted situation. Not only will prices be higher, but the level of services produced will be below the potential of the market. Most empirical studies in the legal field have been carried out in the USA. Three separate studies10 undertaken at different periods find that lack of reciprocity between state bar associations (an entry restriction) leads to a lower lawyer density and higher lawyer incomes. There have been many studies of advertising restrictions. In general these show that advertising prohibitions raise fees charged for professional services and correspondingly, that the more advertising, the lower are fees.11 Arguably the strongest single measure that can affect outcomes in professional services markets is the existence of licensing requirements from self-regulating bodies. Not only entry is directly under licensing control, but the lobby effect of a licensed profession to influence conduct regulation is greatly increased. For this reason, private interest theories would expect more favourable outcomes (here, from a consumer’s point of view) in professions following the certification model of self-organisation. Many economists have preferred arrangements of certification to licensing systems because consumers are in the position of being able to orientate their market decisions by reference to certified producers, but may choose to purchase from non-certified practitioners, especially when lower quality needs are served by lower purchase price.12 On the other hand, a study of pharmacies in Netherlands and Belgium warns of the deleterious effects caused by the costs of measures taken by the licensing body to increase quality (e.g. increased education) being passed on to customers in a higher mark-up, resulting in some customers refraining from buying medicines.13 While most studies of licensing have been carried out among states in the USA, a study of lawyers, architects, , physicians, and pharmacists in Belgium showed that higher degrees of licensing restrictiveness was related to higher prices and higher earnings.14 10 Holen (1965); Pashigian (1977), Kleiner, Gay and Green (1982) Stephen (2002). 12 Svorny (1999) 13 Faure, Maks and Philipsen (2001). 14 Van den Bergh and Faure (1991) 11 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 21 Finally, the suggestion that formation of several self-regulating bodies, in competition with each other (for professional members) has been put forward: under conditions of competition, the economic rents will be dissipated or, at least, reduced15. Such a situation exists in practice in some member states, as we have seen, under models of certification, but not where self-regulation is conducted in a licensing mode. 2.3 Empirical Studies on liberal professions The following specific references to published material on the liberal professions/professional services made here represent the most relevant and useful background to the subject matter extracted from the reviewed literature. The focus here is on recent empirical research. In respect of empirical questions of regulation not much systematic research from an international comparative point of view has been done up to now. One of the most important publications in this respect is Herrmann (1996), who provides a detailed analysis for a large number of professions in several European countries. Some basic information can be found in IFB (1993), which gives an overview of the regulation on liberal professions in all Member States of the European Union at the beginning of the 1990s. OECD (1996) provides some useful information. However, most of it is in tabular form only. A rather good source for information on accounting and legal professions is IBFD (2001). It provides some useful insights into both professional fields. However, much of the information given there is not up to date and the quality of information varies considerably from country to country. The same is true for the different articles on lawyers in different countries in Henssler/Nerlich (1994). A subset of EU member states has been analysed in Felderer et al. (1998) for legal professional services and accountancy professional services, and in Felderer et al. (1999) for legal, accountancy and technical professions. Others, e.g. Gelking (1996): or Wein (1995) deal with specific professions and questions involving more abstract arguments concerning costs and benefits of regulations. One important book that combines empirical facts and theoretical insights has been published by Faure et al. (1993). 15 Kay and Vickers (1990), Ogus (1995). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 23 3. The Regulatory Framework of Liberal Professions in the European Union Introduction and Methodological Background This chapter gives an overview of the regulatory framework of the liberal professions that are the subject of the study. The information given here comes from different sources. These are: - Questionnaires returned from professional bodies. - Relevant literature (articles, books, reports). - Texts of law. - Other sources, like: homepages of professional organisations, other sources on the internet1, individual members of the professions, additional information submitted by professional bodies and ministries with the questionnaires. Regarding incompleteness: there are some professions in several countries for which we did not obtain a returned questionnaire. In these cases information was drawn from the relevant literature (if available) or the respective fields in tables etc. were left empty (if not available). A “structure” for the regulatory systems of professional services On beginning a description of regulatory systems we first have to distinguish between regulation in the wider sense and regulations in the narrow sense. Regulations – in the wider sense of the word – include rules that are applicable to all participants in the economy. Such rules are, for example, general regulations on consumer protection or the general labour law. Such regulations are not part of our analysis. Here we concentrate on regulations in the narrow sense, which are rules that are directly, and in most cases solely, applicable to the liberal professions or professional services. In a first step one can differentiate in this respect between two large groups of regulations. These are: 1 - regulations on market entry - and regulations on so-called “market behaviour” or conduct. In addition to homepages of specific professional organisations, the following internet websites have been of great importance: lawyers and notaries: http://www.simons-law.com/e/index_e.htm, http://elixir.bham.ac.uk/menu/country/default.htm; accountants: http://www.accaglobal.com/members/services/int_mobility/factsheets/; architects and engineers: http://www.archieuro.archiworld.it/presae.htm. 24 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Market entry regulations There are different types of market entry regulations that can be distinguished. In the field of personal preconditions: for a long time in many professions citizenship played an important role (this has changed in the meantime due to EU-legislation). Other personal preconditions to enter a market may for example be a minimum age or good personal reputation. Typically some negative conditions apply here, e.g. not having been convicted of a criminal offence. Preconditions in the field of Qualifications are often formal certificates of qualifications (i.e. certificates on university degrees), respective practising or professional examinations. Some other preconditions may encompass economic needs tests (i.e. ostensibly to answer the question of whether a new entrant is required), registration or membership in a professional body. At the same time one or more areas of reserved practice for liberal professions very often exist. This means that there are exclusive rights for one (or sometimes more) professions to offer specific services or goods on the market. These kinds of regulations lead – amongst other factors – to a certain degree of potential competition on a specific market, within the parameters set by the regulations. Together with the so-called market-behaviour or conduct regulations, described in the next paragraph, they influence the actual degree of competition. Conduct regulations Regulations on market behaviour take different forms of professional and standards quality controls. They influence price-, quality- and product-competition. Typical regulations on market-behaviour are: - regulation of prices and fees (fixed prices, minimum and/or maximum prices etc.), - regulation of advertising and marketing, - regulation of location and diversification (geographical restrictions on offering services, restrictions on establishing branch offices), - restrictions on interprofessional co-operation, I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 25 - restrictions on forms of business (e.g. whether incorporation is allowed and under what preconditions), - other regulations (regulations on continuing education, rules on specialisation or a certain kind of indemnity insurance etc.). Both forms of regulation (market entry and market behaviour regulation) may derive from different sources. It is not only the provisions of (EU member) state law that is relevant here, but also rules that are issued by professional bodies. In general the following types of regulations appear as most relevant: - national state law - regional state law, - rules issued by compulsory professional bodies (licensing), - rules issued by voluntary professional bodies (certification model)2, - regulations by the European Community (treaties, directives, decisions of the European Court of Justice). Such regulations are issued and implemented under different forms of professional organisation: - in models with licensing via state / public authorities, - in models with licensing via professional bodies - often with compulsory membership in a professional association, - in models with pure certification (no licensing). In the second case the licensing may be implemented by only one professional body, or, as is apparent for some professions in some jurisdictions, there are alternative (and therefore to some extent competing) professional bodies. In the last case, there often exist civil law professional bodies without compulsory licensing, and professionals do not have the exclusive right to offer one or different kinds of service. Also there is no market entry regulation in the narrow sense in this case - however it very often appears that there are some basic market-behaviour regulations. The easiest distinction in this respect – apart from the question of whether there is any binding regulation at all – is the one between self-regulation and regulation via the state/public authorities. However, it occurs relatively often that a regulatory system is in fact 2 The distinction between compulsory and voluntary professional bodies is not necessarily co-extensive with the distinction between licensing and certification. This is rue for example where membership to the professional body might be compulsory but it operates a certification system only. However, as to our knowledge, such a combination very rarely occurs, if at all. 26 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S a hybrid between these two categories. Elements of self-regulation are mixed with elements of regulation by the state. There may be for example a public regulator but with only residual regulatory authority, overseeing the practices of the self-regulatory agency. There are also cases where representatives of other (often partly self-regulated) professions are involved in the implementation of the rules of the profession (that is not their own profession). The latter form is called interprofessional co-organisation. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 27 An overview of the regulatory framework: regulation tables and regulation indices This chapter presents an overview of the regulatory systems of selected liberal professions in the EU. In a first step we provide tables on different fields of regulation and try to distinguish different regulatory groups of countries. In a second step, several regulation indices for each profession are constructed: for each profession there is an index for marketentry, one for conduct and an overall index. These indices, together with several quantitative figures on market-outcomes, will be used later on to analyse the overall regulatory and market situation for our selected liberal professions in the member states of the European Union. The regulatory systems of liberal professions very often appear to be rather complicated and detailed knowledge often is necessary for a right interpretation of the one or other rule. For this reason our main source for the regulation tables provided below is our questionnaire, which has been sent to all the relevant professional bodies in the EU as well as to all the relevant ministries. This questionnaire includes all the regulatory instruments mentioned above. At the same time, we asked for the vital organisational and institutional characteristics of the respective regulatory systems. In most cases the information given in the regulation tables directly mirrors the information given in the questionnaires. Unfortunately - not all relevant professional bodies and ministries replied to the questionnaire - not all returned questionnaires have been filled in completely, - and not all information given in the questionnaires turned out to be clear and correct. For that reason, some of the information provided in the following regulation tables has been extracted from - relevant literature, - texts of law and - other relevant sources (see above). The fields for which information is insecure have been marked with a question mark. Professions for which we do not have a filled in questionnaire at the time of writing are marked in italics and some fields remain free (“n.a.”). To obtain a better impression from an internationally comparative point of view we introduce the following simple colour-code for the analysis of market entry: 28 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S High regulation Medium regulation Low regulation No such profession (in the form of lib. prof.) white + italic Not enough information lib. prof. = liberal profession In a first step – concerning market-entry, the countries are respectively assigned to one or the other colour-coded group mainly in respect of the exclusive rights of the relevant profession(s). A market entry index is calculated for each profession in each country, whereby the outcomes of index-calculation fit the colour-coding quite closely. The colour code concerning conduct regulation is as follows: regulation no regulation n.a. not enough information Additionally here the relevant fields are marked with Y (“yes”) and N (“no”). This means that regulation applies/does not apply in the relevant field. In some cases “Y” and “N” are set in brackets. This is the case, when the relevant regulation only applies under specific circumstances etc. (see for further explanation section 3.1.2 below). Our methodology on “regulation indices” is developed to facilitate comparison among the four professions covered by this report as well as, saliently, across member states’ economies as well. The respective overall index score reflects the number of restrictions that are applied and the relative importance of those restrictions. The higher the respective index score, the more restrictive the regulation system for that profession. We construct three types of indices: - one for market-entry - one for conduct, and - an overall index. Within each regulation category, a score is assigned to the particular form of regulation. The score for market entry and conduct ranges from 0 as least restrictive to 6 as most restrictive. The score for the overall index ranges from 0 to 12 (the sum of the market entry and the conduct index). Each regulation category receives a weighting that indicates the relative (assumed) importance of that category in respect of market outcomes. The higher the I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 29 weighting, the more important a regulation category is considered to be, relative to other regulation categories. The use of weights for different categories of regulation is, in the last instance, necessarily subjective. This is a general feature of index construction, not singular to this case. Nevertheless, indices are widely used in different fields of social sciences. For example, in the field of industrial relations and wage setting alone, over 30 different indices exist, all showing some differences in the categories included, their weighting and, alongside with this, outcomes (see for a discussion: Kenworthy 2001). A possible orientation for our purpose is a study done by Nguyen-Hong (2000)3. To the best of our knowledge up to now this is the only existing attempt to construct an index on the regulation of liberal professions. Unfortunately this study concentrates on international trade in professional services and for this reason focuses on some other categories of regulation than we do here (e.g. investment and ownership by foreign professionals etc.). Differences from the indices provided by Nguyen-Hong (2000) have various reasons: - different categories of regulations measured in the index, - a different system of weighting, - the index applies to another time period (mid 1990s for Nguyen-Hong, 2001/2002 for our index) - a higher quality of information on specific regulations in our study4. However, a major parallel between our methodology and the methodology adopted by Nguyen-Hong (2000) is that in both cases a market entry index, a conduct index, and an overall index have been constructed. For the market entry index our weighting and coding is as represented in the following table5: 3 See Nguyen-Hong, Duc (2000): Restrictions on Trade in Professional Services, Staff Research Paper, Productivity Commission, Melbourne. 4 Nguyen-Hong mainly used information provided by OECD (1996) for his index. 5 For pharmacists a slightly different method applies. See the relevant sub-chapter below. 30 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Market Entry Regulation Index ER Category/Variables Entry regulation (general) Coding ERLC*0.40+ ERED*0.40+ ERQT*0.20 Scale 0 to 6 ERLC Licensing 0=0 1 = 1.5 2=3 3 = 4.5 4 or more = 6 0 to 6 40% ERED1*0.30+ ERED2*0.40+ ERED3*0.20+ ERED4*0.10 0 to ≥ 6 years 0to6 40% Number of exclusive and shared exclusive tasks ERED ERED1 ERED2 ERED3 ERED4 ERQT Requirements in education/does only apply in cases of licensing; if no licensing: “0” Duration of special education/university or other higher degree Duration compulsory practising Number of professional exams Number of entry routes to profession (inv. scale) Quotas/economic needs test Weighting1 0 to 6 30% 0 to ≥ 6 years 0 to 6 (0 to ≥ 3)*2 0 to 6 (0 = 4 or more routes; 0 to 6 1=3 routes; 2=2 routes; 3=1 route)*2 40% 20% 10% 0=no 6=yes 0 or 6 Weighting2 20% ER is the overall entry regulation index. The scale is from 0 to 6, and the higher the figure the more restrictive the regulation. Licensing (ERLC) and requirements in education (ERED) have been assigned the highest weights (40% each). It is evident that market entry in most systems is mainly driven by these two categories of regulation. For ERLC we follow the methodology of Nguyen-Hong (2000) and count the number of exclusive or shared6 exclusive tasks provided by the relevant profession. The respective categories of tasks are taken from OECD (1996). We are aware of the problem that the number of exclusive tasks may not perfectly reflect their actual importance. This means that, for example, one exclusive task provided by one profession may cover a higher overall market share (e.g. in % of GDP) than two or more exclusive tasks provided by an other profession. In fact there is no way to solve this problem, as there is insufficient information on the actual importance (in terms of market data) of different tasks provided by liberal professions from an international comparative point of view. ERED (requirements in education) is constructed from three other categories: duration of special education/university or higher degree (30%), duration of compulsory professional practice (40%) number of professional exams (20%) and number of entry routes to profession (10%). The duration of compulsory practice has been assigned the highest weight 6 In this case two or more different professions are licensed to offer the relevant service.. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 31 as long phases of mandatory practice (sometimes combined with relatively low income) may discourage potential professionals, to a considerable extent, from entering a profession. The duration of special education (for a university or other higher degree) and the number of special professional entry exams are each important measures of the degree of market entry regulation as well. The number of different entry routes to the professions is coded as follows: the higher the number of different possible routes, the lower the figure adding to the overall entry index. We gave this field a weight of only 10%, as the (stand-alone) effects of higher flexibility in the entry system (irrespective of the general degree of market entry regulation as expressed in the other categories) should be comparatively low. The existence of quotas/economic needs tests (ERQT), which seldom occurs in the European Union except for pharmacists and notaries, is of more importance and weighted 20%. If there are no restricted tasks (i.e. a “0” in licensing/ERLC applies), then the figure for ERED and ERQT are automatically set at “0”, even if some specific education is obligatory in one or more existing certification (but not licensing !) structures. The construction of the conduct regulation index is somewhat more complicated, as more categories have to be considered. For the conduct index our weighting and coding is as follows: 32 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conduct Regulation Index Category/Variables Coding Scale CR Conduct Regulation (general) MCPR*0.25+ MCAD*0.15+ MCLOC*0.15+ MCDIV*0.20+ MCIC*0.25 0 to 6 MCPR Regulations on prices and fees 0 = no regulations 1 = non binding reference prices on some services 2 = non binding reference prices on all services 3 = maximum prices on some services 4 = maximum prices on all services 5 = minimum prices on some services 6 = minimum prices on all services 0 to 6 25% MCAD Regulations on advertising 0 = no spec. regulations 2 = some forms forbidden (like comparative price advertising, direct mailing etc.) 4 = most forms are forbidden (advertising only in very narrow margins allowed) 6 = all forms of advertising are forbidden 0 to 6 15% MCLOC Regulations on location 0 = location not restricted 6 = location restricted 0 to 6 15% MCDIV Regulations on diversification 0 = no specific regulations 3 = diversification under specific preconditions allowed (branch office head is a professional, maximum number of branch offices etc.) 6 = diversification not allowed in any case 0 to 6 20% MCIC Regulations on form of business and interprofessional co-operation (general) MCIC1 Regulations on form of business MCIC1*0.5+ MCIC2*0.5 0 to 6 25% MCIC1 MCIC2 0 = all forms (incl. incorporation allowed in any case) 2 = partnership allowed, incorporation only allowed in specific cases (regulations on ownership etc.) 5 = incorporation forbidden in any case 6 = partnership and incorporation forbidden in any case; only sole practitioners etc. allowed. MCIC2 Regulations on 0 = all forms allowed 3= with all professions but no incorporation; or only interprofessional co-operation with comparable professions in all forms allowed etc. 4.5 = only with comparable professions and no incorporation 6=generally forbidden Weight -ing 1 0 to 6 50% 0 to 6 50% Regulations on prices and fees (MCPR) and regulations on forms of business and interprofessional co-operation (MCIC) have been given the highest weightings (25% each). It is evident that the model of price setting has direct effects on the relevant market outcomes. The highest weighting coded here has been given to minimum prices: Whereas maximum prices and even reference prices also have some impacts on competition, the direct effects of minimum prices are the strongest. Weight -ing 2 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 33 The question of business form and inter-professional co-operation is very important in respect of potential investment coming from other economic sectors as well as productinnovation and business efficiency generally. The same is true in respect of rules concerning diversification (possibilities to open branch offices) (MCDIV). This category has been weighted 20%. Other categories are regulations on location (15%) and regulations on advertising (15%). Our overall index is constructed from the sum of the market entry and the conduct regulation indices. These indices provide a summary measure that quantifies the most important market restrictions that can be identified from available information sources. One pitfall to be avoided in constructing an index is that a higher score may simply reflect a greater availability of information rather than a more regulated regime - c.f. Nguyen-Hong (2000). For this reason, we construct a regulation index only for professions/countries where enough information of a rather good quality was available at the time of writing. Again, we have to stress that indices such as our regulation indices are not objective rational-scale measures. However, they are objective measures conditional upon the prior subjective definition of a higher or lower degree of regulation (as implemented by the choice and weighting of relevant categories of regulation). Isolated changes in the choice of relevant categories of regulation as well as coding and weighting would lead ceteris paribus to some changes in the regulation indices. Nevertheless, it is certain that no cases of countries/professions originally classed as having a high degree of regulation being classed as countries with a low degree of regulation (or vice versa) would arise after the adoption of an isolated reweighting. That is to say, the constructed indices are not highly sensitive to small changes in coding or weighting. 3.1. Accountancy Services 3.1.1. Organisation and market entry regulation The following three tables (Table 3-1, Table 3-2 and Table 3-3) give an overview of actual organisational models of market entry regulations in accountancy services7. We can see from this that there exists a licensing-model in all EU member states – and, in fact – there has to be a licensing-model in all member states according to respective directives of the European Union, which codify some minimum requirements for international statutory audits (and the professionals engaged in these activities). But the member states have a considerable degree of freedom as to how to organise the respective licensing 7 The term ‘accountancy services’ is always used in the wide sense, to include not only accountants, but also auditors, and (sometimes) tax advisors. 34 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S arrangements. We can see this in Table 3-1 regarding the basic organisational model and the question whether membership in a professional body is compulsory or not. It is obvious, that when compulsory membership in a professional body is required, these body/bodies as a matter of course is/are regularly involved in the formulation and implementation of regulation as well as in the decision of disciplinary sanctions. A mandatory membership for auditors in a respective professional body exists in: Austria, Belgium, Denmark, France, Germany, Italy, Portugal, United Kingdom, Luxembourg and Ireland. In the United Kingdom and Ireland membership is compulsory only in those cases where Chartered or Certified Accountants want to work as a Registered Auditor (and for this purpose need to be licensed to do statutory audits). No compulsory membership in a professional body is found in: Finland, Spain and Sweden. Table 3-2 shows the qualification requirements to get an accountant and/or auditor in the different Member States. U stands for “University Degree”, “HE” for “higher education”. In the case of the United Kingdom “Ch A” stands for “Chartered Accountant”, “Ce A” for “Certified Accountant”. If the information concerning University/higher education degree is set in brackets, this signals that a University degree is not a binding pre-condition to enter the profession and may be replaced e.g. by long practise times or specific non-university courses. In most countries to acquire the right for statutory audit a university or other higher degree is a precondition, but in some countries other, alternative “entrance roads” to the respective profession exist (as in Germany, the UK or Ireland). In all countries there are one or more special professional entry exams for auditors. As already mentioned above, statutory audit is an exclusive right of one or more professional groups in all Member States of the European Union. Even more interesting is a second question on the exclusive rights other than that for statutory audit (Table 3-3). Here we can see that the market entry regulations for financial services are rather heterogeneous from an internationally comparative point of view. The respective categories of tasks given in Table 33 are taken from OECD (1996)8. “XX” means that the relevant task is reserved to the relevant profession or that it is reserved to the relevant profession and other licensed professions. We do not distinguish between these two cases because the question of “shared exclusive tasks” is a very complicated one and a major potential source of error. It became evident during our research that in many cases not even the professional association has exact knowledge on this point. If an “X” is set in brackets here, this means that the relevant regulations apply under specific circumstances only. Overall, the exclusive rights of accountants are much wider in Austria, Belgium, France, Germany, and Luxembourg than they are in the other EU-member states. This is mainly because of the fact that not only statutory audit falls under exclusive rights in these countries 8 All the information given is revised and updated according to our own sources. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 35 but also services like non-statutory audits, accounting and bookkeeping (Austria, Belgium) as well as tax advice and tax representation (Austria, France, Germany), which are exclusive rights of the respective (and other) professions. According to this some of the professions listed in Table 3-1 are, if the respective title is protected at all, primarily of certifying character only (as for example the Administrateurs in the Netherlands or the Management Accountants in the UK). 36 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-1 Accountancy Services: General Country Profession Access to profession: level of regulation nat. Austria subnat. gov. Implementation of regulation by Disciplinary sanctions decided by self-reg gov. self-reg. gov. self-reg. Membership in a prof. assoc. compulsory? X X X X Y n.a. Beeideter Wirtschaftsprüfer X X X Beeideter Steuerberater X X X Belgium Chartered Accountant X X ? n.a. n.a. n.a. Denmark State Authorised Public Accountant X X X X X X Registered Public Accountant X X X X N Finland KHT X X n.a. n.a. n.a. n.a. N HTM X X n.a. n.a. n.a. n.a. N Expert Comptable (Chartered Accountant) X X ? n.a. n.a. n.a. n.a. Y n.a. France Germany ? commissaire aux comptes (Statutory Auditor) X X ? Wirtschaftsprüfer (Business Controler) X X X Vereidigter Buchprüfer (Sworn Auditor) X X X Steuerberater (Tax Adviser) X X X Y X X Y N n.a. n.a. n.a. Y X X X Y X X X Y X X X Y Greece Orkoton Elekton (Certified Public Accountant) X X X X X X X Y Italy Dottore Commercialista (Certified Public Accountant) X X X X X X X Y Regioniere Peritp Commerciale (Accountant) X X X X X X X Y Netherlands Register Accountant (Public Accountant) X X X n.a. n.a. n.a. n.a. Y Accountant Administrative Consultant (Public Accountant) X X X n.a. n.a. n.a. n.a. Y Administrateur (Bokkkeeper) n.a. n.a. n.a. n.a. N Belasting-advusir (Tax adviser) n.a. n.a. n.a. n.a. N n.a. n.a. n.a. Y X X N N Portugal Statutory Auditor X X n.a. Spain Audotires da cueantas (Accounting Auditor) X X X Sweden Auktorisened revisor (Authorised Public Accountant) X X n.a. n.a. n.a. n.a. Godkänd revisor (Approved Public Accountant) X X n.a. n.a. n.a. n.a. N n.a. n.a. n.a. n.a. N Revisor (Accountant) United Kingdom Chartered Accountant Certified Accountant Registered Auditor X X X X X X X (Y) X X X X X X (Y) X X X X X Y X n.a n.a. n.a. n.a. N X X N X Y Public Finance Accountant Management Accountant Luxembourg Ireland X X X X Insolvency Practitioner X X X X X Expert Comptable (Tax adviser) X X Réviseur d`Enterprises X X X X X X X Y Chartered Accountant X X X n.a. n.a. n.a. n.a. (Y) Certified Accountant X X X n.a. n.a. n.a. n.a. (Y) n.a. n.a. n.a. n.a. N Tax Consultant/Tax Practitioner N I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 37 Table 3-2 Accountants: Qualification Requirements Country Profession Practise (years) Professional exam Beeideter Wirtschaftsprüfer University/Higher education degree (years) U4 5 Y (2) Number of “entrance roads” to profession 2 Austria Beeideter Steuerberater U4 3 Y (1) 2 Belgium Reviseur dÉnterprise U4 3 Y (2) n.a. Denmark State Authorised Public Accountant U5 3 Y (2) 1 Registered Public Accountant U4 2 N 1 KHT Approved Auditor U 4-5 3 Y (1) 2 HTM Approved Auditor U3 3 Y (1) 2 Expert Comptable (Chartered Accountant) U7 3 Y (1) 1 Finland France Germany commissaire aux comptes (Statutory Auditor) U7 3 Y (1) 1 Wirtschaftsprüfer (Business Controler) (U 4) min. 3 Y (1) 3 Vereidigter Buchprüfer (Sworn Auditor) (U 4) min. 5 Y (1) 2 Steuerberater (Tax Adviser) (U4) min. 3 Y (1) 3 Greece Orkoton Elekton (Certified Public Accountant) U4 8 Y (1) (?) 1 Italy Dottore Commercialista (Certified Public Accountant) U4 3 Y (3) 1 Regioniere Peritp Commerciale (Accountant) Umin3 3 Y (1) 1 Netherlands Register Accountant (Public Accountant) U 4+3 3 Y (1) 1 Accountant Administrative Consultant (Public Accountant) HE +6 2 Y (2) 2 Administrateur (Bokkkeeper) (U4) 0 N 2 Belasting-advusir (Tax adviser) (U4) 0 N 2 Portugal Statutory Auditor U5 3 Y (1) 1 Spain Audotires da cueantas (Accounting Auditor) U3 3 or 8 (no U) Y (2) 2 Sweden Auktorisened revisor (Authorised Public Accountant) U4 5 Y (1) 1 Godkänd revisor (Approved Public Accountant) U3 3 Y (1) 1 Revisor (Accountant) U3–4 0 N 1 (U 3 - 4) 3 or 4 Y (2) 3 Certified Accountant (U 3 - 4) 3 Y (1-3) 4 Registered Auditor Cha A/Ce A CH A+2/Ce A+2 N (but Cha A/Ce A) 7 Y Y 3 Y (1: 3 parts) 1 CH A+3/Ce A+3 Y (1 Special) several United Kingdom Chartered Accountant Public Finance Accountant Management Accountant Luxembourg Ireland Insolvency Practitioner (U 3- 4) Expert Comptable (Tax adviser) U (3) 3 N 1 Réviseur d`Enterprises U (4), HE 3 or more (HE) Y (2) 2 Chartered Accountant U (3-4), others 3,5 (with U.) Y (min 2) + 2 (RA) 4 Certified Accountant U (3-4), others 3 Y (1-3) + 2 (RA) 4 Tax Consultant/Tax Practitioner HE, several 0 Y (3 parts) several 38 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-3 Accountancy Services: Scope of Activities XX = Exercise reserved; X= Activity exercised, but not reserved Country Profession Statutory audit Austria Beeideter Wirtschaftsprüfer XX Beeideter Steuerberater Nonstatutory audit Public Audit of sector mergers audit and contributio ns in kind X XX XX X Accounting Insolvency Tax advice Tax practise represenandtation bookkeepin g XX X XX Management consultancy Investment advice Legal advice and representation Expert witness in accounting XX XX X X XX X XX XX X X XX X X XX Belgium Reviseur d’Èntreprise XX XX XX XX XX X X X X X Denmark State Authorised Public Accountant XX X X X X X X X X X Registered Public Accountant XX X X X X X X X X X Finland KHT XX X XX X X X X HTM XX X XX X France Expert Comptable (Chartered Accountant) X XX Germany X XX Commissaire aux comptes (Statutory Auditor) XX XX XX Wirtschaftsprüfer (Business Controler) XX X XX XX Vereidigter Buchprüfer (Sworn Auditor) XX X XX Steuerberater (Tax Adviser) X X X X X XX XX X X XX X X X X XX XX X X XX XX X X XX XX X X XX XX X X XX XX X X XX XX X X X X X Greece Orkoton Elekton (Certified Public Accountant) XX X XX Italy Dottore Commercialista (Certified Public Accountant) XX X X XX X X X XX X Regioniere Peritp Commerciale (Accountant) XX X X XX X X X XX X Register Accountant (Public Accountant) XX X XX XX X X X X X Accountant Administrative Consultant (Public Accountant) XX X XX XX X X X X X X X X X Netherlands Administrateur (Bokkkeeper) Belasting-advusir (Tax adviser) Portugal Statutory Auditor XX X XX Spain Audotires da cueantas (Accounting Auditor) X XX X Sweden X X X X X X XX (?) X X X X X X X X Auktorisened revisor (Authorised Public Accountant) XX X XX X X X X X X Godkänd revisor (Approved Public Accountant) XX X XX X X X X X X Revisor (Accountant) X X X X X X X X United Chartered Accountant X X X X X X X X Kingdom Certified Accountant X X X X X X X X X X X X X X X X X X X X Registered Auditor XX Management Accountant X XX X X Insolvency Practitioner Luxembourg Ireland XX Expert Comptable (Tax adviser) X X(X) X X X(X) X XX X? XX X? Réviseur d`Enterprises XX X XX X? X(X) X X X(X) X Chartered Accountant XX X XX X X X X X X X X X Certified Accountant XX X XX X X X X X X X X X X X X X Tax Consultant/Taxation Practitioner X I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 39 3.1.2 Conduct regulation As already mentioned above, in addition to market entry regulations the second important group of regulations is that of conduct regulations. Relevant fields (from left to right on Table 3-4) are price-setting, advertising, regulation on location, regulation on diversification, the question whether incorporation is generally forbidden, the rules concerning inter-professional co-operation, the question whether professional indemnity insurance is compulsory and whether there is an obligation for continuing education. Concerning prices, we distinguish between minimum, maximum and non-binding reference prices. If a “Y” is set in brackets here, this means that the regulation only applies to some kinds of services or other specific pre-condition. Similarly, this applies to the question of advertising: brackets symbolise that only very few kinds of advertising are not allowed, or only very basic regulation exists in cases where, according to our table, “some kinds” of services are forbidden. In the other fields brackets mean that the respective regulation applies in a specific form that would need further description. In reply to the answer whether “inter-professional co-operation is forbidden” in our table four answers are possible: - “any”: this is quite clear: any form of inter-professional co-operation in a joint firm is forbidden. - “incorp. gen”: it is generally forbidden to practise inter-professional co-operation in from of a corporate entity (joint stock-company). - “with non lib. prof”: any form of inter-professional co-operation is allowed, but the respective partners must be members of a comparable profession (in this case e. g. lawyers etc.). - “incorp with non lib prof.”: any form of inter-professional co-operation is allowed, but if the firm is a corporate entity (joint-stock company), the respective partners must be members of a comparable profession (in this case e. g. lawyers etc.). - Brackets in most cases indicate that there are specific rules on ownership etc., e. g. that members of the profession have to hold 51% of the shares or that other specific circumstances apply etc. The trends in liberalisation, that have taken place for accountants in Europe in respect of conduct regulation in the last ten years led to a situation whereby there are only very few countries now with very rigid price regulation (Germany for tax advisers, Greece, Italy and Portugal). In most countries only some forms of advertising are forbidden today. Germany, Spain and arguably France and Belgium still show high regulation in this field. There are no regulations on location (regulations on offering services only in a restricted geographic area) and only in Denmark and in Germany (again for tax advisers) specific regulations on diversification are in place. Italy appears to be the only country where incorporation de facto 40 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S still is not possible (see case study in chapter 3 of this report), whereas the situation concerning inter-professional co-operation is more heterogeneous. The same is true as regards the existence of compulsory indemnity insurance and the obligation for continuing education. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 41 Table 3-4 Country Accountancy Services: Conduct Profession Regulation of prices min. price Austria Advertising forbidden? Max. price reference All price most some Reg. on location Reg. on diversification Incorp. forbidden Interprof. co-operation forbidden? any incorp. gen. with non incorp. lib. prof. w. non lib. prof. Comp. indemn. insurance? Comp. cont. education? Beeideter Wirtschaftsprüfer N N Y N N? Y N (N) N N N Y Y Y Y Beeideter Steuerberater N N Y N N? Y N (N) N N N Y Y Y Y Belgium Chartered Accountant, reviseur d‘ enterprises N N N N? Y? Y? N? N? N? N Y? Y Y Y? Y Denmark State Authorised Public Accountant N N (N) N N N N (Y) N N N N N Y N N Finland France Germany Registered Public Accountant N N N N N N N N N N N N N N KHT N N N N N Y? N? N? N N (N) N (N) Y Y HTM N N N N N Y? N? N? N N (N) N (N) Y Y N Expert Comptable (Chartered Accountant) N N (N) N Y? Y N? (N)? (N) N (N) (N) (N) Y Commissaire aux comptes (Statutory Auditor) N N (Y) N Y? Y N? (N)? (N) N (N) (N) (N) Y N Wirtschaftsprüfer (Business Controler) (N) (N) (N) N Y Y N N N N (N) N Y Y Y Vereidigter Buchprüfer (Sworn Auditor) (N) (N) (N) N Y Y N N N N (N) N Y Y Y Steuerberater (Tax Adviser) Y Y N N N Y N (Y) N N N N Y Y Y N Greece Orkoton Elekton (Certified Public Accountant) (Y) N N N N N N N N N N N Y N Italy Dottore Commercialista (Certified Public Accountant) N N Y N N Y N N Y N Y Y N Y Regioniere Peritp Commerciale (Accountant) N N Y N N Y N N Y N Y Y N Netherlands Register Accountant (Public Accountant) N N (Y) N N (Y) N N N N (N) N Y N Y Accountant Administrative Consultant (Public Accountant) N N (Y) N N (Y) N N N N (N) N Y N Y Administrateur (Bokkkeeper) N N (Y) N N N N N N N N N N n.a. Y Belasting-adviseur (Tax adviser) N N (Y) N N N N N N N N Y Y n.a. Y Portugal Statutory Auditor; Revisor Oficiais de Contas (Y) (Y) (N) n.a. n.a. n.a. n.a. n.a. n.a n.a. n.a. n.a. n.a. n.a. n.a. Spain Audotires da cueantas (Accounting Auditor) N N Y N Y Y N N N N? (N)? N? (N)? Y (Y) Sweden Auktorisened revisor (Authorised Public Accountant) N N N N N N? N N N N (N) N (N) Y Y Godkänd revisor (Approved Public Accountant) N N N N N N? N N N N (N) N (N) Y Y Chartered Accountant N N (Y) N N (Y) N N N N N N N Y (Y) Y United Kingdom Certified Accountant N N (Y) N N (Y) N N N N N N N Y Registered Auditor N N Y N N (Y) N N N N N N N Y Y Management Accountant N N N N N (Y) N N N N N N N Y N Y Insolvency Practitioner N N N N N (Y) N N N N N N (Y) Y Luxembourg Expert Comptable (Tax adviser) N N N N Y? Y? N N N N N N (Y) n.a. n.a. Réviseur d`Enterprises N N N N Y? Y? N N N N N N N N N Ireland Chartered Accountant/Certified Accountant/RA N N N N N (Y) N N N N N N N Y Y Tax Consultant / Taxation Practitioner N N N N N N? N N N N N N N N? N? 42 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The information presented above only gives a brief overview over the regulatory situation for the profession of accountants in respect of market entry and conduct. Overall, it appears very hard to estimate in which country regulation is higher or lower. 3.1.3 Regulation Indices The table below summarises the market-entry, conduct and overall regulation index for accounting services in the Member States of the European Union. Accountants (Auditors): IHS regulation indices Market Entry Conduct Total Rank Belgium 3.9 2.4 6.3 1 Austria 4.2 2.0 6.2 2 Germany 3.6 2.5 6.1 3 France 4.0 1.8 5.8 4 Greece 3.6 1.5 5.1 5 Italy 3.2 1.9 5.1 5 Luxembourg 3.8 1.2 5.0 6 Netherlands 3.1 1.4 4.5 7 Finland 2.6 0.9 3.5 8 Spain 1.9 1.5 3.4 9 Sweden 2.4 0.9 3.3 10 Ireland 2.7 0.3 3.0 11 UK 2.7 0.3 3.0 11 Denmark 2.2 0.6 2.8 12 Portugal 2.7 n.a. n.a. n.a. A very or at least rather high level of market entry regulation for accountants and auditors can be found in Austria, Belgium, France, Luxembourg, Germany and Greece. This fits exactly with our colour-coding in Tables 3-1 to 3-3. On the low end we find Denmark, Sweden and Spain. In respect of conduct we find again the high figures in Austria, Belgium and Germany and this time as well in Italy (whereas the entry regulation for Italy is of medium level). The figures for conduct regulation are lowest for UK, Ireland, Denmark and Sweden. Overall Belgium appears to be the most regulated country in respect of accountants, closely followed by Austria, Germany and France. England & Wales, Ireland, Denmark and Sweden are the least regulated. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 43 3.2. Legal Services Lawyers The main professions in legal services are lawyers and notaries. The following chapter at first deals with lawyers only as we only included this profession in our regulation index for legal professions. The reason for this is that it is in fact impossible to weigh the importance of regulations for notaries versus those for lawyers, whereas at the same time there are several countries in the European Community where the profession of a notary in form of the socalled “latin notary” is not existent. At the same time the market-share of the notaries (where they exist) is likely to be rather small compared to the lawyers. For this reason we can neglect the regulation in the field of notaries here: for our further analysis see chapter 4. 3.2.1 Organisation and market entry regulation Concerning market entry, even more differentiation than in the field of accountancy services can be observed in the field of legal services (lawyers). But the same does not occur in respect of organisation. In nearly all countries membership in a professional organisation is compulsory. However, in not all countries is such membership obligatory in respect to reserved tasks, but regarding the protection of a specific title only. The most liberal regimes in this regard exist in Finland and Sweden (see Table 3-7 below). Lawyers or advocates do not have any (Finland), or only very narrow (Sweden), exclusive rights for offering services in these countries. Thus (nearly) anyone is allowed to give legal advice or even undertake legal representation of clients before courts. In countries coloured dark grey legal representation only is the exclusive right of specific professions, but not legal advice. In the countries coloured black legal representation and legal advice (and sometimes other additional tasks) may only be offered by one or more specific professions. The most regulated in this case are again Austria, France and Germany but – in contrast with the situation regarding accounting services – also Portugal and Spain. In the median position are Belgium, Denmark, Italy, the Netherlands and the United Kingdom. The respective categories of tasks given in Table 3-7 are taken from OECD (1996)9. “XX” means that the relevant task is reserved to the relevant profession or that it is reserved to the relevant profession and other licensed professions. We do not distinguish between these two cases because the question of “shared exclusive tasks” is a very complicated one and a major potential source of error. It became evident during our research that in many cases not even the professional association has exact knowledge on this point. If an “X” is set in brackets here, this means that the relevant regulations apply under specific circumstances only. 9 All the information given in this table is revised and updated according to our own sources. 44 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In respect to education (see Table 3-6 below) in most countries there exists only one “entry road” to the profession, whereby very often a university degree in law is a main precondition to become a lawyer/advocate. Additionally most countries require one or more professional exams and some time of professional practice. However, considerable differences occur in this respect: the spectrum in fact is very broad. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 45 Table 3-5 Country Legal Services (Lawyers): General Profession Level of regulation nat. Subnat. gov. self-reg Implementation of Regulation by Disciplinary sanctions decided by Gov. self-reg. gov. self-reg. Membership in prof. assoc. compulsory? X X Y Austria Rechtsanwalt (Lawyer) X X X X X Belgium Adcocaat (Advocate) X X X X X X Y Denmark Advokat (Attorney at Law) X X X X X X Y Finland Advocate X X X X X Y (only for title) Lawyer X X France Avocat X X X n.a. n.a. n.a. n.a. Y Germany Rechtsanwalt (Attorney at law) X X X X X X X Y Greece Dikigoros (Advocate) X X X X Y Italy Accoccato (Lawyer) X X X n.a. n.a. n.a. n.a. Y Ireland Barrister X X X X X X X Y Solicitor X X X X X X Luxembourg Acocat (Advocate) X X X Netherlands Advocaat (Agttorney at Law) X X X Portugal Advogado X X Spain Abogado X X X X N X X X N X Y X X X n.a. n.a. n.a. n.a. Y Y n.a. n.a. n.a. n.a. Y. Precurador X X X n.a. n.a. n.a. n.a. Y Sweden Advokat (Advcate/avocat) X X X X X X X Y (only for title) United Kingdom (Engl.&Wales) Solicitor X X X X X Barrister X X X X X X N X Y 46 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-6 Legal Services (Lawyers): Qualification Requirements Country Profession University/higher Practise (years) education degree (years) Professional exam Number of „entrance roads“ to profession Austria Rechtsanwalt (Lawyer) U4 5 Y (1) 1 Belgium Adcocaat (Advocate) U5 3 N 1 Denmark Advokat (Attorney at Law) U5 3 Y (1) 1 Finland Advocate U5 4 Y (1) 1 Lawyer U5 0 N 1 France Avocat U5 2 Y (2) n.a. Germany Rechtsanwalt (Attorney at law) U 3,5 2 Y (2) 1 Greece Dikigoros (Advocate) U4 1.5 Y (1) 1 Italy Accoccato (Lawyer) U4 2+1 Y (1) 1 Ireland Barrister U or HE + course 2 1 Y (2) 2 Solicitor U or HE + course 2 2 Y (2) 3 Luxembourg Acocat (Advocate) U 4 + course 2 Y (2) 1 Netherlands Advocaat (Agttorney at Law) U5 3 Y (1+) 1 Portugal Advogado U4 1.5 Y (1) 1 Spain Abogado U5 N Y (1) 1 Sweden United Kingdom (Engl.+Wales) Precurador U5 N Y (1) 1 Advokat (advcate/avocat) U 4,5 5 Y (2004) 1 Jurist U 4,5 N N 1 Solicitor U 3-4 2 see case study 3 Barrister U 3-4 1 see case study 2 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 47 Table 3-7 Legal Services (Lawyers): Scope of Activities XX = Exercise reserved; X= Activity exercised, but not reserved Country Profession Advice domestic Advice Advice foreign law international law law Conveayancing Represen-tation of title to real before courts estate, wills and regulation of familiy matters such as marriage contracts Representation before adminsitrative agencies (incl. tax matters) Tax advice Insolvency practise Managenment consulting etc. X Advice and repr. patent law Austria Rechtsanwalt (Lawyer) XX XX XX X XX XX XX X Belgium Adcocaat /Advicate) X X X - XX X X X X XX Denmark Advokat (Attorney at Law) XX XX XX XX XX X X XX X XX Finland Advocate X X X X X X X X X X Lawyer X X X X X X X X X X France Avocat XX XX XX - XX X X XX - XX Germany Rechtsanwalt (Attorney at law) XX XX XX - XX XX XX X(X) - XX Greece Dikigoros (Adcocate) XX XX XX ? ? ? Italy Accoccato (Lawyer) X X X Ireland Barrister Solicitor X X Luxembourg Acocat (Advocate) XX XX Netherlands Advocaat (Agttorney at Law) X Portugal Advogado XX Spain Abogado XX XX XX ? ? ? XX X X X XX XX XX X X X X X XX ? XX ? ? ? ? ? X X ? XX X X X X X XX XX XX X X X X - XX XX X XX X Precurador XX X XX X XX XX XX Sweden Advokat (Advcate/avocat) X X X X X (X) X X X X X United Kingdom Solicitor X X X XX XX X X XX X XX (Engl.+Wales) Barrister X X X XX XX X X XX 48 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.2.2 Conduct regulation Table 3-8 presents an overview on conduct regulation for lawyers10. Minimum prices apply in Italy, Greece, Germany and Austria, but for the latter two this is only true for specific services (see case study in Germany). In several countries reference prices exist. About half of all countries show rather rigid regulation in respect of advertising. Specific regulations on location (restrictions in offering services from a geographical point of view) are only imposed in the Netherlands, Greece and France. Lawyers in Luxembourg, Greece, Belgium and Germany are not allowed to open branch offices, and lawyers in France and Austria may do so only after fulfilling specific preconditions. Incorporation is forbidden in several countries: this is true for Greece, Italy, Ireland, Germany, Belgium, Portugal, Spain as well as England & Wales (Barristers only). Additionally in several countries registered lawyers are not allowed to work together with other professions in a joint firm. In many cases they may not incorporate with members of other professions. Overall – for example compared with technical professions (see below) – conduct regulation for lawyers in many countries appear to be very rigid. However, at the same time in many countries some liberalisation occurred in the last ten years – especially concerning prices and advertising. Only few countries like Denmark, Finland, Sweden – but now also England & Wales (solicitors only) show rather low degrees of conduct regulation. In this context it is worth mentioning that it is especially the professional organisations of the lawyers, that oppose more liberal regulations concerning form of business and especially in respect to inter-professional co-operation (see case studies in chapter 3). 10 For further explanations of acronyms, etc., used in the table please refer to section 3.1.2. above. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 49 Table 3-8 Legal Services (Lawyers): Conduct Country Profession Regulation of prices Reg. on location Advertising forbidden? Reg. on diversification Incorp. for- Interprof. co-operation forbidden? bidden? any incorp. gen. Comp. cont. education? Austria Rechtsanwalt (Lawyer) (Y) N Y N Y Y N (Y) N Y Y Y incorp. w. non lib. prof. Y Y Belgium Adcocaat /Advicate) N N N N N Y N Y Y N Y N Y Denmark Advokat (Attorney at Law) N N (Y)? N N Y N N N Y Y Y Y Y N Finland Advocate N N N N N Y N N N N N N N Y Y France Avocat N N N N Y Y Y (Y) N N Y N Y n.a. n.a. Germany Rechtsanwalt (Attorney at law) (Y) N N N N Y N Y N N N Y Y Y Y Greece Dikigoros (Adcocate) Y N N Y Y Y Y Y Y Y Y Y Y N Y Italy Accoccato (Lawyer) Y Y N N Y Y N N? Y Y? N? Y Y Y? N Ireland Barrister N N N Y Y Y N N Y Y Y Y Y n.a. n.a. Solicitor N N N N Y Y N N Y Y Y Y Y Y Y min. price Max. price Reference All price Most Some with non lib. prof. Comp. indemn. insurance? Y Y Y Luxembourg Avocat (Advocate) N N N N (Y) Y N Y N Y Y Y Y Y Y Netherlands Advocaat (Agttorney at Law) N N N N N Y Y N N N N Y Y Y Y Portugal Advogado N N Y Y Y Y N N Y N? Y Y Y n.a. n.a. Spain Abogado N N Y N Y Y N N Y N Y? Y? Y? n.a. n.a. Precurador N N Y N Y Y N N Y N Y? Y? Y? n.a. n.a. Sweden Advokat (Advcate/avocat) N N (Y) N N (Y) N N N N Y N Y Y N United Kingdom (Engl.+Wales) Solicitor N N N N N Y N N N N? Y N Y Y Y Barrister N N N N N Y N N Y Y Y Y Y Y Y 50 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.2.3 Regulation Indices The table below summarises the market-entry, conduct and overall regulation index for lawyers in the Member States of the European Union. A very high entry index applies for Austria, France, Luxembourg, Germany, Greece, Portugal und Spain. England & Wales (calculated by ((Barristers+Solicitors)/2), Italy, Belgium, the Netherlands and also Ireland are in the medium field. Of comparatively low level is market entry regulation for lawyers in Sweden and Denmark. No specific entry-regulation exists according to our definition in Finland. This exactly fits our colour-coding above. In respect of conduct the most broad and rigid regulations are found in Greece, followed by Italy, Austria, Spain, Luxembourg, Germany and France. The least restrictive regulation models in respect of conduct exist in Finland, Sweden and Denmark. These are at the same time countries with rather low entry requirements. Only a little bit higher than for these countries is the conduct index for England & Wales (again the figure is given for ((Barristers+Solicitors)/2). Belgium, Ireland, the Netherlands and Portugal are positioned in the medium field. Legal Services (Lawyers): IHS regulation indices Entry Conduct Total Greece 3.5 6.0 9.5 Rank 1 Austria 4.1 3.3 7.3 2 France 3.9 2.7 6.6 3 Luxemburg 3.8 2.8 6.6 3 Germany 3.7 2.8 6.5 4 Spain 3.4 3.1 6.5 4 Italy 2.6 3.9 6.4 5 Portugal 3.5 2.2 5.7 6 7 Belgium 2.5 2.1 4.6 Ireland 2.4 2.1 4.5 8 England&Wales 2.9 1.2 4.0 9 Netherlands 2.1 1.8 3.9 10 Denmark 2.1 0.9 3.0 11 Sweden 2.0 0.4 2.4 12 Finland 0.0 0.3 0.3 13 The overall index is by far the highest for Greece. Then follow Austria, France, Germany, Spain and Italy. Finland, Sweden and Denmark show the lowest overall indices. Also the Netherlands, England & Wales and Ireland have overall regulation indices below the medium level. Overall regulation in Portugal lies in the middle. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 51 Notaries The Notary profession is often analysed together with other liberal professions or professional services. However, they appear to represent a special case in certain countries as they fulfil – at least from their own point of few – a kind of public task or duty. This is an important and widely discussed question and which deserves some attention. What we can see from the following tables is that there are some countries in the EU where the profession of notaries in the sense of the so-called “latin notary” does not exist. The important difference between latin notaries and other professional descriptions of notary (e.g.” Notary Public” or “Scriveners”), is that the notarial deeds of the former are endowed (e.g. in the case of litigation) with the characteristic of representing special evidence guaranteed by public law. No ‘latin’ notary exists in England/Wales, Scotland, Northern Ireland, Ireland and the Scandinavian countries. This means that documents issued or authenticated by a notary do not have a special status before courts and other state offices there. 3.2.4 Organisation and market entry regulation In countries where there is a Latin notary, the market entry regulations are always without exception relatively rigid. First, notaries have to fulfil extensive qualification requirements in those countries. A university degree in law is a mandatory precondition to enter the profession. Additionally, in most countries some professional practising is required. Further, special professional exams exist. From an internationally comparative point of view there is some differentiation in the education requirements, but what is even more important is the fact that in all countries with a Latin notary (due to recent liberalisation, with exception of the Netherlands11) the number of notaries or of notaries’ branch offices is structurally limited (via more or less objective economic needs tests etc.). The main tasks fulfilled by notaries are the following: The notary draws up public and private documents, as well certificates and wills. At the same time notaries also give general legal advice and in some countries may represent clients before administrative agencies or even before courts. In all countries regulations exists a question concerning the cases for which the consultation of a notary is mandatory and there appears to be a wide variety of more or less inclusive regulations in this point. Whereas, for example, in Italy even the buying of a used car has to be certified by a notary, the regulations in Austria are less restrictive. Here notarial form is required for more sensitive areas, such as for marriage contracts, donations, all legal transactions undertaken by blind, deaf or illiterate persons, medical artificial reproduction and for some cases in company law. 11 See http://www.notaris.nl/knb/dutchnotaris/index.html, 52 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-9 Notary Services: General Profession Level of regulation gov. self-reg gov. self-reg. gov. self-reg. Austria Notar (Notary) X X X X X X X Y Y Belgium Notaire (Notary) X X X X X X N Y Denmark no Notaries in form of liberal profession X X X X Y Y Y (Y) nat. subnat. Implementation of regulation by Finland no Notaries in form of liberal profession France Notaire (Notary) X X Germany Notar (Notary) X X Italy Notario X X Netherlands Notary X X Portugal Notario (Notary Public) X Spain Notario (Notary Public) X Sweden No Notaries in form of liberal profession England/Wales No Notaries in form of liberal profession X X Disciplinary sanctions decided by Number Membership in prof. restrict-ed? assoc. compulsory? Country X X X X X Y X X X X Y Y (N) X X? n.a. n.a. n.a. n.a. Y Y X X X X X X Y Y Greece Notary X X X? n.a. n.a. n.a. n.a. Y Y Luxemburg Notaire X X X n.a. n.a. n.a. n.a. Y Y Ireland No Notaries in form of liberal profession I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 53 Table 3-10 Notaries: Qualification Requirements Country Profession University/higher education degree (years) Practise (years) Professional Exam Number of „entrance roads“ to Profession Austria Notar (Notary) U4 7 Y (1) 1 Belgium Notaire (Notary) U 5+1 3 Y (1) 1 2 Denmark no Notaries in form of liberal profession Finland no Notaries in form of liberal profession France Notaire (Notary) U 4 + 3 (course) 2 to 3 Y (2) Germany Notar (Notary) U 3.5 5 to 7 (Y (2)) (Staatsexamen) 2 Italy Notario U4 2 Y (1) 1 Netherlands Notary U4 6 Y (1) 1 Portugal Notario (Notary Public) U5 1 N 1? Spain Notario (Notary Public) U5 0 Y (1) 1 Sweden No Notaries in form of liberal profession England/Wales No Notaries in form of liberal profession Greece Notary U4 3.5 Y (2) 1 Luxemburg Notaire U (4-5) 3 Y (1) 2 parts 1? Ireland No Notaries in form of liberal profession 54 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-11 Notaries: Scope of Activities XX = Exercise reserved; X= activity exercised, but not reserved Country Profession Austria Notar (Notary) XX Belgium Notaire (Notary) X Denmark no Notaries in form of liberal profession Finland no Notaries in form of liberal profession Advice domestic law Advice foreign law Conveayancing of Notarial deeds title to real estate, wills and regulation of familiy matters such as mar-riage contracts Represen-tationn before courts Tax advice Representation before adminsitrative agencies (incl. tax matters) XX XX XX XX X(X) XX X X XX XX Advice international law France Notaire (Notary) XX XX XX XX XX Germany Notar (Notary) XX XX XX XX XX Italy Notario XX XX XX XX XX XX XX XX XX X Netherlands Notary X X X XX XX XX Portugal Notario (Notary Public) XX XX XX XX XX n.a n.a n.a Spain Notario (Notary Public) XX XX XX XX XX Sweden No Notaries in form of liberal profession England/Wales No Notaries in form of liberal profession Greece Notary XX XX XX XX XX n.a. n.a. n.a Luxemburg Notaire XX XX XX XX XX n.a. n.a. n.a. Ireland No Notaries in form of liberal profession I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 55 3.2.5. Conduct regulation We may observe below (Table 3-12), that these systems of market entry are accompanied by a relatively high degree of regulation of market behaviour12. In most countries some kinds of minimum prices are in place (not in the Netherlands and due to recent liberalisation also not in Austria). Regulations on advertising are very restrictive e. g. in Italy, France and Spain, and to some degree more liberal in Austria, Belgium, Germany and especially the Netherlands. In comparison with other liberal professions furthermore there exist strict rules concerning form of business, diversification and inter-professional co-operation in as much as nearly all countries with a Latin notary. 12 For further explanations of acronyms etc. used in the table please refer to section 2.1.2. above. 56 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-12 Notary Services: Conduct Country Profession Regulation of prices Advertising forbidden? Min. price max. price refer-ence All price most Some Reg. on location Reg. on diversification Incorp. for-Interprof. co-operation bidden? forbidden? any incorp. gen. with non lib. prof. Comp. indemn. Incorp. w. insurance? non lib. prof Comp. cont. education? Austria Notar (Notary) N Y Y N Y Y N Y Y Y Y Y Y Y Y Belgium Notaire (Notary) Y Y Y N Y? Y Y Y Y? Y Y Y Y Y N Denmark no Notaries in form of liberal profession Finland no Notaries in form of liberal profession France Notaire (Notary) (Y) (Y) N Y Y Y N Y Y? Y Y Y Y Y Y Germany Notar (Notary) Y Y N N Y Y Y Y Y (Y) (Y) Y Y Y Y Italy Notario N Y N Y Y Y Y Y Y? Y Y Y Y N N Netherlands Notary N (Y) N N N Y N Y N N Y Y Y Y Y Portugal Notario (Notary Public) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Spain Notario (Notary Public) Y Y N Y Y Y Y N? Y Y Y Y Y Y N Sweden no Notaries in form of liberal profession England/wales no Notaries in form of liberal profession Greece Notary Y Y N Y? Y? Y? N? Y? N? Y? Y? Y? Y? n.a. N? Luxemburg Notaire n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Ireland no Notaries in form of liberal profession I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 57 3.2.6 Regulation Indices There are still information deficits in the one or other field concerning notaries. - We did not receive a questionnaire from the respective professional organisations in three countries (Greece, Luxembourg, Portugal). - There is a lack of detailed knowledge on regulation concerning cases for which the consultation of a notary is mandatory in the respective countries. Nevertheless, we calculated regulation indices for the profession of notaries according to the methodology already used for the other professions. As the figures given in the following table do not reflect variations concerning the obligation to consult a notary in different situations, they may underestimate the actual differences in regulations that occur for notaries from an international comparative perspective. Still, some nuances are evident. They mainly derive from differences in the market entry system regarding education and exclusive tasks (concerning legal advice) and the recently implemented absence of economic needs tests (Netherlands) as well as from some differences that appear in the field of conduct regulation. Here again the Netherlands shows the lowest degree of regulation, followed – at a distance - by Austria (where some liberalisation took place in recent years) and France. The level of conduct regulation in Spain may be slightly under-estimated (insecure information concerning the question of diversification/branch offices). Notaries: IHS regulation indices Entry Conduct Total Rank Germany 5.5 5.6 11.0 1 Italy 4.8 5.9 10.7 2 France 5.3 4.7 10.0 3 Austria 5.4 4.2 9.6 4 Spain 4.6 4.8 9.4 5 Belgium 4.0 5.3 9.3 6 Netherlands 3.6 2.6 6.3 7 Greece 5.2 n.a. n.a. n.a. Luxemburg 5.1 n.a. n.a. n.a. Portugal 4.6 n.a. n.a. n.a. 58 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.3. Technical Services Architects 3.3.1 Organisation and market entry regulation In architectural services, as well as in engineering services (see below 3.3.5.), the regulatory situation is more bipolar than in legal services. On the one hand, there are some countries in the EU where market entry regulations in this field are still relatively broad and rigid. This holds for Austria, Belgium, France, Germany, Italy, Spain, Portugal, Greece and Luxembourg. In these countries architects are – to a smaller or larger degree – holders of reserved rights to offer specific services on the market. The respective categories of tasks given in Table 3-15 are taken from OECD (1996)13. “XX” means that the relevant task is reserved to the relevant profession or that it is reserved to the relevant profession and other licensed professions. We do not distinguish between these two cases because the question of “shared exclusive tasks” is a very complicated one and a major potential source of error. It became evident during our research that in many cases not even the professional association has exact knowledge on this point. If a “X” is set in brackets here, this means that the relevant regulations apply under specific circumstances only. At the same time in all the countries where reserved tasks for architects apply membership in a professional association is compulsory. As regards education, a university degree in all these countries is a basic requirement to enter the respective market, but a considerable degree of variation exists in regard to mandatory professional exams and required professional practice. On the other hand, there are several countries, where the relevant regulations are comparatively liberal. The latter are once more the northern European countries (Sweden, Finland and here also Denmark) as well as the Netherlands, England/Wales and Ireland. In these countries for architects no or almost no (Finland) reserved tasks are existent. For this education requirements only apply in respect of certification, but not as a precondition for licensing. 13 All the information given in this table is revised and updated according to our own sources. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 59 Table 3-13 Architectural Services: General Country Profession Level of regulation Nat. Disciplinary sanctions regulation by decided by Architekt (Architect) X X X X X X X Baumeister (not a Lib Prof) X X X X X X X Y Belgium Architect X X n.a. n.a. n.a. n.a. Y Denmark Architect X X X X X - - N X n.a. n.a. n.a. n.a. N X X X X X X Y X X X X X X Y X Finland Architect X France Architects X Germany Freier Architekt (Architect) X Gov. self-reg gov. self-reg. gov. self-reg. Membershi p in prof. assoc. compulsory ? Y Austria Subnat. Implementation of Italy Architect X X X Netherlands Architect X X X Portugal Arquitecto (Architect) X X X Spain Arquitecto (Architect) X X X Arquitecto Tecnico (technical Architect) X X Sweden Arkitekt X England/Wales Architect (RIBA) X Chartered Surveyor Chartered Designer Chartered Building Services Engineer X Y X N X Y X X X X X Y n.a. n.a. n.a. n.a. Y X N X X X X X X X X X X N/Y (RIBA) X X n.a. n.a. n.a. n.a. N X X n.a. n.a. n.a. n.a. N X X n.a. n.a. n.a. n.a. N Chartered Builder X X n.a. n.a. n.a. n.a. N Planner X X n.a. n.a. n.a. n.a. N Greece Architect n.a. n.a. n.a. n.a. n.a. n.a. Y Luxembourg Architecte X X X X X Y Ireland Architect (RIAI) X X N/Y (RIAI) n.a. n.a. X X X 60 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-14 Architects: Qualification Requirements Country Profession University/higher education degree (years) Practise (years) Professional exam Number of „entrance roads“ to profession Austria Architekt (Architect) U5 3 Y (1) 1 6 Y 1 Baumeister (not a Lib Prof) Belgium Architect U5 2 N 1? Denmark Architect (U 5) 0 N several Finland Architect U 4,5-5,5 0 N several France Architects U6 0 N 1 Germany Freier Architekt (Architect) U4 02.Apr N 1 Italy Architect U5 0 Y 1 Netherlands Architect (BNA) (U 4-5) -2 N 2 Portugal Arquitecto (Architect) U 5-6 1 Y (1); not always 1 Spain Arquitecto (Architect) U5 0 N 1 Arquitecto Tecnico (technical Architect) U3 0 N 1 Sweden Arkitekt (SAR) U 4,5 0.5 N 1 England/Wales Architect (RIBA) U5 2 Y (1) 1 Chartered Surveyor U 3-4 2 N n.a. Chartered Designer U3 3 N n.a. Chartered Building Services Engineer U 3-4 6 N n.a. 3 N n.a. Chartered Builder Planner U4 2 N n.a. Greece Architect U5 0 Y (1) n.a. Luxembourg Architecte U4 1 N Y Ireland Architect (RIAI) U5 2 2 N I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 61 Table 3-15 Architectural Services : Scopes of Activity XX = Exercise reserved; X= Activity exercised, but not reserved Topographical determination, demarcation, land surveying Planning prints) (blue Request construction permit for Preparations and Technical control Construction monitoring of and certi-fication cost construction management Country Profession Feasibility studies Austria Architekt (Architect) XX XX XX XX Baumeister (not a Lib Prof) XX XX XX XX Belgium Architect X Denmark Architect X X X XX XX Urban and landscape planning Interior design XX X XX XX X XX X X X X X X(X?) X X X X X X X Finland Architect X (XX) (XX) X X X France Architects X X XX XX (publ. Works) X XX? X Germany Freier Architekt (Architect) X X XX X X X X Italy Architect XX Netherlands Architect X XX XX X XX XX XX XX X X X X X X X X Portugal Arquitecto (Architect) X X X X X X X XX X Spain Arquitecto (Architect) XX XX XX XX XX XX XX XX X? Arquitecto Tecnico (technical Architect) X(X) X(X) X(X) X(X) X(X) X(X) X(X) X? Sweden Arkitekt X X X X X X X X X United Kingdom Architect (RIBA) X X X X XX X X X Chartered Surveyor X X X XX X X X X Chartered Designer X Chartered Building Services Engineer X XX X Chartered Builder X X X X X X XX X Planner X X X X X XX XX? XX? Greece X X Luxembourg Architecte n.a. n.a. X XX XX? n.a. n.a. XX n.a. Ireland Architect X X X X X X X X X 62 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.3.2 Conduct regulation In contrast to the situation in legal or accounting services rather broad and rigid market entry regulation in technical professions does not always (or at least in most cases) correspond with respective conduct regulation (see table 3-16)14. In most countries there does not exist any binding price or fee system (exceptions are Belgium, Germany, Italy and Luxembourg (for public works only)). Concerning advertising, in most countries only moderate regulations persist and regulations on forms of business and inter-professional co-operation are rarely found. 14 For further explanations of acronyms etc. used in the table please refer to section 2.1.2. above. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 63 Table 3-16 Architectural Services: Conduct Country Reg. on location Reg. on diversification? Most Some N Y N N Incorp. for-Interprof. co-operation for-bidden? bidden? any incorp. with non incorp. w. gen. lib. prof. non lib. N N N (Y) (Y) N? Y? N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N Y N N N N N (N) (N) Y N Y N N N Y N N N N (Y) N (Y) (Y) (Y) N N Y Y Y N N N N N N Y Y N Profession Regulation of prices Advertising forbidden? Austria Architekt (Architect) Min. price max. price reference All price N N Y N Belgium Architect Y? N N N Denmark Architect N N N Finland Architect N N N France Architects N N Germany Freier Architekt (Architect) Y Italy Architect Y Comp. indemn. insurance? N N Comp. cont. education? Netherlands Architect N N N N N (Y) BNA N N N N N N N (Y) BNA (Y)(BNA) Portugal Arquitecto (Architect) N N N N? Y? Y N N N N N N N N N Spain Arquitecto (Architect) N N Y N N Y N N N N N N N Y n.a. Arquitecto Tecnico (technical Architect) N N Y? N N Y N N N N N N N n.a. n.a. Sweden Arkitekt N N N N N N N N N N N N N N N United Kingdom Architect N N N N N N N N N N N N N Y (RIBA) N Greece Architect na. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Luxembourg Architecte (Y) Y N Y? Y N N N N Spec. Y Y Y Y N Ireland Architect N Y (RIAI) N N Y (RIAI) N N N N N N N N N pub. N N 64 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.3.3 Regulation Indices The table below summarises the market-entry, conduct and overall regulation index for architects in the member states of the European Union. Unfortunately, at the time of writing, due to lack of appropriate ad secure information, for Greece we are able to provide neither an entry nor a conduct index. According to our basic knowledge of the system of technical professions in Greece this country belongs to the group with a high level of regulation in this field. Entry regulation appears to be most restrictive in Austria, followed by Spain, Italy and Luxembourg. Portugal France, Germany and Belgium are in the middle field. On the lower end (no or only very slight regulation) we find Denmark, Finland, Ireland, Sweden and the United Kingdom. So our colour-code fits well for the less regulated countries, whereas in the more regulated countries some further differentiation appears. The reason for this mainly lies in the different educational systems, whereby for example in Austria comparatively long times of educational practise are required. Technical Services (Architects): IHS regulation indices Entry Conduct Total Italy 3.2 3.0 6.2 Rank 1 Luxemburg 2.6 2.7 5.3 2 Austria 3.9 1.2 5.1 3 Germany 1.8 2.7 4.5 4 Spain 3.2 0.8 4.0 5 Belgium 2.4 1.6 3.9 6 France 2.2 0.9 3.1 7 Portugal 2.2 0.6 2.8 8 Finland 1.4 0.0 1.4 9 Denmark 0.0 0.0 0.0 10 Ireland 0.0 0.0 0.0 10 Netherlands 0.0 0.0 0.0 10 Sweden 0.0 0.0 0.0 10 United Kingdom 0.0 0.0 0.0 10 Greece n.a. n.a. n.a. n.a. As regards conduct, for all countries the figures calculated are – compared to other professional groups – rather low. The only exceptions are Italy, Germany and Luxembourg. The overall regulation index is highest for Italy (because of high figures for entry and conduct) followed by Austria (high figure especially for market entry) and Luxembourg. Above or around the medium level lie Portugal, Germany, France and Belgium. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 65 Engineers 3.3.4 Organisation and market entry regulation In the field of engineering services even more countries show rather or very low entry restrictions compared to architectural services. Countries with low regulation are Sweden, Finland, Denmark, the Netherlands, UK, Ireland, as well as France and Belgium (which count among the higher regulated systems in engineering). Relatively broad and restrictive regulation is found in Austria, Germany, Italy, Spain, Portugal, Luxembourg and probably in Greece (also there is a lack of information on this country at the time of writing). The respective categories of tasks given in Table 3-19 are taken from OECD (1996)15. “XX” means that the relevant task is reserved to the relevant profession or that it is reserved to the relevant profession and other licensed professions. We do not distinguish between these two cases because the question of “shared exclusive tasks” is a very complicated one and a major potential source of error. It became evident during our research that in many cases not even the professional association has exact knowledge on this point. If an “X” is set in brackets here, this means that the relevant regulations apply under specific circumstances only. Again, as with architects, in all countries where some licensing applies, membership in a professional organisation is compulsory. Here again elements of self-regulation are found within a framework of licensing. In the other countries often one or more models of certification exists, but very often not even professional titles are protected by law. In regards to educational requirements, in most countries with a licensing system a university degree or another higher educational degree is a precondition to entering the profession. Remarkable differences again are present concerning professional exams and the length of compulsory professional training. In this respect the regulations are most restrictive in Austria and Germany. 15 All the information given in this table is revised and updated according to our own sources. 66 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-17 Engineering Services: General Country Profession Level of regulation gov. self-reg. gov. self-reg. Austria Ingenieurkonsulenten (Consultant Engineer) X X X X X X Technische Büros (Technical Office) X X X Belgium Burgerlijk Inginieur, Industrieel Inginieur X X n.a. Denmark Civilingenior X X X X Nat. subnat. Implementation of regulation by Gov. self-reg Disciplinary sanctions decided by X n.a. n.a. Membership in prof. assoc. compulsory? Y Y n.a. N N Diplomingenior X X X X Finland Engineer X X X - - N France Engineer X X (X) X (X) N Consulting Engineer and Engineering Firms X X (X) Germany Beratender Ingenieur (Advisory Engineer) Italy Engineer Netherlands University Engineer X X X X X (X) X (X) X X X N X (X) N X X Y X X Y N Polytechnic Engineer N Architect X N Portugal Engenheiro (Engineer) X X n.a. Spain Ingeniero de Caminos, Canales i Puertos X X X n.a. n.a. n.a. Y - - Y Ingeniero de Telecommunicationes X X X - - Y Ingeniero Aeronautico X X X - - Y Ingeniero tecnico de Telecommunicationes X X X - - Y Ingeniero tecnico Aeronautico X X X - - Y N For other types of engineers: see case sudies Sweden United Kingdom Civilengenjör X X n.a. n.a. n.a. n.a. Höjskoleiugenijor X X n.a. n.a. n.a. n.a. N Chartered Engineer X X X X Y Incorporated Engineer X X X X Y Engineer Technician X X X X Engineer X Y X Greece Diplomatouchos Michanicos X X Luxembourg Ingénieur-conseil X X Ireland Chartered Engineer X X Other types of engineers X X X N n.a. n.a. n.a. n.a. Y? X X X X Y X Y - N X X X - I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 67 Table 3-18 Engineers: Qualification Requirements Country Profession University/higher education degree (years) Practise (years) Austria Professional exam Number of „entrance roads“ to profession Ingenieurkonsulenten (Consultant Engineer) U5 3 Y (1) 1 Technische Büros (Technical Office) (U 5) or spec. HE U: 3; HE: 6 Y (1) 2 Belgium Burgerlijk Inginieur, Industrieel Inginieur U 4,5-5 0 N 2 Denmark Civilingenior U5 0 N 1 Diplomingenior U3 0 N 1 Finland Engineer U 3-5 0 N 2 France Engineer (U 3-5) 0 N Several Consulting Engineer and Engineering Firms (U 3-5) 0 N Several Germany Beratender Ingenieur (Advisory Engineer) U/HE 4 02.Mai N 1 Italy Engineer U5 0 Y (1) 0 Netherlands University Engineer U5 0 N 1 Polytechnic Engineer U 3 (4 incl. training) 1 N 1 Portugal Engenheiro (Engineer) U 4-5 2 month N 1 Spain Ingeniero de Caminos, Canales i Puertos U 5-6 0 N 1 Ingeniero de Telecommunicationes U 5-6 0 N 1 Ingeniero Aeronautico U 5-6 0 N 1 Ingeniero tecnico de Telecommunicationes U3 0 N 1 Ingeniero tecnico Aeronautico U3 0 N 1 (or 6 For other types of enginers: see case studies Sweden United Kingdom Civilengenjör U 4,5 0 N 1? Höjskoleiugenijor U2 0 N 1? Chartered Engineer U4 IPD (no spec. Y (1) several several Incorporated Engineer U3 IPD (no spec. Y (1) Engineering Technician U3 IPD (no spec. Y (1) Engineer U 3-4 0 0 several 1 several Greece Diplomatouchos Michanicos U5 0 Y (1) Luxembourg Ingénieur-conseil U 3-5 1 N 1? Ireland Chartered Engineer U4 4 N several Other types of engineers HE sev./U 4 0 N several 68 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-19 Engineering Services : Scope of Activity XX = Exercise reserved; X= Activity exercised, but not reserved Country Profession Feasibility Environ- Design and Representat Tender and Project Constructio Planning Austria Ingenieurkonsulenten (Consultant Engineer) XX XX XX XX X X X X XX XX Technische Büros (Technical Office) XX XX XX XX X X X X XX XX Belgium Burgerlijk Inginieur, Industrieel Inginieur X X X X X X X X X Denmark Civilingenior X X X X X X X X X X Diplomingenior X X X X X X X X X X Engineer X X X(X) X X X X X X X Finland France Testing and Expert Engineer X X X X X X X X X Consulting Engineer and Engineering Firms X X X X X X X X X Germany Beratender Ingenieur (Advisory Engineer) XX X XX XX X X XX X XX XX Italy Engineer X X XX XX X X X XX XX? XX? Netherlands University Engineer X X X (XX) (XX) X X X X X Polytechnic Engineer X X X (XX) (XX) X X X X X Portugal Engenheiro (Engineer) XX XX XX XX XX XX XX XX XX XX Spain Ingeniero de Caminos, Canales i Puertos XX X XX XX X XX X XX XX XX Ingeniero de Telecommunicationes XX XX XX X XX X XX XX XX Ingeniero Aeronautico XX XX XX X XX X XX XX XX Ingeniero tecnico de Telecommunicationes (XX) (XX) (XX) X (XX) X (XX) (XX) (XX) Ingeniero tecnico Aeronautico (XX) (XX) (XX) X (XX) X (XX) (XX) (XX) X For other types of engineers see case studies Sweden United Kingdom Civilengenjör X X X X X X X X X Höjskoleiugenijor X X X X X X X X X X Chartered Engineer X X X X X X X X X X Incorporated Engineer X X X X X X X X X X Engineer X X X X X X X X X x Greece Diplomatouchos Michanicos n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Luxembourg Ingénieur-conseil X X XX XX X XX X X ? ? Ireland Chartered and other engineers X X X X X X X X X X I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 69 3.3.5 Conduct regulation For engineers conduct regulation from an international comparative point of view is even more liberal than for architects. The only countries with a considerable degree of conduct regulation for this professional group are: Austria, Germany, Italy and Luxembourg (see Table 3-20)16. For Portugal and Greece we do not have enough relevant information. On our basic knowledge of these systems at least the one of Greece shows a considerable degree of conduct regulation as well. In all the other countries, generally speaking no specific regulations exist. This, together with the findings in market entry regulation, suggests that the profession of engineers is the most market-driven of all the professions under consideration in this report. 16 For further explanations of acronyms etc. used in the table please refer to section 2.1.2. above. 70 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-20 Engineering Services: Conduct Country Profession Regulation of prices Advertising forbidden? min. price max. price refer-ence all price Austria Most Some Reg. on location Reg. on diversification? Comp. Incorp. for-Interprof. co-operation forbidden? bidden? any incorp. with non incorp. w. indemn. insurgen. lib. prof. non lib. ance? prof Comp. cont. education? Ingenieurkonsulenten (Consultant Engineer) N N Y N N Y N N N N (Y) N (Y) N N Technische Büros (Technical Office) N N Y N N N N N N N N N N N N Belgium Burgerlijk Inginieur, Industrieel Inginieur N N N N N N N N N N N N N N N Denmark Civilingenior/Diplomingenior N N N N N N N N N N N N N N N Finland Engineer, various types N N N N N N N N N N N N N N N France Ingenieur N N N N N N N N N N N N N N N Germany Beratender Ingenieur (Advisory Engineer) Y Y N N N Y Y (Y) N N (Y) (Y) (Y) Y Y Italy Engineer, various types Y N N Y Y Y N N N N N (Y) (Y) Y N Netherlands Engineer, various types N N N N N N N N N N N N N N N Portugal Engenheiro (Engineer) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Spain Ingeniero de Caminos, Canales i Puertos (for “Superior Enginneers”) N (?) N N N N N N N N N N N N Y N Sweden Civilengenjör N N N N N N N N N N N N N N N Höjskoleiugenijor N N N N N N N N N N N N N N N United Engineer; various types N N N N N N N N N N N N N N (Y) reg. Greece Diplomatouchos Michanicos n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (Y) N Y N Y? Y N N N N Spec. Y Y Y Y N N N N N N N N N N N N N N N (Y) reg. Luxembourg Ireland Chartered and other engineers I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 71 3.3.6 Regulation Indices The table below summarises the market-entry, conduct and overall regulation index for engineers in the Member States of the European Union. Unfortunately, at the time of writing, due to lack of appropriate and certain information, we are not able to provide an overall index for Greece and Portugal. For Portugal we only have been able to calculate an entry index, for Greece neither an entry nor a conduct index. According to our basic knowledge of the system of technical professions in Greece this country belongs to the group with a high level of regulation in this field. Technical Services (Engineers): IHS regulation indices Entry Conduct Total Rank Germany 3.7 3.7 7.4 1 Italy 3.4 3.0 6.4 2 Luxemburg 2.7 2.6 5.3 3 Austria 3.8 1.2 5.0 4 5 Spain 3.2 0.0 3.2 Netherlands 1.5 0.0 1.5 6 Finland 1.3 0.0 1.3 7 8 Belgium 0.0 1.2 1.2 Denmark 0.0 0.0 0.0 9 France 0.0 0.0 0.0 9 Ireland 0.0 0.0 0.0 9 Sweden 0.0 0.0 0.0 9 United Kingdom 0.0 0.0 0.0 9 Greece n.a. n.a. n.a. n.a. Portugal 3.4 n.a. n.a. n.a. Austria is the country with the highest entry index, basically because of rather broad exclusive tasks reserved to the profession and because of relatively long mandatory professional practise. Austria is closely followed by Germany, Italy, Portugal, Spain and then – with some distance – Luxembourg. All the other countries regarding market entry show no or only very slight restrictions. Concerning conduct the highest figure we calculated applies to Germany, which is followed by Italy and Luxembourg, and then, with remarkable distance, by Austria and Belgium. Rather interesting is the case of Spain, which shows a rather high figure for entry regulation but no conduct regulation. 72 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.3.7 Overall Regulation Indices for Technical Professions (Engineers + Architects) For our further analysis in Chapter 5 we have to construct a joint regulation index for all technical professions, i.e. for architects and engineers together. For this we sum the respective indices for architects and engineers and then divide the respective number by two. The table below summarises the market-entry, conduct and overall regulation index for technical professions (Engineers + Architects) in the Member States of the European Union. It also once more shows the specific indices for engineers and architects as calculated above. Technical Services (Engineers + Architects): IHS regulation indices Rank Entry Eng. Arch. Total-E Conduct Eng. Arch. Total-C Total Eng. Arch. Total Total Italy 3.4 3.2 3.3 3 3 3 6.4 6.2 6.3 1 Germany 3.7 1.8 2.7 3.7 2.7 3.2 7.4 4.5 5.9 2 Luxemburg 2.7 2.6 2.7 2.7 2.7 2.7 5.3 5.3 5.3 3 Austria 3.8 3.9 3.8 1.2 1.2 1.2 5 5.1 5 4 Spain 3.2 3.2 3.2 0 0.8 0.4 3.2 4 3.6 5 Belgium 0 2.4 1.2 1.2 1.6 1.4 1.2 3.9 2.6 6 France 0 2.2 1.1 0 0.9 0.5 0 3.1 1.5 7 Finland 1.3 1.4 1.4 0 0 0 1.3 1.4 1.4 8 Netherlands 1.5 0 0.7 0 0 0 1.5 0 0.7 9 Denmark 0 0 0 0 0 0 0 0 0 10 Ireland 0 0 0 0 0 0 0 0 0 10 Sweden 0 0 0 0 0 0 0 0 0 10 UK 0 0 0 0 0 0 0 0 0 10 Portugal 3.4 2.2 2.8 n.a. 0.6 n.a. n.a. 2.8 n.a. n.a. Greece n.a. n.a. n.a. n.a. n.a. 0 n.a. n.a. n.a. n.a. Italy shows the highest overall regulation index, whereby the total Index for each the architects and the engineers is high. Italy is followed by Germany (very high index for engineers, lower for architects), by Luxembourg (same index for engineers and architects) and Austria (nearly the same overall index for engineers and architects). The total index for both professions in Belgium is 2,6 (whereas it has been 3,9 for the Architects and 1,2 for the engineers). All the other countries show a total overall index between 0 and 1,5. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 73 3.4. Pharmacists 3.4.1 Organisation and market entry regulation The profession of the pharmacist is, broadly speaking, organised as a licensing-model in all EU member states. But still there are significant differences. In Sweden pharmaceutical products are sold via a state-monopoly. There is only one state owned company carrying out services of pharmacies. Also in Austria, Belgium, Denmark, Finland, France, Italy, Portugal, Spain, Greece and Luxembourg the regulations are quite extensive. In all these countries the number of pharmacies is restricted (via economic needs tests etc.). Only in Germany, UK, Netherlands and Ireland are there, as far our present knowledge extends, no such regulations. In regards to our colour-coding we marked all the countries, where the number of pharmacies is restricted, as “high regulation countries”. All the others have been marked as countries of medium regulation. Although regulation is uniformly very high in most of the countries, the regulation indices at the end of this chapter still show some differences. 74 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-21 Pharmacies/Pharmacists: General Country Profession Level of regulation nat. Austria Apotheker Belgium Pharmacien Denmark Finland subnat. gov. self-reg Implementation of regulation by Disciplinary sanctions decided by gov. gov. self-reg. self-reg. Membershi Number of p in prof. pharmacies assoc. restricted? compulsory ? X X X X X X X Y Y /X X X X X X X Y Y Apoteker X X X X N (N) Proviisori X X X X N Y France Pharmacien X X X n.a. n.a. n.a. n.a. Y Y Germany Apotheker X X X X X X X Y N Italy Farmacisti X X X X X X Y Y Netherlands Pharmacist X X N N Portugal Farmaceutico X X Y Y Spain Farmacéutico X n.a. Y? Y Sweden Apotekare N Y X Y (N) X X X X X X X United Kingdom Pharmacist X X Greece Pharmacist X X Luxembourg Pharmacist X X Ireland Pharmacist X X X X X n.a. n.a. n.a. X X X X X X X X Y Y n.a. n.a. X n.a. n.a. Y Y X X X X N N (owned I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 75 Table 3-22 Pharmacists: Qualification Requirements Country Profession Professional exam Number of „entrance roads“ to profession Apotheker University/higher Practise (years) education degree (years) U 4,5 1 Austria Y (1) 1 Belgium Pharmacien / Apotheker U5 0 N 1 Denmark Apoteker U5 0 Y (1) 1 Finland Proviisori U5 0.5 N 1 France Pharmacien U5 1 N 1 Germany Apotheker U4 1 Y (1: 3 parts) 1 Italy Farmacisti U5 2 Y (1) 1 Netherlands Pharmacist U6 0 N 1 Portugal Farmaceutico U5 0,5 (pre-graduate) Y (1) as from 2003 1 Spain Farmacéuticos U 4,5 0,5 (pre-graduate) N? 1 Sweden Apotekare U5 0 N 1 United Kingdom Pharmacist U4 1 Y (2) 1 Greece Pharmacist U4 0.5 Y (1) 1 Luxembourg Pharmacist U 4,5 0.5 n.a. 1 Ireland Pharmacist U4 1 Y (1) 1 76 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-23 Pharmacists: Scope of Activity/Monopoly A. Pharmacists have the monopoly of the retail sale of medicinal products. B. Members of other health professions may sell medicinal products (please specify). C. Medicinal products may also be sold in retail shops other than pharmacies. A B X X For the treatment of patients, doctors may obtain permission to set up an "in? house" pharmacy if the surgery is more than 6 km from the nearest dispensary. Veterinary surgeons may keep a veterinary pharmacy at home without authorisation to serve the needs of the veterinary surgery. Certain pharmaceutical products (specified by regulation) may be sold in retail shops ("Drogerien"). Belgium X Denmark X Medicinal products may be supplied only by dispensing pharmacists and by doctors and veterinary surgeons authorised to stock such products. Doctors and veterinary surgeons are required to buy them in a pharmacy which is open to the public. They may dispense such Veterinarians are allowed to sell veterinary medicines. Medicinal products from the group Vet. OTC drugs can be sold from retail shops which have special permission from the "Danish Medicine Agency". In addition to pharmacists veterinarians are authorised to sell veterinary medicinal products. Austria X X Finland France C X Germany Italy X Netherlands X Portugal X Spain X X Remarks X X Article L 512 of the Public Health Code (see Annex X). Derogation’s are provided for in Articles L 594, L 610, L 612, L 659 and L 662 of the Code and in the Law of 28 December 1967 on birth control. (1) By veterinarians for animals they are treating. -1 -2 (2) Medicines having only a slight effect. X X A+B: except in some rural areas, pharmacies have a monopoly. C: "druggists" may, under licence, sell a limited number of medicinal products. Veterinarians may supply medicinal products for an animal under their care. Only veterinary surgeons when carrying out emergency operations. Sweden X United Kingdom X Greece Lux. Ireland Medicinal products may be stocked, stored and supplied only by legally authorised pharmacies and by hospital, health-centre and firstaid unit pharmacies for internal use or where special monitoring, supervision and inspection of multidisciplinary health-care teams is Vetereinary medicinal products may be supplied only by dispensing pharmacies or breeding establishments/ associations and authorised commercial undertakings and only under the supervision of the competent pharmaceutical authorities. OTC-pharmaceuticals can be sold in Apoteket AB (Nat. Corp. Swe. Pharm.) pharmacies by technicians. X X Doctors may sell medicines to their patients under the Medicines Act 1968 but under the National Health Service Acts only doctors in rural areas who are specifically permitted to dispense may supply medicines to their patients and they can sell only medicines which are not permitted to be dispensed on NHS prescriptions. Dentists may sell medicines for dental treatment but only to non? NHS patients. Medicinal products which are on the General Sale List (GSL) may be sold from any shop provided that the premises can be closed i.e. sales are not permitted from places such as stall in markets. GSL medicines are those which, in the opinion of the competent authorities can, with reasonable safety, be sold other than under the supervision of a pharmacist. Veterinary surgeons may sell medicines for the treatment of animals under their care. Certain medicines for horses may also be sold by saddlers and a specified range of medicines for animals may be sold by agricultural merchants. X These are commonly described as "general sales list" medicines. X X Veterinary surgeons may supply medicinal products, which they must buy in a pharmacy open to the public. Source: PHARMACEUTICAL COMMITTEE (Free movement of pharmacists) (2001): CONDITIONS FOR THE OPERATION OF A COMMUNITY PHARMACY IN THE MEMBER STATES, Working Document, Brussels, XV/E/8115/4/97/EN. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 77 3.4.2 Conduct regulation Conduct regulation for pharmacists is in all countries rather restrictive. But still there is a remarkable degree of differentiation (see Table 3-24)17. In all countries the one or other type of price regulation exists. Normally the prices for prescription only medicines are fixed (at least as a maximum price), but the prices for OTCmedicines can be set by wholesalers and pharmacists freely. Regulations concerning advertising can be found in all countries, but there is some differentiation in the range and breadth and rigidity of these regulations (see for some examples the case studies in the second part of the report). In many countries regulations on location, diversification (opening of branch offices) and inter-professional co-operation (with respect to ownership of pharmacies) also exist. The most liberal regimes can be found in this respect in Ireland and the United Kingdom. Denmark, Finland and Germany, among others, are examples of rather restrictive regulation in these fields. 17 For further explanations of acronyms etc. used in the table please refer to section 2.1.2. above. 78 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 3-24 Pharmacists: Conduct Austria Apotheker N Spec. Y N N Y Y N Y Incorp. for- Interprof. co-operation forbidden? Comp. bidden? any incorp. with non incorp. w. indemn. insurgen. lib. prof. non lib. ance? prof Y (N) Y (N) Y N Belgium Pharmacien / Apotheker N Spec. Y N N N Y N (Y) N N N N N N N Denmark Apoteker Spec. Y Spec. Y N N N (Y) N Y Y Y Y Y Y N N Finland France Proviisori Pharmacien N Y Y? N N N N N Y Y Y N N (Y) (Y) Y N Y Y Y Y Y Y Y Y N N? (Y) N Country Profession Regulation of prices Advertising forbidden? min. price max. price Reference all price Spec Y most Some Reg. on location Reg. on diversification Comp. cont. education? Y Germany Apotheker Spec. Y Spec. Y N N N Y N Y Y Y Y Y Y N Y Italy Farmacisti N Spec. Y N N N Y N Y Y Y Y Y Y N Y Netherlands Pharmacist N Y N N N Y N (Y) N N N N N N Y Portugal Spain Farmaceutico Farmacéutico N N Y Spec. Y Spec. N N N N Y Y Y Y N N Y Y N Y Y? Y Y? Y Y? Y Y? N n.a. Y Y Sweden Apotekare (state monopoly) Y? Y Y N N N Y Spec. Y Spec. Spec. Spec. Spec. Spec. N N United Kingdom Pharmacist N (Y) N N N Y N N N N N (Y)? (Y)? Y Y Greece Luxembourg Pharmacist Pharmacist Y Spec. N? Y Spec. Y. Spec. N N N N? Y Y Y Y N N Y Y Y? Y? Y? Y? Y? Y? Y? Y? Y? Y? Y n.a. N n.a. Ireland Pharmacist N Y Spec. N N (N) (N) N N N N N N N N N I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 79 3.4.3 Regulation Indices For pharmacists we have changed the modus of the calculation of the entry index. The reason for this is that the main differences between the countries can be found in regards of the existence/non-existence of an economic needs test, whereas the regulations concerning licensing are rather similar. For this we changed the weighting of the respective categories of regulation as shown in the table below. ERLC has now a weight of 20% (instead of 40% for the other profession), ERED has a weight of 45% (instead of 40% for the other professions) and ERQT is weighted 35% (instead of 20% for the other professions). Market Entry Regulation Index for Pharmacists ER Category/Variables Entry regulation (general) Coding ERLC*0.20+ ERED*0.45+ ERQT*0.35 Scale 0 to 6 ERLC Licensing See separate table below 0 to 6 20% ERED Requirements in education/does only apply in cases of licensing; if no licensing: “0” Duration of special education/university or other higher degree Duration compulsory practising Number of professional exams Number of entry routes to profession (inv. scale) ERED1*0.30+ ERED2*0.40+ ERED3*0.20+ ERED4*0.10 0 to ≥ 6 years 0to6 45% ERED1 ERED2 ERED3 ERED4 ERQT Quotas/economic needs test Weighting1 0 to 6 30% 0 to ≥ 6 years 0 to 6 (0 to ≥ 3)*2 0 to 6 (0 = 4 or more routes; 0 to 6 1=3 routes; 2=2 routes; 3=1 route)*2 40% 20% 10% 0=no 6=yes 0 or 6 Wighting2 35% Furthermore, the coding for Licensing (ERLC) has been changed. The methodology applied here is shown in the table below. 80 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Coding ERLC (Licensing) for Pharmacists Country Selling of Medicinal Products Doctors and Veterinarians Others: Retail Shops Doctors Veterinarians Pharmacists Monopoly X X X Greece Italy Sweden Luxembourg Portugal Finland Belgium Spain France Denmark Germany Ireland Netherlands Austria UK X (X) XX X X (X) X X X X X X X X X (X) X X X X X X X XX (X) Index ERLC 6,0 6,0 6,0 4,5 4,5 4,5 3,0 3,0 3,0 1,5 1,5 1,5 1,5 1,5 1,5 Explanation of Indices: 6: only pharmacies are allowed to sell medicinal products 4,5: under specific preconditions also veterinarians (no doctors) are allowed to sell medicinal products 3: under specific preconditions also doctors (and veterinarians) are allowed to sell medicinal products 1,5: under specific preconditions also retail shops are allowed to sell medicinal products The table below summarises the market-entry, conduct and overall regulation index for Pharmacists in the Member States of the European Union. Pharmacists: IHS regulation indices Pharmacists Entry Conduct Total Rank Sweden 6.0 6.0 12.0 1 Greece 4.4 4.5 8.9 2 Italy 4.8 3.6 8.4 3 Portugal 4.2 3.8 8.0 4 Luxemburg 4.0 3.9 7.9 5 Spain 3.6 3.9 7.5 6 Austria 3.6 3.7 7.3 7 France 3.8 3.5 7.3 7 Finland 4.0 3.0 7.0 8 Denmark 2.3 3.6 5.9 9 Germany 1.6 4.1 5.7 10 Belgium 3.6 1.8 5.4 11 United Kingdom 2.7 1.4 4.1 12 Netherlands 1.2 1.8 3.0 13 Ireland 1.5 1.2 2.7 14 According to our index entry regulation is strongest in Sweden (state monopoly), followed by Italy, Greece, Portugal, Finland and the group of Spain, Austria and Belgium. Even a little bit lower is the index for Denmark. However, the differences arising in this group may be I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 81 somewhat artificial, as in all these countries market entry tests in the form of economic needs tests apply, that may be of different nature but all have been coded the same way. The differences primarily apply because of different education systems and broader or less broad licensing. The lowest figures have been calculated for the Netherlands, Ireland, Germany and the UK. In these countries the maximum number of community pharmacies is not fixed (in Ireland since February 2002, see case study in chapter 3 below). Conduct regulation, apart from Sweden (which is a special case again), is most restrictive in Greece, followed by Italy, Luxembourg, Spain, France, Austria and Finland. A little bit more on the liberal side are Belgium, Denmark and Germany. The most liberal systems exist in the UK, Netherlands, Ireland as well as Belgium. Overall, the highest “total index” (entry+conduct) has been ascribed to Sweden (state monopoly). Very high figures show also Greece, Italy, Luxembourg, Spain, Austria, France, Portugal and Finland. Placed in the middle are Belgium, Denmark and Germany. The most liberal regimes overall can be found in the UK, the Netherlands and Ireland. 82 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 3.5 Summary of regulation across member states If we take a look at our simplified structure of market entry regulations (i.e. the colour-coding) we get the following overall picture. In regard to the different countries we can state that Austria, Germany and Luxembourg show rather extensive regulations in all professional fields. The same is true - for most professions - for France, Spain, Portugal, Italy, Belgium (and as far as we know at this stage also for Greece). The less regulated markets in respect to market entry regulations are found in Sweden, Denmark, Finland, the Netherlands, the UK (in some professions only England/Wales has been analysed) and Ireland. Summary Market Entry Regulations/Colour Coding Accountancy Services Country Legal Services Notary Services Country Architectural Services Country Engineering Services Country Country Austria Austria Belgium Belgium Denmark Finland France France Germany Austria Austria Austria Austria Belgium Belgium Belgium Belgium Denmark Denmark Denmark Denmark Finland Finland Finland Finland France France France France Germany Germany Germany Germany Germany Italy Italy Italy Italy Italy Italy Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands Portugal Portugal Portugal Portugal Portugal Portugal Spain Spain Spain Spain Spain Spain Sweden Sweden Sweden Sweden Sweden United Kingdom United Kingdom Greece Greece Greece Luxembourg Luxembourg Luxembourg Ireland Ireland Pharmacies Country United Kingdom United Kingdom United Kingdom Greece Greece Greece Luxembourg Luxembourg Luxembourg Ireland Ireland Ireland In respect of the various professional fields there is a rather bipolar situation in engineering and architectural services: some countries show rather rigid licensing models, in others certification is the standard model. In accountancy services all countries show a kind of certification model, but the scope of exclusive rights to offer services varies considerably. In legal services one can observe all degrees of market entry regulation, especially for lawyers: from very loose (Finland and Sweden) to very rigid (Austria, France, Germany and others). For notaries the situation is different: in all countries with a so-called “Latin notary” the market entry regulations are rather strict (number of notary branches restricted by economic needs tests etc.). As regards pharmacies/pharmacists we find a considerable degree of market entry regulation in most countries. In all countries there is some kind of licensing model, but in Ireland, Germany, the UK and the Netherlands the number of pharmacies are not restricted. This colour-coding is very well reflected in our regulation indices. The following table gives the figures for the overall regulation indices, for all the professions/professional fields where one has been calculated (i.e. not the notaries), sorted by countries. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 83 Overview: Total IHS regulation indices for different professions Lawyers Notaries Austria Accountants 6.2 7.3 9.6 Architects 5.1 Engineers 5.0 Pharmacists 7.3 Belgium 6.3 4.6 9.3 3.9 1.2 5.4 Denmark 2.8 3.0 0.0 0.0 5.9 Finland 3.5 0.3 1.4 1.3 7.0 France 5.8 6.6 10.0 3.1 0.0 7.3 Germany 6.1 6.5 11.0 4.5 7.4 5.7 n.a. n.a. n.a. 8.9 0.0 0.0 2.7 Greece 5.1 9.5 Ireland 3.0 4.5 Italy 5.1 6.4 10.7 6.2 6.4 8.4 Luxembourg 5.0 6.6 n.a. 5.3 5.3 7.9 Netherlands 4.5 3.9 6.3 0.0 1.5 3.0 Portugal n.a. 5.7 n.a. 2.8 n.a. 8.0 Spain 3.4 6.5 9.4 4.0 3.2 7.5 Sweden 3.3 2.4 0.0 0.0 12.0 UK 3.0 4.0 0.0 0.0 4.1 All the regulation indices with a value of 5 or higher have been coloured black. The indices with a value between 2.5 and 4.9 are coloured dark grey; those below 2.5 are light grey. It is obvious that the profession of pharmacists shows the most highly regulated systems in relative terms. It is followed by legal services and accounting services. Concerning engineers there exist only four countries with relatively high regulation, in regards to architects only three (whereas the two missing countries supposedly would count among the countries with high regulation indices). Most light grey fields (low regulation indices) can be found in engineering services, followed by architects and then legal services. Countries with high indices for all professions are Austria, Italy, Luxembourg and with one exception Germany (and possibly Greece). Belgium, Portugal and Spain appear to be in the medium field, whereas The UK, Sweden (with the exception of pharmacists), the Netherlands, Ireland, Finland and Denmark (the latter again with the exception of pharmacists) show rather liberal regulatory regimes (from a comparative point of view). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 85 4. Overview of the Case Studies This report includes a special section (Part 2) that provides detailed information on the regulation – both for market entry and conduct – on a heterogeneous selection (subset) of member states, along with further detailed information on the economic characteristics of each branch of professional services. Cross-reference is also made to the overall degree of regulation, for market entry and conduct regulation, as described and calculated in Chapter 3. The subset of member states is different for each profession. Within professional fields the following member states are studied: Legal profession (lawyers, notaries): 5 member states Denmark, Italy, UK/England and Wales, Germany, France Accountancy (+Tax advisers): 4 member states Italy, Netherlands, Germany, France Technical professions (engineers, architects): 4 member states Austria, Finland, France, Spain Pharmacists: 4 member states Ireland, Portugal, Sweden, Germany The current chapter presents a brief comparative overview of the case studies in each professional field, focussing on recent trends in regulation changes. 4.1 Legal Services In legal services, detailed analysis has been undertaken for Denmark, Italy, England&Wales, Germany and France. In Italy, Germany and France we find the typical continental model, where legal services are traditionally organised in two main professions: the lawyer and the (“latin”) notary, whereas in England&Wales as well as in Denmark the notary of the latin type is not known. The important difference between latin notaries and other professional descriptions of notary (e.g.”Notary Public” or “Scriveners”), which we do not include in the 86 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S analysis, is that the notarial deeds of the former are endowed (e.g. in the case of litigation) with the characteristic of representing special evidence guaranteed by public law. In England&Wales, however, there is another division of the profession in existence: that between solicitors and barristers. According to the regulatory information encapsulated in our regulation indices (see the previous chapter 3), a relatively high degree of market entry regulation for lawyers exists in Germany and France, whereas it is considerably lower in Italy, England and Wales and Denmark. This is conditioned by the fact, notwithstanding other important differences (especially in the respective education systems), that legal advice is an exclusive task of selected professions in France and Germany, but not in the other three countries, where representation before courts (and some times other organisations) is the only important service field reserved for lawyers. Conduct regulation for lawyers attains the highest level in our subset in Italy, followed by Germany and France. In England&Wales as well as in Denmark – after a series of liberalisation in the 1990s – conduct regulation now is rather liberal, with a certain higher degree of regulation remaining, however, concerning questions of business form and interprofessional co-operation. As indeed applies to all the member states of the European Union regarding trends in regulatory changes in legal professions, one cannot observe any farreaching system changes that have taken place within the case study subset of countries. (An example of such would be a change from a licensing to a certification model or viceversa). What we can observe, however, are gradual changes in the systems of market-entry, and even more so in respect of conduct-regulation. In Denmark liberalisation concerning prices and advertising, and, to some extent forms of business etc., was combined with a certain complication of the process of market-entry. A new final admittance examination was introduced in 1996, exactly at the same time as some regulations concerning conduct were liberalised to a certain extent. In Italy, According to the Law of 24 February 1997, the distinction between two groups of attorneys - avvocati and procuratori legali is no longer made. The profession of Procuratore Legale has been abolished. As has been the case for the accounting professions (see below), several attempts have been made in recent years to deregulate the legal professions in Italy. The system of market entry has been changed (and liberalised to some extent). The same is true for regulations on marketing and advertising, as well as for the system of fee setting and regulations concerning forms of business and inter-professional co-operation (although the last have not been implemented up to now). The professional division between Solicitors and Barristers in England&Wales has been a subject for discussion in these countries for quite a while now. Whereas upon first consideration there may be no direct negative outcomes of this separation (as a monopoly for barristers in representation in the higher courts does not exist any more), to the external I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 87 observer it is rather unclear what, apart from tradition, the advantage of this separation is. Conduct regulation for legal professions in England&Wales is now rather liberal as far as prices fees/advertising are concerned. Somewhat rigid regulations are still applicable, however, concerning forms of business and inter-professional co-operation. In Germany several regulatory changes have been implemented in recent years in various fields of lawyers’ conduct regulation (advertising, business forms, location and diversification). However, the fees system and the rather high-level market entry regulation remain unchanged. In France, following the reform of 1990, the differentiation between “avocats” and “conseil juridiques“ has been eliminated. In contrast to the developments in many other countries, in France no far-reaching steps towards liberalisation of conduct-regulation have been made. In overall general terms, for the profession of lawyers we notice certain trends towards liberalisation (especially in respect of conduct regulation) in most of our case study countries. Concerning notaries, such tendencies are generally less common in the selected case study countries. However, there are some examples for liberalisation in this profession in other member states. Countries in this category are Austria (liberalised fee system, advertising) and especially the Netherlands (fees, advertising, inter-professional cooperation). 4.2 Accountancy Services In relation to accountancy professions detailed analysis has been carried out for Italy, the Netherlands, Germany and France. According to our regulation indices, the highest degree of market-entry regulation of these countries exists in France and Germany, whereas it is considerably lower in the Netherlands and Italy. Apart from differences in the education systems, this is again conditional primarily on different exclusive tasks reserved to the professions: whereas tax-advising is a reserved task in Germany in France, it is not in Denmark and Italy. Conduct regulation is highest in Germany, followed by Italy, France and the Netherlands, where rather liberal regulations are in place. As in the field of legal services, no truly system-changing developments have taken place in the regulatory systems of the relevant professions during the last ten years. However, several steps towards liberalisation can be observed. The regulatory system of accountants in Italy in the last ten years has undergone several changes. Some of them led to a higher degree of freedom for professionals. Regulatory changes of this kind primarily concerned prices and fees, forms of advertising and forms of business (although the last one has not effectively been implemented yet). 88 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The regulatory systems for accountants in the Netherlands are a rather good example for a country where the market-entry regulations basically fulfil the minimum requirements of the EC 8th Directive on auditing, and where the conduct-regulations are rather liberal. This is especially true for regulation on fees and prices as well as advertising and, with some limitation, also for inter-professional co-operation. Both professional bodies (the NOvAA and the NIvRA) appear to be rather open-minded as regards further liberalisation, especially concerning inter-professional co-operation. However, this reform, up to now, has been strongly opposed by Dutch lawyers, who worry about a possible market dominating position of the big accounting firms also occurring in the legal services field. In Germany, some steps towards liberalisation have been taken, mainly in respect of business forms and regulations concerning advertising. Regulation for French auditors appears to be rather restrictive with respect to entry regulation and no changes in this respect have occurred during recent years. Conduct regulation, however, appears to be rather liberal. This is especially the case in respect of price regulation and partially as regards the form of firm and inter-professional co-operation. At the same time, the profession has adopted new measures in relation to professional quality management (peer reviews etc.) and continuing education. 4.3 Technical services In regard to technical professions (engineers and architects), detailed analysis has been undertaken for Austria, Finland, France and Spain. Finland is an example of a country, where almost no special regulation in the sense of rules concerning market entry and conduct applies to the technical professions. This means that no licensing system exists and that no special rules on prices, business forms, advertising etc. have to be followed. Neither engineers nor architects are obliged to become members of, or be registered with, a professional association. The associations of architects (SAFA), construction engineers and architects (RIA) as well as civil engineers (RIL) have been set up on a voluntary basis. Austria is one of the countries with a high degree of regulation concerning market entry, but with comparatively low conduct regulation. The same is true for Spain. In France, special market entry regulation (in the sense of licensing) only applies to architects, but not to engineers. In France, conduct regulation is non-existent (engineers), and of a very liberal character (architects). Taken altogether, the case studies show the considerable variations concerning different degrees of regulation in technical services that occur throughout the European Union. As in the other professions, recent trends in regulation show no complete system changes but a gradual adaptation towards more liberal rules. In respect of our case studies, the latter is especially true for Austria and Spain. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 89 In Austria since 1994, Civil Technicians may establish Civil Technician Corporations. The opening of local branch offices has been allowed since 1993/94: the formerly applicable restrictions have been abolished. The same is true for price regulation that established minimum prices, which was in place until 1993. In Spain rather tight regulation of prices existed until 1997, but it was rescinded in that year. Regulations restricting which services may be offered in geographical terms were also abolished in 2000. However, the professional bodies are still organised on a territorial basis, but membership of one territorial body is now enough to practise anywhere in Spain. In France, advertising for architects was liberalised to some degree in 1992. In respect of market entry, a reform is currently under discussion. The proposed reform does not show clear signs of liberalisation. On the one hand, if it were to be adopted, some facets of the reform would lead to a considerably higher degree in market entry regulation (by defining a broader range of cases where planning has to be performed by a licensed professional). On the other hand, the group of professions allowed to perform building and planning tasks would be enlarged (by licensing of professions other than architects in respect of these tasks). 4.4 Pharmacy Services For pharmacists detailed analysis has been carried out for Ireland, Portugal, Sweden and Germany. The profession of the pharmacist is, broadly speaking, organised as a licensing model in all EU member states. Nevertheless, there are still significant differences between countries. In Sweden, pharmaceutical products are sold via a state-monopoly. There is only one state owned company carrying out the services of pharmacies. Portugal represents an example of a large group of countries (Austria, Belgium, Denmark, Finland, France, Italy, Spain, Greece, Luxembourg) that have quite extensive regulations. In all these countries the number of pharmacies is restricted (via economic needs tests etc.). Ireland is (together with Germany, the UK and the Netherlands) one of the countries where no such regulations apply. Generally speaking, steps towards liberalisation have occurred less frequently in this professional group than in the other professional groups analysed in this report. One exception is Ireland, where in fact a “re-liberalisation” took place. Regulations came into force as from May 1996 that limited the number of General Medical Scheme (GMS) dispensing pharmacies, i.e. pharmacies which are reimbursed by the GMS for dispensing prescriptions to medical cardholders and other qualifying individuals. The requirements for opening a new pharmacy included several preconditions in regards to minimum population density in the local area and distance from already established pharmacies. The Minister for Health and Children announced on 31st January 2002 his revocation of these regulations. The effect of the revocation, in respect of the awarding of new Community Pharmacy 90 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Contracts, is a return to the pre-1996 situation, whereby the applicant applies to the health board for a Community Pharmacy Contract, which may be granted providing the relevant educational preconditions are met. In Portugal, some regulatory changes have occurred in recent years, but there are no signs of real liberalisation. A similar lack of recent regulation can be stated for Germany. However, we should stress that Germany is one of the few countries in the European Union where the number of community pharmacies is not limited via economic needs tests etc. 4.5 Summary All aspects considered together, a high degree of “system-stability” is evident for all professions analysed in the case studies of this report in respect of regulatory changes. In this context, we did not find any complete system change (from a licensing model to certification model or in the reverse direction) and it only rarely occurs that exclusive tasks which are reserved to one or more liberal professions are opened to other potential service providers in the market. However, frequent changes in the regulatory framework can be observed in the field of conduct regulations. These changes in almost all cases have taken the form of liberalisation (e.g. in respect of price regulation, advertising, form of firm, inter-professional co-operation). Such liberalisation is seldom accompanied by the introduction of more restrictive regulation in the field of market entry (but an example of this indeed happening is the case of lawyers in Denmark). Despite the continued existence of traditional, somewhat ‘defensive’ forms of regulation on market entry and conduct in a few countries, there is a trend to more pro-active forms of consumer protection and quality management, which implies a lower degree of anticompetitive effects. For several professions in several countries in recent years, for example, professional indemnity insurance has been made obligatory (or, if already in existence, broadened). Other examples are the introduction of obligatory continuing education, facilities for specialisation, or in some cases, specific voluntary certification and/or benchmarking systems. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 91 5. A Benchmarking Survey of Professional Services This section presents a comparative analysis of nearly all EU member states in terms of key economic variables and indicators. For a few countries and professions no comparable data has been found, and for this reason they are missing from the analysis. Unfortunately from an analytical point of view, comparable data, i.e. statistical data collected for groups of services on an identical basis, exists only, and then again sparingly, at the 4digit level of the NACE classification system. Thus our results are grouped into four professional service areas for analysis as follows, whereby aggregated data for certain professions are included (shown in brackets): – Legal professional services (lawyers and notaries) – Accountancy Services (accountants, statutory, but also book-keeping*and tax advising* – Technical professions (consulting engineers (various sub-classifications) and architects) – Pharmacists The inclusion of economic activities like book-keeping and tax-advising (marked with *) in a 4-digit category poses a problem for the analysis: these occupations, inasmuch as they may be carried out by persons who are not included as professionals in our scope of professional services as ‘liberal professions’ also contribute to the economic statistics. Due to lack of an alternative (which would filter out these activities) the analysis of ‘accounting services’ is carried out in the following pages as if the activities were within the scope of our professional definitions. The possible resulting contamination of the data and the corresponding analysis is mitigated by the observation that such activities as tax-advising are also within the domain of professional accountants. Due to the over-proportionate contribution to economic output of large and medium-sized accountancy firms, the possible distorting effect on turnover statistics is likely to be less than the effect on employment. Such observations will be true for all member states, sometimes to slightly varying degrees. Nevertheless, within the ‘broadbrush’ approach of our analysis the deleterious effects on consistency are assumed to be minimal. 5.1 Description of the Dataset Basic data on the number of firms (F), turnover of the 4-digit branch (T) and employment (E) are presented for the year 2000, or alternatively, when this data was not available, for the nearest year to 2000. At the time of the study data for 2001 was only available in a few cases, so 2000 was chosen as the base year. 92 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Employment figures include both paid employees and also ‘unpaid persons’, i.e. selfemployed and assisting spouses. The definitions are based on EUROSTAT definitions1, which are unified for EU member states. Data definitions from national data which differ from the EUROSTAT definitions were taken into account: in some cases a correction to the data could be justified; in some few cases the data from the member state statistical office could not be used to augment the dataset because of incompatibility. Key indicators are ratios that are calculated based on the variables F, T and E, and their relation to the population (Pop) and GDP of each member state in the survey. The following units are used: - F: Number [Firms] - T: Million EUR (or ECU as appropriate) - E: Number [Employment] - Pop: Millions [Population] - GDP: Million EUR (or ECU as appropriate) [Turnover] ( - TS: Turnover Share) [Gross Domestic Product] A further key variable associated with each branch is the number of practising professionals.2 The following definitions were used: - Legal Professions: Total number of qualified registered lawyers, notaries in practice, excludes patent lawyers (relatively small in number) - Accountancy Professions: Total number of professional accountants (for example registered in the ‘Chamber’ or ‘Chartered’/’Certified’ and equivalents) and statutory auditors in public practice (note: usually qualified with academic degree but with some exceptions), auditors, but excluding ‘only tax advisors’ - Architects and Engineering Professions: Number of academic (university, polytechnic degree) practising consulting engineers and architects - Pharmacy Profession: Academically qualified registered, non-clinical pharmacists For each of the four branches there does not exist a unique single complete source of data on professionals. Our data has been constructed based on numerous sources, data from IHS questionnaires (where given), and many telephone enquiries to professional bodies in the member states. The resulting figures for professionals are the best estimates based on 1 2 New Cronos Database. see also Note on terminology in section 1.1. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 93 this information3. The information on the number of practising professionals is important for the further analysis. An additional variable, volume of services provided (V) has been derived from the turnover variable: it is expressed in units of millions POI-adjusted EUR (price and output adjusted euros), i.e. adjusted by price factors and the size of the GDP in each member state4. Volume expresses the branch turnover in a comparable unit: different effects of price levels and the total output of the economy are taken into account. The latter adjustment is considered necessary because professional business services derive their revenues in large part from the business sector. It can be expected ceteris paribus that the level of output of a professional service is dependent on the level of output on a per capita basis (or productivity) of the whole economy.5 Despite our best efforts, inaccuracies in data are possible. For this reason we have adopted lines of empirical analysis that are robust. That is to say that the observations made would withstand sensitivity analysis of variations in the data, to within any reasonably expected deviations. Each indicator shows a spectrum of results, shown by the coefficient of variation6. The categorisation of member states, for each indicator on its own merits, into ‘High’, ‘Medium’ and ‘Low’ is based on the median values, not the mean, as the latter can be strongly biased by exceptional high or low values. Roughly speaking, in each case about one third of member states are classified in each category: but this is not a fixed rule – if, for example 6 states show values close together near the median value, then these will all be classified as ‘Medium’. See the charts ‘Distribution of Key Ratios in EU Member States’ in each of the benchmarking sections for legal, accountancy, technical, and pharmacy services respectively. Altogether there are data for13 member states used in the benchmarking of legal services (Portugal and Greece missing), 12 member states for accountancy services (Belgium, Portugal and Greece missing), 13 member states for technical services (Portugal and Greece missing), and 14 member states for pharmacies’ services (Greece missing). 3 See Annexes D for sources. POI – price and output indices - were constructed as the product of Purchasing Power Parities (PPPs) deflators, which remove the effect of price level differences between countries, and GDP per capita in Purchasing Power Standards (PPS) obtained from EUROSTAT. One PPS – a ‘standardised euro’ based on an EU average - buys the same given average volume of goods and services in all countries. See Annexes C for these indices. 5 The POI adjustment in any year has the same effect as comparing the ratio of branch turnover with GDP for each member state (the indicator T in % of GDP), which also takes into account differences in prices and outputs, but has the disadvantage of being a dimensionless coefficient. 6 The coefficient of variation (CV%) is the intrasubject standard deviation divided by the mean, expressed as a percentage. 4 94 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 5.2 Results of Benchmarking Reference in the following is made to the branch Overview-tables which appear before each benchmarking analysis i.e. for each of legal, accountancy, technical, and pharmacy services. The sequence of appearance of member states in the overview-tables is from left to right, in decreasing order of the overall regulation index (the sum of entry and conduct regulation indices) which was presented in Chapter 3, i.e. most highly regulated to least regulated. The intention of the benchmarking exercise is to determine whether there are any indications of causality between the performance of individual EU member states in each of the four professional services areas, and the degree of regulation as expressed in the indices of regulation. Whereas the construction of the regulation indices involves a weighting of factors, which inevitably involves an element of subjectivity, the choices made have been explained in section 2 and the calculation methodology has been made explicit. The data used to calculate key indicators has been obtained from published statistics, so that there is no a priori linkage between these two sets of data. Interpretation of the relationship between indicators and regulation indices is, however, a delicate matter. This is not chiefly conditioned by remaining uncertainties in the data on professional services at the 4-digit level, nor by the construction of the regulation index, but by the inherent aggregated level of the data, and the not entirely one-to-one correspondence between the 4-digit level and the professions studied. Furthermore, regulation of the professions is surely not the only factor that can influence outcomes in member states, even when care is taken to analyse the results on an equitable comparative basis. Other systemic variables that can affect results, such as the distribution of demand for services, including the ‘product mix’ of services, patterns of education and employment, or efficiencies of production, among others, may all serve to mask the effects of regulation. Nevertheless, we can detect certain patterns that do not appear to be random effects, inasmuch as we can explain the data using the knowledge gathered about the differences between member states in their regulation systems. Some trends are only apparent in a group of countries: contradictions in trends are noted where of importance, but some effects may be uncommented. A case in point is Luxembourg, which is considered a special case of its own, due to its size and concomitant specialised business and industrial structure. In examining a ratio, it is simple arithmetic that it will be, for example, relatively high if either the numerator is also relatively high in international comparison to the denominator, or the denominator is relatively low in international comparison to the numerator. So the fact (of being, say a relatively high value) is not in itself necessarily conclusive. The importance of a relationship (or lack of it) lies in the interplay of several characteristics simultaneously, and interpreting these is the aim of the following sub-sections. Care is taken not to fall into the trap of casuistic explanations. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 95 5.2.1 Legal Services All the comparisons in this section refer to data in Overview Table 5-1, and to the relative classification shown by the ‘colour coding’ as high, medium or low in relation to member states in the survey. Austria and France7 are medium producers of legal services (in terms of turnover as a percentage of GDP or volume per capita Austria is slightly less than median, whereas France is above the median of the countries surveyed). The ‘professional density’, i.e. the relative number of legal professionals as defined in the previous section, is however low in both countries, which results in high turnover per professional (and volume per professional) relative to the group of member states surveyed. Employment is low in Austria, and somewhat below the median value in France, and the number of firms is relatively low in Austria, medium in France, in relative terms, respectively. Interestingly, Austria and France have the highest regulation indices, 7.34 and 6.61 respectively (excepting Luxembourg). These countries also show the highest index on entry regulations, which would offer an explanation for the low number of professionals, and high volumes generated in comparison to this number. The other country with an (enormously) high volume to professional ratio is Belgium, which appears to be an extreme outlier in terms of per capita volume, has a medium number of professionals for its size. A group of countries with low regulation index scores, Netherlands, Denmark, Finland and Sweden have relatively low numbers of professionals, but unlike Austria and France the overall volume per professional in these countries is in the middle bracket. Netherlands and Denmark are also the only countries with low number of firms and relatively high employment per firm and high or medium turnover per firm (this last indicator is high for Netherlands, just above median value for Denmark), indicative of a higher degree of concentration in the market. This points to an association between ‘market shake-out’ or concentration processes and low degrees of regulation, especially in the area of conduct regulation, and seems to be a clear result of firms having the scope to merge. This process is, however, not associated with high market power, as the volume of legal services per capita in both these countries is below the median (and low in Denmark). 7 Note that there is some uncertainty concerning data for France – c.f. Case Studies in Part 2. In this analysis we use extrapolated Eurostat data for France (see corresponding Case Study in Chapter 7). Even if the INSEE data were used, the sense of the analysis above for accountancy services does not change: in this case the volume per capita for France is over twice the median value, but the volume per professional is over four times the median value. 96 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In contrast, Spain and Italy exhibit a high degree of de-concentration, with relatively high numbers of firms and also a high density of professionals, so fairly high degrees of (entry) regulation do not seem to act as a barrier to entry in these countries. The level of overall employment in relation to the number of professionals in Spain and Italy is also the lowest in our survey sample, so it seems possible that there is a different division of labour between professionals and other employees, including trainees, applying, compared to other countries. UK and Ireland are high volume countries for legal services, also on a per employed person basis, which can be related to systemic differences in legal practice, but in both cases the volume per professional does not rise out of the middle category. In both member states the degree of regulation takes on medium to low values. They are also characterised by having large firms, whether measured by the number of professionals per firm or employment per firm, as do two countries with lower overall degree of regulation, namely Netherlands and Denmark. It is noticeable that all four countries have low indices of entry regulation, but this trend is not continued in the case of Sweden and Finland. Germany appears as an exception to one of the trends described above. Despite having a high regulation index the volume per professional is not high. However the volume of business compared to the level of employment is low despite a medium per capita volume, i.e. relatively low productivity, in common with Luxembourg, which also has a high regulation index. The relative number of firms and the associated employment per firm are both in the ‘average’ bracket for German legal services. Since data is only available for Germany for the year 2000, there is a question as to whether the effects of reunification in 1991, and the subsequent combination of two legal systems from different models of society, are still of major influence. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 97 Table 5-1 Overview – Legal Services 2000 Legal Services (k7411) Key Variables: F in units T in Mio EUR E in units Professionals in units3 AUT LUX FRA2 GER ESP1 ITA 2 792 1 234 16 456 4 592 494 130 1 395 830 30 340 13 352 146 018 39 940 31 195 11 863 200 461 105 724 79 565 5 041 127 812 105 296 87 608 11 273 148 665 139 500 (2001) (2001) (2001) (2000) (2001) BEL IRL1 27 196 14 744 85 787 14 888 1 525 971 11 065 7 476 (2001) (2001) (2001) 8.10 0.44 59.23 82.16 39.39 57.68 Population in Mio. GDP in Bil. EUR 205 21 1 405 2 026 565 1 166 Key Indicators: 442 263 440 380 63 129 T per Firm in 1000 EUR 5 894 2 824 4 813 6 426 1 606 1 697 E per 1000 firms 75 93 91 59 39 76 T per E in 1000 EUR E per Mio. of Pop 2 031 3 200 2 465 2 440 3 244 2 577 345 1 133 512 380 2 020 1 519 F per Mio. of Pop 1 645 1 680 1 316 3 389 1 323 1 592 Prof per 1000 F T per Prof in 1000 EUR 269 157 334 112 48 81 3 584 1 681 3 656 1 896 1 214 1 066 E per 1000 Prof 567 1 904 674 1 287 2 673 2 419 Prof Density (per Mio. Pop) 152 298 225 144 128 195 T per cap. in EUR T in % of GDP 0.60 0.62 0.95 0.59 0.89 0.97 1 101 61 12 947 10 849 7 472 12 577 Vol in POI-adjusted Mio. EUR* 136 139 219 132 190 218 Vol per cap. in EUR* 394 123 427 348 94 144 Vol per firm in 1000 EUR* 67 43 89 54 58 85 Vol per E in 1000 EUR* Vol per Prof in 1000 EUR* 240 73 324 103 71 90 4.1 3.8 3.9 3.7 3.4 2.6 Entry Index 3.3 2.8 2.7 2.8 3.1 3.9 Conduct Index REGULATION INDEX 7.3 6.6 6.6 6.5 6.5 6.4 * adjusted for relative prices and national output - NB. not shown as high, medium or low (absolute, not relative values) 10.24 248 3.73 89 542 3 154 172 8 378 2 656 547 990 5 762 1 454 1 440 5.94 13 715 1 339 504 160 921 2.5 2.1 4.6 637 7 256 88 2 963 408 4 902 130 1 480 2 002 260 1.09 868 232 569 78 116 2.4 2.1 4.5 Summary statistics Sources: Eurostat, IHS, national statistics Colour code: high relative to median medium relative to median low relative to median 1 2 3 1999 based on extrapolated values reference year see row below Key Variables: F in units T in Mio EUR E in units Professionals in units Population in Mio. GDP in Bil. EUR Regulation Indices: Entry Index Conduct Index REG. INDEX Median Standard deviation Mean Coeff. of variation 4 344 2 565 36 700 13 222 10.2 248 22 720 6 837 83 083 42 938 27.4 631 29 673 7 752 88 396 51 973 28.2 667 131% 113% 106% 121% 103% 106% 2.6 2.1 4.6 2.8 2.1 4.9 1.1 1.1 2.1 41% 53% 43% Key Indicators: T per Firm in 1000 EUR E per 1000 firms T per E in 1000 EUR E per Mio. of Pop F per Mio. of Pop Prof per 1000 F T per Prof in 1000 EUR E per 1000 Prof Prof Density (per Mio. Pop) T per cap. in EUR T in % of GDP Vol in POI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Vol per Prof in 1000 EUR* NLD1 UK 24 416 25 062 272 000 111 772 DNK SWE FIN 2 675 2 565 36 700 13 222 1 658 876 14 507 4 359 4 344 1 388 15 881 8 480 1 557 384 3 334 2 120 (2001) (2001) (2000) (2000) (2002) 59.62 1 548 15.76 374 5.33 176 8.86 247 5.17 132 1 026 11 140 92 4 562 410 4 578 224 2 434 1 875 420 1.62 21 584 362 884 79 193 3.3 1.2 4.5 959 13 720 70 2 329 170 4 943 194 2 776 839 163 0.69 2 309 147 863 63 175 2.1 1.8 3.9 528 8 750 60 2 722 311 2 629 201 3 328 818 164 0.50 597 112 360 41 137 2.1 0.9 3.0 319 3 656 87 1 792 490 1 952 164 1 873 957 157 0.56 1 125 127 259 71 133 2.0 0.4 2.4 247 2 141 115 645 301 1 362 181 1 573 410 74 0.29 340 66 219 102 161 0.0 0.3 0.3 Median Mean 440 4 813 87 2 577 410 1 680 181 1 896 1 287 164 0.69 2 309 147 360 71 137 460 5 621 86 3 027 820 2 451 237 2 486 1 375 294 1.18 6 580 263 399 76 210 Standard deviation 287 3 778 32 1 842 780 1 507 239 1 322 739 355 1.47 7 068 332 255 31 225 Coeff. of variation 62% 67% 37% 61% 95% 61% 101% 53% 54% 121% 125% 107% 126% 64% 40% 107% 98 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 5-1 Distribution of Key Ratios in EU Member States - Legal Services Professional Density (per Mio. of Population) 3000 2500 2000 1500 1000 500 0 ESP ITA IRL LUX UK BEL GER SWE NLD DNK FRA AUT FIN GER SWE DNK FIN Sources: EUROSTAT, national statistics, IHS Volume per cap. in EUR 1600 1400 1200 1000 800 600 400 200 0 BEL UK IRL FRA ITA ESP NLD LUX AUT Sources: EUROSTAT, national statistics, IHS Volume per person employed in 1,000 EUR 180 160 140 120 100 80 60 40 20 0 BEL FIN FRA ITA UK IRL SWE AUT Sources: EUROSTAT, national statistics, IHS NLD ESP GER LUX DNK I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 99 5.2.2 Accountancy Services All the comparisons in this section refer to data in Overview Table 5-2, and to the relative classification shown by the ‘colour coding’ as high, medium or low in relation to member states in the survey. Austria and France8 are blow median producers of accountancy services (in terms of turnover as a percentage of GDP or volume per capita) whereas the branch in Germany may be classed as being of medium size. The ‘professional density’, i.e. the relative number of accountancy professionals per head of population, is however low in all three member states. As a result the turnover per professional (and volume per professional) is in a higher category than the output volume on its own, i.e. in the case of France and Austria, volume per capita is relatively low, but volume per professional is medium; in the case of Germany volume is medium, but volume per professional is high. Employment is also low in Austria as in France, relatively, and at a medium level in Germany: exactly the same holds for the number of firms in each country. In our data, Spain, a medium volume producer, is the same as Germany in terms of all the variables mentioned in last paragraph. The number of professionals recorded for Spain is however, certainly much lower than the figure needed for a fair comparison, because it is restricted to the number of registered auditors in practice without the number of accountants. Since accountants do not require registration, we were unable to obtain a valid estimate for the number of accountants.9 Interestingly, Austria has the highest regulation index (6.19), and Germany and France have the third and fourth highest regulation indices, 6.08 and 5.83 respectively. In terms of the entry index alone, Austria ranks first, France second, and Germany third, which would offer an explanation for the low number of professionals, and high volumes generated in comparison to this number. As is the case for legal services, Italy exhibits a high degree of de-concentration, with relatively high numbers of firms and also a high density of professionals, so the high degree of (entry) regulation (second highest overall index, and fifth highest index in terms of entry) does not seem to act as a barrier to entry. The level of overall employment in relation to the number of professionals in Italy is also the lowest in our survey sample, so it seems possible that there is a different division of labour between professionals and other employees, including trainees, applying, compared to other countries. 8 Note that there is some uncertainty concerning data for France – c.f. Case Studies in Part 2. In this analysis we use extrapolated Eurostat data for France (see corresponding Case Study in Chapter 8). Even if the INSEE data were used, the sense of the analysis above for accountancy services does not change: in this case the volume per capita for France is classed as medium, but the volume per professional is high. 9 Communication with Asociación Española de Asesores Fiscales. 100 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In contrast, the three countries with the lowest regulation indices, Denmark, UK and Ireland have each a density of professionals in a higher category than the associated indicator, volume per professional (medium/low, high/medium and high/low respectively), so that the opposite effect from that applying to Austria, France and Germany is in evidence. Sweden and Finland are respectively medium and low suppliers of accountancy services, that are at least ‘neutral’ in terms of the categories relative number of professionals and volume per capita (medium/medium and medium/low respectively). Netherlands has a smaller number of professionals (medium category) than the associated volume generated per professional (high), but it is also high volume per capita producer of accountancy services so there are no clear trends that would mark it out in our analysis. Interestingly, it shares middle position in terms of regulation index along with Finland among 12 member states surveyed. A higher degree of market concentration i.e. a low number of firms compared to the country’s size (population) combined with relatively high employment per firm and volume per firm, is present in UK, Ireland, and France, and to a slightly lesser extent in Germany. The first two of these member states exhibit a low degree of regulation (as summarised by the regulation index) whereas the latter two countries are high up on the scale of overall regulation. The degree of conduct regulation is in cross-professional examination, lower, however (c.f. legal services). In accountancy services, therefore, the existence of relatively higher numbers of larger firms, employing higher numbers of persons, most likely is a result of firms having the scope to merge. This process is, however, associated with high market power, as the volume of services per accounting firm in these countries is without exception high. This finding is unique among the four professional services areas covered in this survey. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 101 Table 5-2 Overview – Accountancy Services 2000 Accounting (k7412) Key Variables: F in units T in Mio EUR E in units 3 Professionals in units AUT ITA FRA2 GER NLD1 LUX FIN 3 530 1 377 22 663 3 068 90 216 9 460 182 211 88 421 35 070 17 038 283 087 14 078 15 800 9 023 135 476 14 800 780 424 4 164 346 13 680 5 310 82 400 6 359 4 239 595 9 924 3 126 (2000) (2001) (2000) (2002) (2001) (2001) 8.10 57.68 82.16 59.23 0.44 15.76 Population in Mio. GDP in Bil. EUR 205 1 166 2 026 1 405 21 374 Key Indicators: 390 105 486 571 544 388 T per Firm in 1000 EUR 6 420 2 020 8 072 8 574 5 338 6 023 E per 1000 firms 61 52 60 67 102 64 T per E in 1000 EUR 2 797 3 159 3 445 2 287 9 550 5 228 E per Mio. of Pop 436 1 564 427 267 1 789 868 F per Mio. of Pop 869 980 401 937 444 465 Prof per 1000 F 107 1 210 610 1 226 835 449 T per Prof in 1000 EUR 2 061 20 108 9 154 12 035 12 958 7 387 E per 1000 Prof 379 1 533 171 250 794 403 Prof Density (per Mio. Pop) 170 164 207 152 973 337 T per cap. in EUR 0.67 0.81 0.84 0.64 2.03 1.42 T in % of GDP 1 229 10 554 15 581 8 749 198 4 780 Vol in POI-adjusted Mio. EUR* 152 183 190 148 454 303 Vol per cap. in EUR* 348 117 444 554 254 349 Vol per firm in 1000 EUR* 54 58 55 65 48 58 Vol per E in 1000 EUR* 401 119 1 107 591 572 752 Vol per Prof in 1000 EUR* Entry Index 4.2 3.2 3.6 4.0 3.8 3.1 Conduct Index 2.0 2.9 2.5 1.8 1.2 1.4 REGULATION INDEX 6.2 6.1 6.1 5.8 5.1 4.5 * adjusted for relative prices and national output - NB. not shown as high, medium or low (absolute, not relative values) Summary statistics Sources: Eurostat, IHS, national statistics Colour code: high relative to median medium relative to median low relative to median 1 1999 based on extrapolated values reference year see row below Key Variables: F in units T in Mio EUR E in units Professionals in units Population in Mio. GDP in Bil. EUR Median Standard deviation Mean 20 538 6 026 94 047 16 576 28.8 663 25 388 6 580 97 090 26 535 28.9 686 124% 109% 103% 160% 100% 104% 2.9 1.3 4.0 3.0 1.4 4.4 0.7 0.8 1.4 24% 61% 31% 3 Regulation Indices: Entry Index Conduct Index REG. INDEX IRL1 SWE UK 37 064 5 041 128 490 5 162 13 212 2 306 20 561 4 100 1 416 687 11 559 2 696 (2001) (2001) (2001) 5.17 132 39.39 565 8.86 247 140 2 341 60 1 919 820 737 190 3 175 605 115 0.45 528 102 124 53 169 2.6 0.9 3.6 136 3 467 39 3 262 941 139 977 24 892 131 128 0.89 7 472 190 202 58 1 447 1.9 1.5 3.4 175 1 556 112 2 320 1 491 310 562 5 015 463 260 0.93 1 868 211 141 91 456 2.4 0.9 3.3 Coeff. of variation 13 446 3 673 52 532 5 120 12.3 310 2 ESP1 Median Key Indicators: T per Firm in 1000 EUR E per 1000 firms T per E in 1000 EUR E per Mio. of Pop F per Mio. of Pop Prof per 1000 F T per Prof in 1000 EUR E per 1000 Prof Prof Density (per Mio. Pop) T per cap. in EUR T in % of GDP Vol in POI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Vol per Prof in 1000 EUR* 389 5 681 63 3 176 795 803 506 6 201 534 196 0.83 3 324 186 301 57 428 Mean 373 5 381 70 3 678 851 859 589 9 075 606 273 0.96 5 788 213 318 60 530 DNK 27 350 19 674 231 000 51 675 4 104 1 376 17 024 5 077 (2001) (2001) (2001) 3.73 89 59.62 1 548 5.33 176 485 8 163 59 3 095 379 1 904 255 4 287 722 184 0.77 614 165 434 53 228 2.7 0.3 3.0 719 8 446 85 3 874 459 1 889 381 4 470 867 330 1.27 16 943 284 619 73 328 2.7 0.3 3.0 335 4 148 81 3 194 770 1 237 271 3 353 953 258 0.78 938 176 229 55 185 2.2 0.6 2.8 Standard deviation 199 2 636 21 2 037 512 579 390 7 236 399 232 0.43 6 038 94 169 12 405 Coeff. of variation 53% 49% 30% 55% 60% 67% 66% 80% 66% 85% 44% 104% 44% 53% 19% 76% 102 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 5-2 Distribution of Key Ratios in EU Member States - Accountancy Professional Density (per Mio. of Population) 1800 1600 1400 1200 1000 800 600 400 200 0 ITA DNK UK LUX IRL FIN SWE NLD AUT FRA GER ESP IRL AUT FRA FIN IRL LUX Sources: EUROSTAT, national statistics, IHS Volume per cap. in EUR 500 450 400 350 300 250 200 150 100 50 0 LUX NLD UK SWE ESP GER ITA DNK Sources: EUROSTAT, national statistics, IHS Volume per person employed in 1,000 EUR 100 90 80 70 60 50 40 30 20 10 0 SWE UK FRA ESP NLD ITA DNK Sources: EUROSTAT, national statistics, IHS GER AUT FIN I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 103 5.2.3 Technical Services All the comparisons in this section refer to data in Overview Table 5-3, and to the relative classification shown by the ‘colour coding’ as high, medium or low in relation to member states in the survey. Austria and Spain are, compared to respective size, medium producers in the technical services branch (in terms of turnover as a percentage of GDP or volume per capita). The ‘professional density’, i.e. the number of architecture and consulting engineering professionals per head of population, as defined in the previous section, takes on, however, the lowest values of all member states in the survey. Correspondingly, the volume of services supplied per professional is in the highest of these 13 countries. A similar situation, albeit in a less pronounced form, exits in the market for technical services in Germany. Germany is also, in relative (but not absolute) terms, a medium producer of technical services, with an output per capita volume about 10% under the median in our survey. Its above median volume per professional coefficient is therefore rather to be explained in terms of a professional density more than 10% beneath its respective median position. In yet weaker form, these observations also hold for the Belgian technical services market. A certain contrast should be noted between the data for Germany and Belgium and those of Denmark. Although all three countries have been banded in our classification in terms of the three indicators discussed here as medium, the latter has generated a volume per capita that is about 20% above median, with professional numbers also about 20% higher than median, which results in a volume per professional that takes a value exactly in the middle of the countries in our survey. Interestingly, of the countries thus far discussed, only Denmark has a low (actually, zero) regulation index. In contrast, Germany and Austria have high degrees of regulation, and the regulation index for Spain and Belgium takes on above-median values. In terms of the entry index alone, Austria ranks first, Spain third, Germany fourth, and Belgium fifth, which offers an explanation for the low number of professionals, and high volumes generated in comparison to this number. As is the case for legal services and accountancy services, Italy exhibits a high degree of deconcentration, with relatively high numbers of firms and also a high density of professionals, so the high degree of (entry) regulation (the highest overall index, and second highest index in terms of entry) does not seem to act as a barrier to entry. The level of overall employment in relation to the number of technical professionals in Italy is also the third lowest in our survey sample, so it seems possible that there is a different division of labour between professionals and other employees, including trainees, applying, compared to other countries. 104 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In contrast, UK, Ireland and Netherlands have each a density of technical professionals in a higher category than the associated indicator, volume per professional (high/low, medium/low, and high/low, respectively), and these countries have very low scores on the scale of regulation index (zero for UK, zero for Ireland, and zero for conduct regulation in Netherlands) so that the opposite effect from that applying to many of the highly regulated technical services of countries discussed above. Sweden exhibits a high volume per professional but this is due to it being the highest per capita producer of technical services in our survey group of member states, rather than being conditioned by the number of professionals, which is somewhat above median level. Finland may be classed along with Spain in terms of the key indicators examined in the overview table, but this would otherwise go against the grain of our general findings. (This assumes, however, that the number of professionals for Finland is in fact not an underestimate.10 ) A higher degree of market concentration i.e. a low or medium number of firms compared to the country’s size (population) combined with high employment per firm and volume per firm well above the median, is found in UK, Ireland, and Netherlands, all three very low regulated countries for technical services. France11 fits into this general pattern also, and to a much lesser extent in Denmark and Germany. Germany is thus the only exception in the above list, having a high index of regulation. In technical services, therefore, the existence of relatively higher numbers of larger firms, employing higher numbers of persons, is clearly associated with a low degree of regulation, and seems to be a clear result of firms having the scope to merge. This process is not associated with high market power, as the volume of technical services per capita in these countries is medium or low (an exception being UK). 10 11 Data for Finland: 3000 practising graduated civil engineers; SAFA estimates the number of architects at 3500. Note that there is some uncertainty concerning data for France – c.f. Case Studies in Part 2. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 105 Table 5-3 Overview – Technical Services 2000 Technnical Services (k7420) Key Variables: F in units T in Mio EUR E in units Professionals in units3 ITA GER LUX AUT ESP 2 BEL FRA 195 754 15 848 278 437 131 448 69 880 32 490 360 269 130 148 809 310 3 449 789 7 932 4 517 37 385 7 673 79 679 11 911 184 682 48 723 14 824 4 428 39 598 16 992 (2001) (2001) (2001) (2000) (2001) FIN 50 376 29 662 287 698 80 300 6 337 2 784 26 355 6 500 (2001) (2000) 57.68 82.16 0.44 8.10 39.44 10.24 Population in Mio. GDP in Bil. EUR 1 166 2 026 21 205 609 248 Key Indicators: 81 465 383 569 149 299 T per Firm in 1000 EUR 1 422 5 156 4 263 4 713 2 318 2 671 E per 1000 firms 57 90 90 121 64 112 T per E in 1000 EUR 4 827 4 385 7 911 4 614 4 682 3 867 E per Mio. of Pop 3 394 850 1 856 979 2 020 1 448 F per Mio. of Pop 671 1 862 975 967 611 1 146 Prof per 1000 F 121 250 392 589 244 261 T per Prof in 1000 EUR 2 118 2 768 4 371 4 872 3 790 2 330 E per 1000 Prof 2 279 1 584 1 810 947 1 235 1 660 Prof Density (per Mio. Pop) 275 395 710 557 302 432 T per cap. in EUR 1.36 1.60 1.48 2.20 1.96 1.78 T in % of GDP 17 681 29 711 144 4 031 17 392 4 119 Vol in POI-adjusted Mio. EUR* 307 362 331 497 441 402 Vol per cap. in EUR* 90 425 178 508 218 278 Vol per firm in 1000 EUR* 64 82 42 108 94 104 Vol per E in 1000 EUR* 135 228 183 525 357 242 Vol per Prof in 1000 EUR* Entry Index 3.3 2.7 2.7 3.8 3.2 1.2 Conduct Index 3.0 3.2 2.7 1.2 0.0 1.4 REGULATION INDEX 6.3 5.9 5.3 5.0 3.2 2.6 * adjusted for relative prices and national output - NB. not shown as high, medium or low (absolute, not relative values) 59.23 1 405 589 5 711 103 4 858 851 1 594 369 3 583 1 356 501 2.11 28 762 486 571 100 358 1.1 0.5 1.5 Summary statistics Sources: Eurostat, IHS, national statistics Colour code: high relative to median medium relative to median low relative to median Key Variables: F in units T in Mio EUR E in units Professionals in units Population in Mio. GDP in Bil. EUR Median Standard deviation Mean 40 632 12 374 134 315 53 634 27.4 634 53 964 13 158 136 062 63 031 28.2 667 133% 106% 101% 118% 103% 105% 1.1 0.0 1.4 1.4 0.7 2.1 1.4 1.1 2.2 99% 154% 105% 1 1999 based on extrapolated values reference year see row below 2 3 Regulation Indices: Entry Index Conduct Index REG. INDEX 1 DNK 1 SWE IRL UK 14 780 7 242 93 100 39 000 5 719 3 795 29 742 11 595 1 663 869 10 928 7 189 24 369 7 393 53 450 17 850 (2001) (2001) (2000) (2001) (2001) (2000) 5.17 132 15.76 374 5.33 176 3.73 89 8.86 247 59.62 1 548 439 4 159 106 5 097 1 225 1 026 428 4 055 1 257 538 2.11 2 467 477 389 94 380 1.4 0.0 1.4 490 6 299 78 5 907 938 2 639 186 2 387 2 475 460 1.94 6 519 414 441 70 167 0.7 0.0 0.7 664 5 201 128 5 580 1 073 2 027 327 2 565 2 175 712 2.15 2 587 485 452 87 223 0.0 0.0 0.0 522 6 571 80 2 926 445 4 323 121 1 520 1 925 233 0.98 777 208 467 71 108 0.0 0.0 0.0 303 2 193 138 6 032 2 750 732 414 2 994 2 014 834 3.00 5 991 676 246 112 336 0.0 0.0 0.0 706 6 079 116 5 719 941 3 548 199 1 713 3 338 664 2.56 34 120 572 608 100 171 0.0 0.0 0.0 Coeff. of variation 14 824 7 242 53 450 17 850 10.2 248 NLD Median Key Indicators: T per Firm in 1000 EUR E per 1000 firms T per E in 1000 EUR E per Mio. of Pop F per Mio. of Pop Prof per 1000 F T per Prof in 1000 EUR E per 1000 Prof Prof Density (per Mio. Pop) T per cap. in EUR T in % of GDP Vol in POI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Vol per Prof in 1000 EUR* 465 4 713 103 4 858 1 073 1 146 261 2 768 1 810 501 1.96 5 991 441 425 94 228 Mean 435 4 366 99 5 108 1 444 1 702 300 3 005 1 850 509 1.94 11 869 435 375 87 263 Standard deviation 188 1 715 25 1 202 848 1 166 136 1 047 634 185 0.52 12 189 120 159 20 120 Coeff. of variation 43% 39% 25% 24% 59% 69% 45% 35% 34% 36% 27% 103% 28% 42% 23% 46% 56 097 39 619 341 000 199 039 106 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 5-3 Distribution of Key Ratios in EU Member States - Technical Services Professional Density (per Mio. of Population) 4000 3500 3000 2500 2000 1500 1000 500 0 UK NLD ITA DNK SWE IRL LUX BEL GER FRA FIN ESP AUT GER LUX ITA IRL NLD ITA LUX Sources: EUROSTAT, national statistics, IHS Volume per cap. in EUR 800 700 600 500 400 300 200 100 0 SWE UK AUT FRA DNK FIN ESP NLD BEL Sources: EUROSTAT, national statistics, IHS Volume per person employed in 1,000 EUR 120 100 80 60 40 20 0 SWE AUT BEL UK FRA ESP FIN Sources: EUROSTAT, national statistics, IHS DNK GER IRL I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 107 5.2.4 Pharmacy Services All the comparisons in this section refer to data in Overview Table 5-4, and to the relative classification shown by the ‘colour coding’ as high, medium or low in relation to member states in the survey. Compared to the three other professional services studied, all countries excepting Netherlands and Ireland exhibit a high degree of regulation in pharmacy services, as may be shown by comparison of index values. Both Denmark and especially Portugal have low number of professional pharmacists; whereas Denmark also exhibits a high volume per professional, the corresponding value for Portugal is a medium value. Both countries have high overall indices (in terms of absolute value, not the median value12). This is not the case for Netherlands’ pharmacy services, on the other hand, which meet the same criteria, but which are not particularly highly regulated, especially in terms of barriers to entry. The foregoing discussion would seem to indicate a certain weaker relationship between a low number of professionals and high volumes per professional than was found for the other three professions, exemplified in pharmacy services by the cases of Denmark and especially Portugal, as this finding is shared by the case of Netherlands, which is less restrictively regulated (whereas Italy is regarded as a special case, see below). It is in fact quite noticeable that the ‘spread’ of values in many of the indicators in pharmacy services differs from that found in the other three professions: the number of exceptional ‘high’ and ‘low’ deviations from the median value is correspondingly fewer. Also the coefficients of variation are generally smaller than for legal and accountancy professions (especially when the ‘outlier’ case of Sweden is disregarded). The inverse relationship between the relative number of professionals and corresponding volume (turnover share) of pharmacy business on a per professional basis is, however, more clearly in evidence: of the five countries for which the former indicator is in a higher classification category than the latter, Ireland, UK and Belgium have the first, third, and fourth least regulated pharmacy professions according to the regulation index (whereas Finland and France occupy middle positions on our scale). Italy is the only country meeting extreme opposite criteria, i.e. a high density of professionals combined with a low volume per professional, which in the other professions studied has often been associated with less regulated professions. Italy, however, has a high degree of 12 This is a fair comparison: the regulation index assesses restrictive criteria on an equal basis across the professions; the key indicators in a branch of the professional services may, however, only have comparative value within the profession itself. 108 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S regulation pertaining. As in the case of the legal, accountancy and technical services, Italy exhibits a high degree of de-concentration, with relatively high numbers of firms and also a high density of professionals (as do France, Belgium and Ireland), so the high degree of Italian (entry) regulation (highest overall index after the exceptional case of Sweden), does not seem to act as a barrier to entry. Outstandingly, the level of overall employment in relation to the number of pharmacy professionals in Italy is also the lowest in our survey sample of 14 countries, so it seems that there is possibly a different division of labour between professionals and other employees applying, compared to other countries. A higher degree of market concentration i.e. a low or medium number of firms compared to the country’s size (population) combined with high employment per firm and volume per firm well above the median, is found in UK, Denmark and Finland, all three very low or less regulated countries for pharmacy services. Therefore, the existence of relatively higher numbers of larger firms, employing higher numbers of persons, is clearly associated with a low degree of regulation, and seems to be a clear result of firms having the scope to merge. This process is not associated with abuse of market power, as the volume of pharmacy services per capita in these countries is around the median value (even low in the case of UK). Sweden, of course, with 2 firms in the year 2000 (!), satisfies this criterion; in this case it is the result of complete state regulation, not concentration driven by the market. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 109 Table 5-4 Overview – Pharmacies 2000 Pharmacies (g5231) Key Variables: Pharmacists Share in % EUROSTAT T in Mio EUR F in units TS in Mio EUR E in units 3 Professionals in units SWE ITA PRT LUX ESP FRA AUT FIN 1 DNK 1 GER BEL 22,4 13 184 15 602 2 953 53 169 64 000 20,0 2 311 2 832 462 14 227 9 498 31,8 171 80 54 708 292 27,9 8 978 18 855 2 505 57 751 19 641 27,6 24 048 23 527 6 637 124 842 57 650 28,9 1 870 1 055 540 11 060 4 581 28,8 1 413 591 406 7 184 4 200 29,3 1 178 288 345 5 273 1 008 (2001) (2000) (2001) (1998) (2000) (2002) (2001) (2002) (2001) (2000) (2001) 8,86 57,68 10,00 0,44 39,44 59,23 Population in Mio. GDP in Bil. EUR 247 1 166 115 21 609 1 405 Key Indicators: 282 330 030 678 TS per Firm in 1000 EUR 189 163 133 5 575 000 8 850 E per 1000 firms 3 408 5 024 3 063 5 306 77 43 53 59 56 TS per E in 1000 EUR 32 1 258 1 423 1 624 1 464 2 108 E per Mio. of Pop 922 270 283 183 478 397 F per Mio. of Pop 0,23 2 500 000 4 102 3 354 3 650 2 450 Prof per 1000 F 1 042 186 128 115 132 TS per Prof in 1000 EUR 46 49 2 230 2 425 2 940 2 166 E per 1000 Prof 831 1 498 670 498 564 1 110 973 Prof Density (per Mio. Pop) 95 124 64 112 74 TS per cap. in EUR 51 46 0,40 0,26 0,41 0,47 0,27 0,25 TS in % of GDP 535 3 295 904 3 658 6 436 Vol in POI-adjusted Mio. EUR* 25 90 58 93 109 60 57 Vol per cap. in EUR* 267 449 319 316 274 Vol per firm in 1000 EUR* 211 194 62 64 63 52 48 Vol per E in 1000 EUR* 36 186 112 107 95 87 Vol per Prof in 1000 EUR* 51 Entry Index 6,0 4,8 4,2 4,0 3,6 3,8 Conduct Index 6,0 3,6 3,8 3,9 3,9 3,5 REGULATION INDEX 12,0 8,4 8,0 7,9 7,5 7,3 * adjusted for relative prices and national output - NB. not shown as high, medium or low (absolute, not relative values) 8,10 205 5,17 132 5,33 176 82,04 1 974 10,21 236 512 10 483 49 1 365 130 4 342 118 2 414 565 67 0,26 482 60 457 44 105 3,6 3,7 7,3 687 12 156 57 1 389 114 7 107 97 1 710 812 79 0,31 360 70 609 50 86 4,0 3,0 7,0 1 196 18 309 65 989 54 3 500 342 5 231 189 65 0,20 235 44 816 45 233 2,3 3,6 5,9 368 8 213 45 1 951 238 2 364 156 3 474 562 87 0,36 6 342 77 325 40 138 1,6 4,1 5,7 227 3 761 60 1 692 450 1 741 130 2 160 783 102 0,44 963 94 210 56 120 3,6 1,8 5,4 347 11 817 29 1 138 96 5 397 64 2 190 520 33 0,13 1 718 29 299 25 55 2,7 1,4 4,1 Sources: Eurostat, IHS, national statistics Colour code: high relative to median medium relative to median low relative to median 1 1999 2 1998 3 reference year see row below Median Standard deviation Mean Coeff. of variation Median Mean 31,0 3 367 4 594 1 044 17 280 8 000 NLD 20,0 3 300 2 660 11 150 5 000 Summary statistics 31,7 22 638 19 491 7 176 160 081 46 078 2 UK Standard deviation 17,3 11 531 5 744 1 995 67 878 31 000 21,4 2 909 1 525 622 16 324 2 528 33,0 946 1 173 312 7 136 2 966 (2001) (1999) (2000) 59,62 1 548 15,65 352 3,73 89 408 10 704 38 1 043 97 1 658 246 6 457 161 40 0,18 564 36 370 35 223 1,2 1,8 3,0 266 6 084 44 1 911 314 2 529 105 2 406 794 84 0,35 279 75 238 39 94 1,5 1,2 2,7 Coeff. of variation Key Indicators: Key Variables: Pharmacists Share in % EUROSTAT T in Mio EUR F in units TS in Mio EUR E in units Professionals in units Population in Mio. GDP in Bil. EUR Regulation Indices: Entry Index Conduct Index REG. INDEX 28325.0 3 104 2 179 641 15 276 6 500 10 241 26.5 6 989 6 811 1 837 39 576 18 317 26 591 5.2 8 030 8 549 2 322 48 989 22 234 27 648 20% 115% 126% 126% 124% 121% 105% 110% 3.6 3.6 7.2 3.4 3.2 6.6 1.4 1.3 2.4 41% 40% 37% TS per Firm in 1000 EUR E per 1000 firms TS per E in 1000 EUR E per Mio. of Pop F per Mio. of Pop Prof per 1000 F TS per Prof in 1000 EUR E per 1000 Prof Prof Density (per Mio. Pop) TS per cap. in EUR TS in % of GDP Vol in POI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Vol per Prof in 1000 EUR* 358 8 532 51 1 406 211 3 427 123 2 318 565 71 0.29 734 65 318 46 106 23 963 405 870 51 1 448 222 181 660 137 2 724 593 73 0.31 1 843 68 19 435 47 121 88 092 1 487 784 13 371 150 667 266 79 1 478 298 27 0.10 2 221 23 71 383 12 56 1 IRL 368% 367% 26% 26% 68% 367% 58% 54% 50% 37% 34% 121% 34% 367% 25% 46% 110 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 5-4 Distribution of Key Ratios in EU Member States – Pharmacies Professional Density (per Mio. of Population) 1200 1000 800 600 400 200 0 ITA FRA FIN IRL BEL LUX AUT SWE GER UK ESP DNK NLD PRT ITA DNK NLD UK LUX UK Sources: EUROSTAT, national statistics, IHS Volume per cap. in EUR 120 100 80 60 40 20 0 FRA BEL ESP PRT GER IRL FIN SWE AUT LUX Sources: EUROSTAT, national statistics, IHS Volume per person employed in 1,000 EUR 70 60 50 40 30 20 10 0 PRT ESP ITA BEL FRA FIN SWE DNK Sources: EUROSTAT, national statistics, IHS AUT GER IRL NLD I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 111 5.3 Hypotheses derived from the analysis The type and extent of analysis is limited by the level of aggregation of the data available for comparison purposes and the heterogeneity of specific characteristics of individual member states’ professional services. For example, the high volume of legal service in UK, in per capita as well as absolute terms, may to a greater or less extent be conditional on the types and degree of regulation (which is less than the median in the survey). However, the roots of this development lie almost certainly in the particular legal systems of England and Wales (and the legal system of Scotland). It is not surprising in the light of this comment, therefore, that there appears to be no pattern of linkage in our data between the relative volume of business and our assessment of regulation restrictiveness. Some caution has thus to be exercised in interpreting the data. Raising output potential by means of less regulation It is of interest here to consider the effects of regulation on the economic performance of professional services in member states In the following we highlight links that appear to exist between output indicators and corresponding values of our calculated regulation index for the country – whereby attention is restricted to the business professional services, i.e. legal, accounting and technical. In a later step we will examine these possible links after filtering the data to take account of different conditions in member states. Table 5-5 Output measures and degree of regulation Professional Services Correlations: Legal Accountancy Technical Vol per Firm vs. Regulation Index -0.14 0.09 -0.49 Vol per Employment vs. Regulation Index -0.21 -0.28 -0.37 Legal + Accountancy + Technical grouped -0.36 Source: IHS The link between output on a per firm basis and regulation shows only one correlation coefficient meriting further attention: in technical services, the value of –0.49 (significant at the 5% level) indicating higher values of regulation index being associated with lower values of volume per firm, or more saliently, that firm size, i.e. expressed as volume of business, is higher in less regulated countries. This relationship conforms with the findings on enterprise size and organisational forms described in the case studies in Part 2. It is interesting that we find for legal services, accounting services and technical services a negative correlation between regulation and volume per employed person. Whereas each sample size on its own is too small for the values to be statistically significant, other tests show that differences between each of the three groups in volume per employee and 112 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S regulation index are complementary.13 So, when the data for these three professions are grouped together, the sample size is 38 and the correlation between productivity and degree of regulation is -0.356, which is highly significant, even at a 2% level. A similar methodology for analysing (un/employment) data with respect to its bivariate association with a constructed index (strictness of employment protection legislation) has been reported in OECD (1999). We return to this discussion in a following section (‘GAP’ Analysis’). Leaving aside pharmacy services (which is set apart from the other three professional fields by conducting business in retail trading) this points in the first analysis to lower productivity in higher regulated countries. (See corresponding charts below, where the trend line is shown). If we take as a starting point an assumption that the technology used in producing legal services is the same in each member state in the survey (and make similar assumptions for technical services, and for accounting services, separately), then there would be no reason to expect any such trend in productivity differences. It should be noted here, once more, that the measure of volume already factors out differences in price levels and general (overall) output levels of the economies. Thus these negative correlations can indicate a shortfall in potential output. That is to say, we can hypothesise that a reduction in regulation for a currently highly regulated profession would lead to an increase in branch volume, and therefore (ceteris paribus – without affecting employment levels) a productivity increase will be recorded. This hypothesis that ‘regulation stifles development’ has often been referred to in the theory of professional services (c.f. following chapter). Vol / E Chart 5-5 Productivity vs. Regulation Index - Legal Services 180 160 140 120 100 80 60 40 20 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Regulation Index Source: IHS 13 Kruskal-Wallis test and non-parametric median test, which do not assume Normal distribution. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 113 Vol / E Chart 5-6 Productivity vs. Regulation Index - Accountancy Services 100 90 80 70 60 50 40 30 20 10 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Regulation Index Source: IHS Chart 5-7 Productivity vs. Regulation Index - Technical Services 120 Vol / E 100 80 60 40 20 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Regulation Index Source: IHS Example: Spain The case of Spain, where certain reforms liberalising (conduct) regulation were carried out during the 1990s, may be illustrative of the hypothesised connection between deregulation and increases in productivity and output. The table below shows that in the legal, accounting and technical professional services steady annual gains in productivity - the level of volume per employment – were achieved, and, especially, that even higher rates of per annum compound growth were achieved in terms of volume per capita. 114 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 5-6 Productivity and Volume per capita growth in Spain 1992 1993 1994 1995 1996 Legal services F in units T in Mio EUR E in units 1997 1998 1999 growth (p.a. compound) 2000 Range* 71 802 79 565 3 998 5 041 8,0 1996-99 119 832 127 812 2,2 1996-99 154 190 7,2 1996-99 50 58 5,0 1996-99 Vol per cap. in EUR* Vol per E in 1000 EUR* Accountancy F in units 3,5 1996-99 37 064 T in Mio EUR 2 522 5 041 79 408 128 490 8,4 1993-99 Vol per cap. in EUR* 96 190 12,0 1993-99 Vol per E in 1000 EUR* 47 58 3,6 1993-99 E in units Technical services F in units 57 634 T in Mio EUR E in units 70 841 77 378 79 679 6 644 7 824 10 457 11 911 7,6 1992-2000 124 491 151 195 170 232 184 682 5,1 1992-2000 231 307 393 441 8,4 1992-2000 72 80 91 94 3,4 1992-2000 Vol per cap. in EUR* Vol per E in 1000 EUR* 61 020 12,2 1993-99 4,1 1992-2000 * relevant start and end years for which compound growth applies Sources: EUROSTAT, Instituto Nacional de Estadística, IHS There are indeed considerable annual gains in productivity and per capita volume, matched or exceeded during (parts of) the 1990s in our sample only: for legal services - in Italy and UK, in Sweden (volume only), and in France (productivity only); for accountancy services (productivity only) in Netherlands, Denmark and Sweden; and for technical services over the second half of the 1990s - in UK (productivity only) and Austria (volume only). The lack of complete data in our survey for the period 1990 to 2000 means that no comparisons with Germany, Ireland, Belgium and Luxembourg are possible. More specifically, our data allows a comparison of the architects and consulting engineering branch for two periods, before and after 1997, in which year fixed tariffs were eliminated (c.f. chapter on case studies in Part 2 for technical services). The table below shows that growth rates in productivity (turnover per employment) accelerated after 1997, almost entirely due to an enormous growth in turnover, far in excess of the improvement in the general economic situation alone, while employment in the branch almost kept pace with GDP. Table 5-7 Spain, Technical Services Technical Services Growth p.a. (compound) 1992-97 1997-2000 GDP 1,3 7,1 T per E in 1000 EURO -0,6 7,6 E per Mio. of Pop 3,8 6,8 T per cap. in EURO 3,1 14,9 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 115 Whereas we cannot conclude that tariff liberalisation in Spain is the only factor that led to performance growth in Spain in the late 1990s, the example certainly lends credence to the hypothesis that suitable deregulation can induce productivity increases and result in an overall faster growth in business volume. 5.4 Findings revisited using GAP-Analysis Introduction We take the analysis of the previous section a step further with what we call GAP-analysis. In this phase, we control for the presence of specific characteristics that apply to the data at the member state level. The values for key indicators and variables used in our analysis are based either on 4-digit or 3-digit level data of the Eurostat’s NACE classification (Rev.1). Legal services (K7411), accountancy (K7412) as well as architectural and engineering activities (K742) are located within the 2-digit K74-sector together with other branches supplying business services. The k74 sector includes the business and management consulting branch, which like legal, accountancy and technical services employs many highly qualified persons, but which is in general not subject to similar restrictions regarding competition; k74 also includes many trade services not subject to the same degree of self- and/or government regulation as professional services (although specific branch regulation may exist). All branches in the k74 sector have in common that they are business services subject to common business conditions, social systems and commercial law of the particular member state in question. The ‘Other business activities’ classification of k74 is the lowest statistical level that includes the three professional business services in this study. The values for the variables F, T, and E on the 2-digit level equal the sum of the appropriate values for the branches within the K74sector as indicated in the following diagram Table 5-8 Embedding of surveyed professions within the K74-sector 2-digit level 3-digit level 4-digit level K74 Other business activities K741 Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy; holdings K7411 Legal activities K7412 Accounting, book-keeping and auditing activities; tax consultancy K7413 Market research and public opinion polling K7414 Business and management consultancy activities K7415 Management activities of holding companies K742 Architectural and engineering activities and related technical consultancy K743 Technical testing and analysis K744 Advertising K745 Labour recruitment and provision of personnel K746 Investigation and security activities K747 Industrial cleaning K748 Miscellaneous business activities n.e.c. K7481 Photographic activities K7482 Packaging activities K7483 Secretarial and translation activities K7484 Other business activities n.e.c. 116 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Thus, it is possible to relate the values for the surveyed branches to the totality of the K74sector and to put this into a comparative context. In other words: For a subset of key indicators and key variables14 and for all the countries that took part in the benchmarking survey we calculated the proportion of 4-digit and 2-digit-values: XGAP=(X4-digit/X2-digit) *100 This procedure aims to correct for influences that result from different market or production conditions (and macroeconomic conditions) as well as from general regulations like fiscal or labour legislation. All these factors lead to differences between countries that cannot be attributed to the branch-specific regulation of market-entry and market–behaviour. Comparative values for key variables are potentially distorted by such influences. With regard to the intervening variables like those mentioned above, it is assumed that the branches within the K74-sector are generally subject to equal treatment. The new comparison of key variables thus obtained differs from that of the previous analysis of the legal, accountancy and technical services respectively on their own, by instead being based on ratios between 2-digit and 4-digit values. All of the values discussed in this section are relative to the appropriate values on the K74-level. By this method, we can measure the extent of any ‘gap’ between the structural meso- or microeconomic variables of each professional service and the k74 class of other business services. For variables taking on absolute values (e.g. number of firms, turnover, employment) or ratios with a common denominator15 (e.g. employment per million of population) the gap figures in each country represents the percentage of the k74 sector ascribed to the 2-digit category in question. Regardless of how these vary from country to country, each value is always less than 100; for all other ratios (e.g. volume per firm), on the other hand, the greater the deviation of the gap value from 100 (smaller or larger) the more the professional service is differentiated from the general class members within the particular country under scrutiny. For example, the volume per (1000) firms in the accountancy branch is generally less than the overall level in the k74 sector (i.e. the gap value is less than 100), except in Luxembourg where the gap value is 119.7, reflecting the exceptionally high level of accountancy business there (see Gap Analysis table). Evaluation of the calculated gap ratios across member states now enables a cross-country comparison of the relative ‘strength’ that the professional services exhibit within their ‘own’ k74 sector economy. 14 Number of firms, turnover in Mio. EUR, number of persons employed, turnover per firm in Mio. EUR, employment per 1000 firms, turnover per person employed in 1000 EUR, employment per Mio. of population, firms per Mio. of population, turnover per cap. in EUR, turnover in % of GDP, volume per cap. in EUR, volume per 1000 firms in Mio. EUR, volume per person employed in 1000 EUR; 15 For this reason, there are only 6 different sets of gap values for each profession in the GAP analysis tables. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 117 Table 5-9 GAP-Analysis Table Legal Serv. (k7411) Aut 2000 Lux 2000 Fr 20002 F in units T in Mio EUR E in units T per Firm in 1000 EURO E per 1000 firms T per E in 1000 EURO E per Mio. of Pop F per Mio. of Pop T per cap. in EURO T in % of GDP Vol in PPI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Entry Index Conduct Index REGULATION INDEX 9.31 7.45 8.11 79.95 87.08 91.81 8.11 9.31 7.45 7.45 7.45 7.45 79.95 91.81 4.08 3.26 7.34 Accounting (k7412) Aut 2000 F in units T in Mio EUR E in units T per Firm in 1000 EURO E per 1000 firms T per E in 1000 EURO E per Mio. of Pop F per Mio. of Pop T per cap. in EURO T in % of GDP Vol in PPI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Entry Index Conduct Index REGULATION INDEX 11.78 8.31 11.17 70.57 94.85 74.40 11.17 11.78 8.31 8.31 8.31 8.31 70.57 74.40 4.16 2.03 6.19 Techn. Serv. (k7420) F in units T in Mio EUR E in units T per Firm in 1000 EURO E per 1000 firms T per E in 1000 EURO E per Mio. of Pop F per Mio. of Pop T per cap. in EURO T in % of GDP Vol in PPI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Entry Index Conduct Index REGULATION INDEX It 2000 12.12 7.02 6.06 57.88 49.97 115.85 6.06 12.12 7.02 7.02 7.02 7.02 57.88 115.85 3.82 2.80 6.62 It 2000 15.75 10.38 12.60 65.92 79.98 82.41 12.60 15.75 10.38 10.38 10.38 10.38 65.92 82.41 3.16 2.93 6.09 9.86 7.18 7.54 72.77 76.43 95.21 7.54 9.86 7.18 7.18 7.18 7.18 72.77 95.21 3.88 2.73 6.61 Sp 1999 Ger 2000 26.51 10.00 9.78 37.71 36.88 102.24 9.78 26.51 10.00 10.00 10.00 10.00 37.71 102.24 3.40 3.08 6.48 13.12 6.91 8.38 52.66 63.89 82.43 8.38 13.12 6.91 6.91 6.91 6.91 52.66 82.43 3.70 2.78 6.48 Ger 2000 Fr 20002 Lux 2000 14.75 9.83 11.84 66.61 80.25 83.00 11.84 14.75 9.83 9.83 9.83 9.83 66.61 83.00 3.60 2.48 6.08 5.14 4.85 6.99 94.43 136.17 69.35 6.99 5.14 4.85 4.85 4.85 4.85 94.43 69.35 4.00 1.83 5.83 19.14 22.90 18.08 119.65 94.46 126.67 18.08 19.14 22.90 22.90 22.90 22.90 119.65 126.67 3.84 1.23 5.07 It 2000 15.30 12.37 10.28 80.89 67.20 120.37 10.28 15.30 12.37 12.37 12.37 12.37 80.89 120.37 2.56 3.89 6.45 Nl 1999 15.29 9.71 7.99 63.50 52.26 121.50 7.99 15.29 9.71 9.71 9.71 9.71 63.50 121.50 3.08 1.43 4.51 Bel 2000 42.29 44.90 23.03 106.17 54.46 194.96 23.03 42.29 44.90 44.90 44.90 44.90 106.17 194.96 2.52 2.09 4.61 Fin 2000 15.31 6.94 7.70 45.35 50.31 90.13 7.70 15.31 6.94 6.94 6.94 6.94 45.35 90.13 2.64 0.93 3.57 Irl 1999 17.99 16.69 14.19 92.79 78.90 117.60 14.19 17.99 16.69 16.69 16.69 16.69 92.79 117.60 2.40 2.10 4.50 23.05 13.49 10.63 58.50 46.11 126.86 10.63 23.05 13.49 13.49 13.49 13.49 58.50 126.86 1.18 1.38 2.56 8.05 9.88 8.97 122.84 111.51 110.16 8.97 8.05 9.88 9.88 9.88 9.88 122.84 110.16 3.28 1.18 4.46 Nl 1999 2.99 4.69 3.56 156.86 119.04 131.77 3.56 2.99 4.69 4.69 4.69 4.69 156.86 131.77 2.08 1.83 3.91 Sp 1999 Swe 2000 UK 2000 12.35 10.00 9.83 80.94 79.59 101.70 9.83 12.35 10.00 10.00 10.00 10.00 80.94 101.70 1.92 1.48 3.40 Ger 2000 Lux 2000 Aut 2000 Sp 1999 Bel 2000 Fr 20002 Fin 2000 34.18 29.40 19.85 26.46 25.78 17.40 18.74 16.71 27.25 20.74 19.25 15.07 14.98 18.43 13.02 50.89 63.74 84.15 102.99 80.43 56.33 51.25 75.44 69.63 50.51 90.35 124.37 111.55 147.90 159.24 19.25 15.07 14.98 18.43 13.02 34.18 29.40 19.85 26.46 25.78 17.40 18.74 16.71 27.25 20.74 17.40 18.74 16.71 27.25 20.74 17.40 18.74 16.71 27.25 20.74 17.40 18.74 16.71 27.25 20.74 50.89 63.74 84.15 102.99 80.43 90.35 124.37 111.55 147.90 159.24 3.30 2.74 2.66 3.84 3.20 3.03 3.20 2.66 1.18 0.00 6.33 5.94 5.32 5.02 3.20 1 correlations for legal services excluding Belgium 2 based on extrapolated values (see Part 2) Source: EUROSTAT, national statistics, IHS UK 2000 12.55 7.12 5.96 56.74 47.50 119.45 5.96 12.55 7.12 7.12 7.12 7.12 56.74 119.45 2.40 0.93 3.33 Nl 1999 9.01 7.76 7.62 86.09 84.54 101.83 7.62 9.01 7.76 7.76 7.76 7.76 86.09 101.83 2.68 0.30 2.98 Dk 2000 Swe 2000 Fin 2000 5.40 5.83 7.14 108.02 132.39 81.59 7.14 5.40 5.83 5.83 5.83 5.83 108.02 81.59 2.08 0.93 3.01 Irl 1999 16.70 11.81 14.83 70.72 88.77 79.66 14.83 16.70 11.81 11.81 11.81 11.81 70.72 79.66 2.68 0.30 2.98 4.13 4.29 4.61 103.87 111.59 93.08 4.61 4.13 4.29 4.29 4.29 4.29 103.87 93.08 1.98 0.44 2.42 5.62 4.48 2.59 79.66 46.02 173.11 2.59 5.62 4.48 4.48 4.48 4.48 79.66 173.11 0.00 0.30 0.30 Dk 2000 16.37 22.88 16.52 18.61 23.15 18.49 15.94 32.46 13.24 25.25 22.84 15.62 14.85 20.45 9.03 14.95 15.50 11.25 97.36 141.84 80.16 135.68 98.64 84.52 90.69 89.38 54.65 80.32 66.95 60.84 107.35 158.70 146.66 168.92 147.34 138.91 14.85 20.45 9.03 14.95 15.50 11.25 16.37 22.88 16.52 18.61 23.15 18.49 15.94 32.46 13.24 25.25 22.84 15.62 15.94 32.46 13.24 25.25 22.84 15.62 15.94 32.46 13.24 25.25 22.84 15.62 15.94 32.46 13.24 25.25 22.84 15.62 97.36 141.84 80.16 135.68 98.64 84.52 107.35 158.70 146.66 168.92 147.34 138.91 1.08 1.35 0.74 0.00 0.00 0.00 0.46 0.00 0.00 0.00 0.00 0.00 1.54 1.35 0.74 0.00 0.00 0.00 * Correlation is significant at the 0.05 level (1-tailed) ** Correlation is significant at the 0.05 level (2-tailed) 9.86 7.18 8.11 80.89 76.43 110.16 8.11 9.86 7.18 7.18 7.18 7.18 80.89 110.16 2.56 2.10 4.61 Median 13.36 9.16 8.56 68.58 64.07 107.04 8.56 13.36 9.16 9.16 9.16 9.16 68.58 107.04 2.24 0.60 2.84 Dk 2000 Swe 2000 UK 2000 Median 14.05 9.43 9.19 69.58 80.12 95.92 9.19 14.05 9.43 9.43 9.43 9.43 69.58 95.92 2.88 1.33 4.04 Irl 1999 19.62 14.94 14.02 76.16 71.46 106.57 14.02 19.62 14.94 14.94 14.94 14.94 76.16 106.57 0.00 0.00 0.00 Median 22.88 17.40 14.95 84.15 66.95 138.91 14.95 22.88 17.40 17.40 17.40 17.40 84.15 138.91 1.18 0.00 1.54 corr. with reg. ind.1 0.56 * -0.47 * -0.47 * -0.53 * corr. with reg. index -0.04 0.20 0.35 -0.43 corr. with reg. index 0.75 ** -0.47 * -0.47 * -0.42 * 118 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Check of previous findings Productivity: Gap analysis is used first to test the inverse relationship between the level of regulation and the productivity (volume per employment) indicated by the preceding analysis of the original data. The results not only corroborate the previous analysis, but also show the existence of the relationship more clearly. Productivity in the surveyed member states is negatively correlated with regulation in legal, accountancy and technical services: the correlation coefficients are -0.53, -0.43, and -0.42, respectively, whereby the figures for technical and legal are both (1-tailed) statistically significant . When the data for legal, accountancy and technical services are grouped together, the corresponding trend is corroborated (which is not an automatic result of grouping, but instead a confirmation of the effect). A highly significant correlation between productivity and regulation index of -0.5 exists for the totality of all 38 cases (see below), independent of the affiliation to one of the three surveyed branches (and this correlation rises further, to -0.6 if the outlier case of Belgium, legal services, is excluded). Correlations volume per person Pearson Correlation employed Sig. (2-tailed) (in 1000 euro) N regulation index -0.485 ** 0.002 38 Nonparametric test volume per person Spearman's rho -0.427 ** employed Sig. (2-tailed) 0.007 38 (in 1000 euro) N ** Correlation is significant at the 0.01 level (2-tailed). Note: Belgium, (legal services) is omitted from the scatter plot below.) Chart 5-8 Productivity vs. Regulation index (legal+accountancy+technical) I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 119 Concentration effects: With regard to legal16 and technical services (shown in the graphic below) there seems to be a linkage between the number of firms and the level of regulation. Correlation coefficients of +0,56 and +0,75 (both significant), respectively, indicate that the number of firms - relative to the number of firms at the K74-level - increases with the value of the regulation index.17 In countries with more restrictive branch-specific regulation in the fields of legal and technical services, the number of firms within the K74-sector from the K7411- and K742-branches is generally greater than in countries with less regulation. Chart 5-9 Relative number of firms vs. Regulation Index – Technical services These relationships lead to the hypothesis that advantages which would result from an optimal size of firms (economies of scale) are not utilized fully in more regulated branches on account of missing incentives - with less competition there is less incentive to exploit a potential increase of productivity.18 This hypothesis is also supported by the fact that the volume (turnover) per firm is negatively correlated with the index of regulation in the legal and technical services branches (significant), i.e. the average size of firms (by turnover) is smaller in markets that are more restrictive (see charts below). There are no statistically significant results of the kind discussed here for accountancy services, which is not surprising. Due to the presence of a few very large accounting firms (‘big four’), this branch already exhibits a very high degree of concentration, whereas 16 The exceptional case of Belgium (where according to our data 42% of enterprises in the k74 sector are legal firms) has been left out for the following analysis 17 An examination of number of firms per million of population leads to similar results. 18 c.f.: Felderer et alt. (1998); Part II, page: 38; 120 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S concentration levels are much lower in legal technical services, even in member states where the degree of regulation is low. Chart 5-10 Volume per firm in 1000 EUR vs. Regulation index – Legal services Chart 5-11 Volume per firm in 1000 EUR vs. Regulation index –Technical services I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 121 Other findings: Due to the lack of comparator at the k74 level equivalent to the number of professionals, an investigation of the relationship between volume per professional and degree of regulation examined in the benchmark analysis cannot be repeated with the GAP methodology. 5.5 Excursus: Scope for liberalisation by comparison with peers The following chart shows once again the distribution of volume per employee (or productivity) for legal services. The purpose here is illustrative of a line of reasoning, so the choice of legal services is arbitrary, and the following arguments could apply equally to accountancy, technical and pharmacy professional services. Likewise the situation shown can be repeated for other variables e.g. volume per capita, volume per professional etc. Chart 5-12 Scope for reducing regulation – assuming constant returns-to-scales (legal services, illustrative) Vol per E in 1000 EUR* 180 160 140 120 100 80 60 40 20 - BEL FIN 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 Regulation Index - Legal As the starting point we make here the assumption that no major ‘market breakdown’19 has been reported in any of the countries examined in the survey. There is thus no reason to expect that lower regulation strategies which work in one member state could not be made to work in another. The highest ratio of volume per employee to degree of regulation in the sample is exhibited by Finland20, which is the most ‘efficient’ in this sense and thus the benchmarking peer in this case. Allowing now, that the positive effects of regulation may in part account for the current state, we can imagine that a liberalisation strategy that results in 19 ‘Market breakdown’ is used here in a general sense, not in the narrower technical sense of ‘market failure’ -see Chapter 2 on Theory. 20 Corresponding to the line through the origin with the highest gradient. 122 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S a reduction in the degree of regulation could be implemented, at least up to the limit of being comparable with the peer(s). The chart 5-12 indicates, for example, that the volume per employee takes on its highest value in Belgium, but that this high level could still be attained in conjunction with a sizeable reduction in regulation, to the extent indicated by the relation between productivity and degree of regulation of the benchmark peer, in this case Finland. Obviously in this case, unless there are contravening factors, each other member state could likewise reduce its degree of regulation in legal services, at least to match on a pro-rata basis the benchmark set by the peer. We could conjecture, on the other hand, there are effects resulting from some regulations which actually enable certain results to be achieved. Perhaps, following this reasoning, certain high levels of volume per employee are, hypothetically, in part a product of the existence of higher degrees of regulation. In this case we would not assume that the (producer) benefits of less regulation are constantly scalable. The new situation under this assumption is shown in the chart 5-13 – Belgium exhibits a higher degree of regulation than Finland, but also has a higher volume per employee. In this case both Belgium and Finland would be benchmark peers21, and together they delimit a ‘benchmark boundary’ with respect to productivity in the sample of countries surveyed. Chart 5-13 Scope for reducing regulation – assuming decreasing returns-to-scales (legal services, illustrative) Vol per E in 1000 EUR* 180 160 140 120 100 80 60 40 20 - BEL FIN 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 Regulation Index - Legal 21 N.B.: the discussion in this excursus is intended as being illustrative, and the arguments hypothetical. No overall assessment of performance is implied. In the case of legal services in Belgium, there is also uncertainty concerning the accuracy of the data. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 123 By similar reasoning we can surmise that the degree of regulation in any other member state can still be reduced by any ‘leftwards’ and/or ‘upwards’ movement up to a point on a ‘boundary’ delimited by the peers. Thus it may be supposed that a reduction in the degree of regulation in other countries can still result in an equal performance in productivity as exists at present, at least, once again based on comparison with the situation of ‘peers’. While the arguments presented here are illustrative and no exact calculation of the benefits or appropriate extent of ‘regulation reduction’ is being claimed, due to situational differences between countries, the diagrams highlight the scope for liberalisation, ceteris paribus, as suggested by peer comparison, which lies at the root of the approach taken throughout this study. For the kinds of comparisons with peers indicated here, it is indeed not germane to the argument whether or not the negative correlations between productivity and degree of regulation for legal, accountancy and technical services, as calculated in the previous section, are statistically significant. The existence of a peer or peers having comparable or superior performance, in terms of key outcomes like productivity and volume per capita at least, is by itself the starting point for questioning whether suitable liberalisation strategies that improve economic outcomes without detriment to professional values and quality of service can be found for other, more restrictively regulated, member states. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 125 6. Summary and Conclusions This study has been based on a survey of the rules, regulations and statutory laws governing the practise of professional services in the legal, accountancy, technical and pharmacy fields in EU member states. Most of the information concerning the regulations themselves, and their interpretation within a unified framework was enhanced by the results of a Survey Questionnaire sent out to over 200 professional bodies in 15 member states. The return of questionnaires varied by country, profession, and organisation. In the Annexes E are included a list of returning and non-returning bodies, and a summary of the sections completed, as well as the actual questionnaire itself. The information on regulations has been gathered into a 'compendium’ which summarises the rules governing the range of services provided, regulations on entry to the profession, and regulations in respect of conduct in the profession. Summary tables of these regulations have been compiled. The detail of regulation may to a certain extent be slightly obscured in the tabular summary (without distorting the basic facts). For this reason detailed information concerning regulation has been provided for a subset of member states in each professional field; in parallel, economic data concerning the 'subset countries’ have been presented, in order to gain insights into the actual performance of the professions. In addition to a common denominator of basic data on total branch output, employment and enterprises of each professional field, the dynamics of each branch were investigated. Together with other available economic data, and information sourced from professional bodies via the Survey Questionnaire, these are juxtaposed to the findings on the state of regulation in each case study. Arising out of the compendium of regulations, which has been completed to the maximum extent possible within the resources of this project, indices of regulation have been calculated for each profession and each professional field. As well as an overall index, separate indices in respect of entry regulations, and of conduct regulations, have been compiled. There is wide divergence in the state of regulation of professional services in the European Union, and the extent of this variance is reflected succinctly, and we intend, fairly, in the numerical value of the indices. Independently of the formation of regulation indices, comparable basic economic data has been gathered for each country. The resulting dataset covers between 12 to 14 of the 15 member states. As with the data on regulations, a maximum coverage was sought. Missing data is due to non-availability. In the study we would have preferred to be able to draw on a wider range of economic performance statistics, but these are simply not available on a 126 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S general basis. A serious comparison of country data has, however, to be based on comparable data definitions. The absence of more detailed information implies that comparison has to be made at the lowest level of aggregation possible. Fortunately, some such data has in recent years been made available at the level of professional field (4-digit NACE classification). A "snapshot" comparison of the branch structure of each of the four professional fields studied in or near to the year 2000 was interpreted in conjunction with the respective indices of regulation. Because data are aggregated over (related) professions, and because of existing differences in systems (and in business, governmental and professional culture) between different countries, the effects of regulation cannot be expected to be regular throughout the EU. Nevertheless it has been possible to distinguish basic trends associated with highly regulated professions in member states, and trends associated with professions in countries that are subject to a low degree of regulation. Overall the spectrum of regulation intensity is broad in all four professional fields. In general regulations on conduct are less restrictive than those concerning entry, and it is this former area that the most significant moves towards liberalisation have taken place in recent years. Nearly half of the member states in the EU can be said to have very restrictive regulations governing entry and conduct to the legal professions. Accountancy services are only slightly less restrictive regarding entry in a similar number of countries, the level of conduct regulation being at a general lower level. The general level of regulation in the technical services is lower than in legal services and accounting services, but a relatively high level still exists in nearly half of all states. In absolute terms, the pharmacy professional services are the most highly regulated of the professions covered in this study, many regulations stemming from rules made at state governmental level. Correspondingly, this profession is to a lesser extent self-regulated. The Results of the Study in the context of Economic Theory As outlined in Section 5 in the case studies of Part 2, the study concentrated on the crossmember-state analysis of basic economic outcomes, and associated indicators and ratios. These data were cross-analysed against our regulation indices. Four overall indices have been produced, composed of indices of entry and conduct for each of the professions, combined into an index relating to one of the four professional fields. The literature has long bemoaned the scarcity of empirical studies of professional services. This lack of studies is perhaps not surprising, given the difficulty of gathering data on this subject. The most valuable economic data for testing hypotheses derived from the theories outlined above, would involve prices, costs, and earnings. Obtaining data for even one I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 127 country on these variables is fraught with difficulties, including non-availability as a timeseries (or in most cases, at all) and non-disclosure policies. Nevertheless, the study has been able to demonstrate the existence of trends in the data: • The study shows that there is a tendency for highly regulated professions to be associated with relatively low numbers of professionals, and that in those member states where this obtains, the volumes of output in the branch attributable per professional tend to be higher than would be expected given the economic strength of the branch in that country. Equally the reverse tendencies were noted in lowly regulated professions. This effect was noticed in all four professional areas studied – legal, accounting, technical and pharmacy, but was least observable in the pharmacy branch. This result supports the hypothesis arising out of contra-regulation theories, namely that economic benefits are being gained by highly regulated professions at the expense of consumer welfare. Whereas no direct information on earnings is available, higher fees will ,ceteris paribus. lead to higher turnover (volume). In this connection, it was often noted that countries associated with high levels of volume per professional seldom corresponded to the countries where volume per employed person was classed as high, etc. The most dynamic branches, in terms of growth and market consolidation, have been found in member states where professions are less regulated. Furthermore, there is a negative correlation between the degree of regulation and the productivity of the branch, measured by volume per employee.. The relationship between higher productivity and less restrictively regulated professional services was also found to hold after filtering the data to control for specific country effects (GAP analysis). The relationship was shown to be statistically significant for legal, accountancy and technical services of the surveyed member states grouped together, and separately for legal services and technical services.. Indeed the economic data linked with the degree of regulation indices are ratios of volume to employment, firms and professionals. This finding also lends credence to theoretical predictions that output could be increased in some countries and professions, on account of higher productivity levels, if regulation intensity were to be reduced. It seems fair to point out that the study does not deal with the quality and range of services provided in member states – no information is available – so this is assumed homogeneous enough for a fair comparison of economic outcomes to be made. In the absence of evidence to the contrary, it is assumed that none of the markets for professional services has experienced the dire consequences of market breakdown predicted by theories based on the presence of conditions known as ‘market failure’. Indeed, since the economic outcomes of professional services in those member states where they 128 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S are subject to lower degrees of regulation are comparable with professional services in more highly regulated member states, the predictions of public interest theory seem wide of the mark, and that, on the contrary, regulation could be reduced - at least to the level of their peers in other member states of the EU. Research Report Economic impact of regulation in the field of liberal professions in different Member States Regulation of Professional Services Iain Paterson, Marcel Fink, Anthony Ogus Section co-authors: Joachim Merz*, Felix Fink*; Helmut Berrer Final Report – Part 2 Study for the European Commission, DG Competition** January 2003 * (Case Studies: Germany, France) **The contents of the study do not necessarily reflect the opinion or position of the European Commission. Institut für Höhere Studien (IHS), Wien Institute for Advanced Studies, Vienna Contact: Iain Paterson : +43/1/599 91-152 email: paterson@ihs.ac.at email: paterson@ihs.ac.at Affiliations Anthony Ogus: Centre for Regulation and Competition, University of Manchester School of Law Joachim Merz, Felix Fink: Research Institute on Liberal Professions, University of Lüneburg Marcel Fink: Department of Government, University of Vienna Iain Paterson, Helmut Berrer: Department of Economics & Finance, Institute for Advanced Studies, Vienna Thanks go to the IHS project team members Niki Graf and Hermann Kuschej, and to the many correspondents at professional bodies, member states’ statistical offices and Eurostat. Contents Part 2 - Case Studies...................................................................................... 131 7. Case Studies Legal Services......................................................................... 133 7.1 Legal professions in Denmark: an overview .............................................. 133 Market Entry......................................................................................................... 134 Conduct Regulation.............................................................................................. 136 Economic Characteristics..................................................................................... 137 Summary ............................................................................................................. 142 7.2 Legal professions in Italy: an overview ...................................................... 143 Market Entry......................................................................................................... 144 Conduct Regulation.............................................................................................. 148 Economic Characteristics..................................................................................... 151 Summary ............................................................................................................. 156 7.3 Legal professions in England & Wales: an overview................................. 157 Market Entry......................................................................................................... 158 Conduct Regulation.............................................................................................. 162 Economic Characteristics..................................................................................... 165 Summary ............................................................................................................. 176 7.4 Legal professions in Germany .................................................................... 177 Lawyers ............................................................................................................... 177 Market Entry......................................................................................................... 177 Conduct Regulation.............................................................................................. 179 Notaries ............................................................................................................... 184 Market Entry......................................................................................................... 186 Conduct Regulation.............................................................................................. 189 Economic Characteristics (Lawyers and Notaries) ............................................... 192 7.5. Legal Professions in France: an overview ................................................ 206 Market Entry......................................................................................................... 208 Conduct Regulation.............................................................................................. 211 Economic Characteristics..................................................................................... 214 8. Case Studies Accounting .............................................................................. 219 8.1 The Accountancy Professions in Italy: an overview .................................. 219 Market Entry......................................................................................................... 220 Conduct Regulation.............................................................................................. 222 Economic Characteristics..................................................................................... 224 Summary ............................................................................................................. 228 8.2 Accounting professions in the Netherlands: an overview ........................ 230 Market Entry......................................................................................................... 231 Conduct Regulation.............................................................................................. 232 Economic Characteristics..................................................................................... 234 Summary ............................................................................................................. 240 8.3 Accounting Professions in Germany.......................................................... 241 Accountants and sworn-in auditors....................................................................... 241 Market Entry......................................................................................................... 241 Conduct Regulation.............................................................................................. 244 Tax advisers ......................................................................................................... 247 Market Entry......................................................................................................... 247 Conduct Regulation.............................................................................................. 249 Economic Characteristics (Accountants, Sworn-in Auditors and Tax advisers) ..... 252 8.4 The Professions of Accountants and Auditors in France: an overview ... 267 Market Entry......................................................................................................... 268 Conduct Regulation.............................................................................................. 270 Economic Characteristics..................................................................................... 273 9. Case Studies: Technical Professions ........................................................... 279 9.1 Technical Professions in Austria: an overview .......................................... 279 Market Entry......................................................................................................... 280 Conduct Regulation.............................................................................................. 282 Economic Characteristics..................................................................................... 284 Summary ............................................................................................................. 290 9.2 Technical Professions in Finland: an overview.......................................... 291 Market Entry......................................................................................................... 291 Conduct Regulation.............................................................................................. 293 Economic Characteristics..................................................................................... 294 Summary ............................................................................................................. 301 9.3 Technical Professions in France................................................................. 302 Architects ............................................................................................................. 302 Market Entry......................................................................................................... 302 Conduct Regulation.............................................................................................. 306 Engineers............................................................................................................. 310 Market Entry......................................................................................................... 311 Conduct Regulation.............................................................................................. 313 Economic Characteristics..................................................................................... 316 9.4 Technical Professions in Spain ................................................................... 324 Technical professions in Spain: an overview......................................................... 324 Market Entry......................................................................................................... 324 Conduct Regulation.............................................................................................. 326 Economic Characteristics..................................................................................... 327 10. Price Structure in EU Pharmaceutical Retail Markets................................ 335 Background.......................................................................................................... 335 The Pharmaceutical Market ................................................................................. 340 Structure of Drug Prices ....................................................................................... 342 Turnover Share .................................................................................................... 351 11. Case Studies Pharmacy ............................................................................... 353 11.1 The Profession of Pharmacists in Ireland: an overview .......................... 353 Market Entry......................................................................................................... 353 Conduct Regulation.............................................................................................. 358 Economic Characteristics..................................................................................... 359 Summary ............................................................................................................. 362 11.2 The Profession of Pharmacists in Portugal: an overview........................ 363 Market Entry......................................................................................................... 364 Conduct Regulation.............................................................................................. 366 Economic Characteristics..................................................................................... 369 Summary ............................................................................................................. 372 11.3 The Profession of Pharmacists in Sweden: an overview ........................ 373 Market Entry......................................................................................................... 373 Conduct Regulation.............................................................................................. 374 Economic Characteristics..................................................................................... 375 Summary ............................................................................................................. 377 11.4 The Profession of Pharmacists in Germany: an overview ...................... 378 Market Entry......................................................................................................... 379 Conduct Regulation.............................................................................................. 380 Economic Characteristics..................................................................................... 382 Tables Table 7-1 Table 7-2 Table 7-3 Table 7-4 Table 7-5 Table 7-6 Table 7-7 Table 7-8 Table 7-9 Table 7-10 Table 7-11 Table 7-12 Table 7-13 Table 7-14 Table 7-15 Table 7-16 Table 7-17 Table 7-18 Table 7-19 Table 7-20 Table 7-21 Table 7-22 Table 7-23 Table 7-24 Table 7-25 Table 7-26 Table 7-27 Table 7-28 Table 7-29 Table 7-30 Table 7-31 Table 7-32 Table 7-33 Firms, Turnover and Employment; Denmark 7411 ............................. 138 Key Statistics, Legal Services; Denmark 7411 ................................... 139 Profit Ratios in Professional Services, Denmark................................ 140 Legal Form of enterprises, Professional Services, Denmark.............. 141 Demand of notary services by type and category of client (%)........... 146 Firms, Turnover and Employment; Italy 7411..................................... 152 Key Statistics, Legal Services, Italy 7411 ........................................... 153 Self-employment and Employees, Italy.............................................. 154 Legal Form of Companies ................................................................. 154 Offices ............................................................................................. 154 Firm Size by Employment ................................................................ 155 Number of Legal Professionals ........................................................ 155 Firms, Turnover and Employment; U.K. 7411................................... 165 Key Statistics, Legal Services; U.K. 7411......................................... 166 Professional Services Firms: Size Class by Turnover, UK................ 167 Growth rates of solicitors and barristers in the 1990s....................... 173 Firms, Turnover and Employment; Germany 7411 ........................... 192 Key Statistics, Legal Services: Germany 7411 ................................. 192 Quantitative development of lawyers 1980 to 2002 in Germany....... 193 Personal yearly fee turnover of lawyers exclusively active in own offices (without advocate notaries) in West and East Germany 1993 to 1999 ........................................................................................................ 195 Personal yearly charge turnover of full time lawyers (without advocate notaries) in West and East Germany 1993 to 1999.......................... 196 Personal yearly turnover of lawyers exclusively active in own offices (without advocate notaries) in West and East Germany 1993 to 1999 ........................................................................................................ 196 Personal yearly turnover of full time lawyers (without advocate notaries) in West and East Germany 1993 to 1999 ........................................ 197 Apprentice lawyers - Germany, 1990 to 2000 .................................. 198 Law Students in Germany 1959 to 2001 .......................................... 199 Number of notaries in Germany 1980 to 2002 ................................. 200 Firms per legal form (2000).............................................................. 202 Turnover and persons employed (2000) .......................................... 202 Total expenditure (2000) .................................................................. 202 Number of employees and personnel costs (2000) .......................... 203 Turnover, stocks and material costs (2000)...................................... 203 Investment, taxes and subsidies (2000)........................................... 203 Firms in turnover size classes (2000) .............................................. 204 Table 7-34 Table 7-35 Table 7-36 Table 7-37 Table 7-38 Table 7-39 Table 7-40 Table 8-1 Table 8-2 Table 8-3 Table 8-4 Table 8-5 Table 8-6 Table 8-7 Table 8-8 Table 8-9 Table 8-10 Table 8-11 Table 8-12 Table 8-13 Table 8-14 Table 8-15 Table 8-16 Table 8-17 Table 8-18 Table 8-19 Table 8-20 Table 8-21 Table 8-22 Table 8-23 Firms in employment size classes (number of persons employed) (2000) .............................................................................................. 205 Firms, Turnover and Employment; France 7411 .............................. 214 Key Statistics, Legal Services: France 7411..................................... 214 Development of legal services enterprises in France 1996 to 2001 . 215 Number of legal services’ enterprises in employee classes in France 1996 to 2001.................................................................................... 216 The average turnover in legal services’ enterprises in employee classes in France 1996 to 2000.................................................................... 216 Employment structure in legal services’ enterprises by gender in France from 1996 to 2000 ........................................................................... 217 Firms, Turnover and Employment; Italy 7412..................................... 224 Key Statistics, Accountancy, Italy 7412 .............................................. 225 Self-employment and Employees, Italy.............................................. 226 Legal Form of Companies ................................................................. 227 Offices ............................................................................................... 227 Membership ...................................................................................... 228 Firms, Turnover and Employment; Netherlands 7412 ........................ 235 Key Statistics, Accountancy, Netherlands 7412 ................................. 236 Performance of Accountancy Services, Netherlands ......................... 237 Netherlands Accountancy Firms and Employment by Turnover Size Class ............................................................................................... 238 Legal Form of Accountancy Enterprises, Netherlands...................... 238 Entrance to the Accountancy Profession, Netherlands, NIvRA ........ 239 Firms, Turnover and Employment; Germany 7412........................... 252 Key Statistics, Accountancy Services: Germany 7412 ..................... 252 Quantitative development of accountants, accountants societies, swornin auditors and sworn-in auditors societies in Germany 1980 to 2002. ........................................................................................................ 254 Women in the profession: accountants and sworn-in auditors in Germany, 2002 ................................................................................ 255 Accountants: Age structure by gender in Germany 2002 ................. 256 Sworn-in Auditors: Age structure by gender in Germany 2002 ......... 257 Quantitative development of tax advisers, tax lawyers, others and tax advisory associations 1980 to 2002 in Germany.............................. 259 Offices of tax advisers in Germany 2001 and 2002.......................... 260 Age structure of tax advisers*1 2002 in Germany............................. 261 Apprentices for an assistant in tax and economic consulting professions (Fachgehilfen in steuer- und wirtschaftsberatenden Berufen)* in Germany 1980 to 2001 (end of year) ............................................... 262 Firms per legal form (2000).............................................................. 263 Table 8-24 Table 8-25 Table 8-26 Table 8-27 Table 8-28 Table 8-29 Table 8-30 Table 8-31 Table 8-32 Table 8-33 Table 8-34 Table 8-35 Table 8-36 Table 8-37 Table 8-38 Table 9-1 Table 9-2 Table 9-3 Table 9-4 Table 9-5 Table 9-6 Table 9-7 Table 9-8 Table 9-9 Table 9-10 Table 9-11 Table 9-12 Table 9-13 Table 9-14 Table 9-15 Table 9-16 Table 9-17 Table 9-18 Table 9-19 Table 9-20 Turnover and persons employed (2000) .......................................... 263 Total expenditure (2000) .................................................................. 263 Number of employees and personnel costs (2000) .......................... 264 Turnover, stocks and material costs (2000)...................................... 264 Investment, taxes and subsidies (2000)........................................... 264 Firms in turnover size classes (2000) .............................................. 265 Firms in employment size classes (number of persons employed) (2000) .............................................................................................. 266 Firms, Turnover and Employment; France 7412 .............................. 273 Key Statistics, Accountancy Services: France 7412 ......................... 273 Number of companies...................................................................... 274 The number of accountancy enterprises in employee classes in France 1996 to 2001.................................................................................... 275 The average turnover in accountancy enterprises in employee classes in France 1996 to 2000.................................................................... 276 Employment structure in accountancy enterprises by gender in France from 1996 to 2000 ........................................................................... 276 Size of Firms.................................................................................... 277 Number of employees...................................................................... 277 Firms, Turnover and Employment, Austria 7420 ................................ 285 Key Statistics, Legal Services; Austria 7420 ...................................... 286 Structure data for professional services. Austria 2000 ....................... 288 Firms by Number of Employees – Technical Services. Austria........... 289 Self- employed professionals, Technical services, Austria ................. 289 Types of Firm Ownership................................................................... 290 Firms, Turnover and Employment; Finland 7420 ............................... 295 Key Statistics, Technical Services; Finland 7420 ............................... 295 Turnover Top 30 groups..................................................................... 300 Firms, Turnover and Employment; France 7420 .............................. 317 Key Statistics, Accountancy Services: France 7420 ......................... 317 Number of Architects active in France 1996 to 2001 ........................ 318 Number of engineers active in France 1996 to 2001 (on 31/12)....... 319 The number of engineers enterprises in employee classes in France 1996 to 2001.................................................................................... 319 The average turnover of engineering enterprises in employee classes in France 1996 to 2000........................................................................ 320 Employment structure in engineering enterprises by gender in France.. ........................................................................................................ 321 Number of companies economically active at the end of year.......... 322 Number of employees...................................................................... 322 Average turnover by size class of employment ................................ 323 Enterprise demography ................................................................... 323 Table 9-21 Table 9-22 Table 9-23 Table 9-24 Table 9-25 Table 9-26 Table 9-27 Table 9-28 Table 9-29 Table 10-1 Table 10-2 Table 10-3 Table 10-4 Table 10-5 Table 10-6 Table 10-7 Table 10-8 Table 10-9 Table 10-10 Table 10-11 Firms, Turnover and Employment; Spain 7420 ................................ 328 Key Statistics, Technical Services; Spain 7420 ................................ 329 Architects and engineers, 1997........................................................ 330 Breakdown of 7420 branch by Size of employment of firms............. 330 Legal Form of enterprises and employment..................................... 331 Professionals ................................................................................... 331 Employees and Firms ...................................................................... 332 Firms, International .......................................................................... 332 Output / Input................................................................................... 333 Total Pharmaceutical Expenditure in % of GDP ............................. 337 Total Pharmaceutical Expenditures per capita, Euro PPP.............. 337 Numbers of Manufacturers, Wholesalers and Pharmacies ............ 340 Manufacturers, Wholesalers and Pharmacies per million capita .... 341 Numbers of Manufacturers and Pharmacies per Wholesaler......... 341 Average drug consumption per capita ........................................... 342 Regulations for Price Setting at the Ex-Factory Level 2000 / 2001 343 Regulations for Wholesale Margins 2000/2001 ............................. 345 Regulations for Pharmacy Margins 2000/2001 .............................. 346 Value Added Tax for Pharmaceuticals in Contrast to VAT in general.... ...................................................................................................... 348 Product Shares of Drug Prices ...................................................... 349 Table 11-1 Table 11-2 Table 11-3 Table 11-4 Table 11-5 Table 11-6 Table 11-7 Table 11-8 Table 11-9 Table 11-10 Table 11-11 Key Statistics, Pharmacy Services, Ireland 5231 ............................. 360 Key Statistics, Pharmacy Services, Ireland 5231 ............................. 361 Key Statistics, Pharmacy Services, Portugal 5231 ........................... 370 Key Statistics, Pharmacy Services, Portugal 5231 ........................... 371 Key Statistics, Pharmacy Services; Sweden 5231 ........................... 376 Key Statistics, Pharmacy Services; Sweden 5231 ........................... 376 Key Statistics, Pharmacy Services, Germany 5231.......................... 383 Key Statistics, Pharmacy Services, Germany 5231.......................... 384 Total turnover of pharmacies* in Germany 1992 to 2000.................. 385 Turnover per pharmacy* 1980 to 2000 in Germany........................ 386 Business economic results: trade margins, expenditure and turnover profits of pharmacies in Germany 1980 to 2001 ............................. 386 Table 11-12 Pharmacists, pharmacies and supply of pharmacies in Germany 1980 to 2001........................................................................................... 387 Table 11-13 Female pharmacists in Germany 1980 to 2001 ............................. 388 Table 11-14 Employees in pharmacies in Germany 1980 to 2001 ..................... 390 Table 11-15 Table 11-16 Table 11-17 Pharmaceutical personnel in pharmacies 1980 to 2001 (end of years) in Germany (Structure in percent of total employment of previous table) ...................................................................................................... 390 Pharmacy students 1980/81 to 2000/01 in Germany...................... 391 Turnover, output and gross return per pharmacy............................ 392 Charts Chart 7-1 Chart 7-2 Chart 7-3 Chart 7-4 Chart 7-5 Chart 7-6 Chart 7-7 Chart 7-8 Chart 7-9 Chart 7-10 Chart 7-11 Chart 7-12 Chart 7-13 Chart 7-14 Relative Growth Rates, Denmark 7411 ............................................. 139 Relative Growth Rates, Italy 7411 ..................................................... 153 Relative Growth Rates, U.K. 7411..................................................... 167 Market Share of Top 15 Law Firms by Turnover in 2000 ................... 168 Solicitors’ Real Gross Revenue......................................................... 169 Average real profits per equity partner – by size of firm (Principals) .. 169 Average real profits per solicitor – by size of firm (Principals)............ 170 Average weekly earnings by occupation ........................................... 170 Growth in the number of solicitors ..................................................... 171 Growth in the number of barristers .................................................. 172 Total number of QCs vs. Total QC awards ....................................... 174 Number of QCs ............................................................................... 174 Number of chambers by specialism ............................................... 175 Relative Growth Rates*, France 7411 ............................................. 215 Chart 8-1 Chart 8-2 Chart 8-3 Chart 8-4 Chart 8-5 Chart 8-6 Relative Growth Rates, Italy 7412..................................................... 226 Relative Growth Rates, Netherlands 7412 ........................................ 236 Accountants: Age structure by gender in Germany 2002................... 256 Sworn-in auditors: Age structure by gender 2002 in Germany .......... 257 Development of tax advisers, tax lawyers and tax advisory associations 1980 to 2002 in Germany ................................................................. 259 Relative Growth, France 7412 .......................................................... 274 Chart 9-1 Chart 9-2 Chart 9-3 Chart 9-4 Relative Growth Rates, Austria 7420 ................................................ 286 Relative Growth Rates, Finland 7420................................................ 296 Relative Growth Rates, France 7420 ................................................ 317 Relative Growth Rates, Spain 7420 .................................................. 329 Chart 10-1 Chart 10-2 Chart 10-3 Chart 10-4 Chart 10-5 Chart 10-6 Chart 10-7 Chart 10-8 Chart 10-9 Chart 10-10 Chart 10-11 Share of Total/Public Healthcare Expenditures 2000 in % of GDP. 338 Total/Public Expenditures on Health 2000 - per capita, Euro PPP . 338 Total/Public Pharmaceutical Expenditures 2000 in percent of Total Expenditures on Health ................................................................. 339 Total/Public Pharmaceutical Expenditures 2000 per capita, Euro PPP 339 Ex-Factory Price per Standard Unit in PPP-€ 1998........................ 344 Wholesale Share per Standard Unit in euro and PPP-€ 1998 ........ 344 Average Pharmacy Margins in terms of Pharmacy Net Retail Price347 Pharmacy Share per Standard Unit in € and PPP-€ 1998.............. 348 Product Shares in the Pharmaceutical Market............................... 350 Pharmacy retail price incl. VAT / Standard Unit in € 1998.............. 350 Actual Pharmacists (Net) Turnover Share per capita..................... 351 Chart 11-1 Chart 11-2 Chart 11-3 Chart 11-4 Chart 11-5 Relative Growth Rates, Ireland 5231............................................... 361 Relative Growth Rates, Portugal 5231 ............................................ 371 Relative Growth Rates, Sweden 5231............................................. 377 Relative Growth Rates, Germany 5231 ........................................... 384 Male and female pharmacists 1980 to 2001 (end of years) in Germany ........................................................................................................ 389 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 129 Part 2 - Case Studies I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 131 Part 2 - Case Studies The following chapters give detailed information on the regulation – both for market entry and conduct – on a heterogeneous selection (subset) of member states, along with further detailed information on the economic characteristics of each branch of professional services. Part 2 is divided into five sections: one for each of the four professional services fields covered by the study (Chapters 7,8,9 and 11), and a section outlining the special retail trade background of pharmacy services (Chapter 10). The subset of member states is different for each profession. Within professional fields the following member states are studied: Legal profession (lawyers, notaries): 5 member states Denmark, Italy, UK/England and Wales, Germany, France Accountancy (+Tax advisers): 4 member states Italy, Netherlands, Germany, France Technical professions (engineers, architects): 4 member states Austria, Finland, France, Spain, Pharmacists: 4 member states Ireland, Portugal, Sweden, Germany. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 133 7. Case Studies Legal Services 7.1 Legal professions in Denmark: an overview The legal profession in Denmark is, apart from judges, the Advokat (lawyer). There are no notaries in form of a liberal profession, i.e. in the form of the so-called “latin notaries system”, whereby deeds certified by notaries have absolute probative force. Advokats in Denmark have the exclusive right to represent parties before courts. But in most cases the representation by an Advokat is not obligatory: With certain narrow exceptions there is, in civil cases, no necessity for individuals to employ Advokats to plead the case in Court, as they have the right to plead the case themselves. In criminal cases the court will appoint a counsel for the defence if the defendant does not engage one himself. Should parties decide not to represent themselves before the civil courts, they may only be represented by a lawyer (Advokat). Accordingly, lawyers (Advokats) have a monopoly where representation of clients in court is concerned. In Denmark there does not exist a monopoly for lawyers for legal advice (given for reward). This subject-field is not regulated and legal advice may be provided by other professions as well. Denmark is one of the countries for which we calculated are relatively low over-all regulation index for legal professions (3,005). The entry index counts 2.08 (only Sweden, Finland and Ireland have lower ones). The conduct index with 0.925 is – together with the ones of Finland and Sweden – one of the lowest in the European Community. All in all the conductregulations for Lawyers in Denmark appear – at least from an international comparative point of view – to be of rather liberal character. Concerning market entry there are some basic regulations that are more rigid than for example in Finland. However, there are not many tasks which by law are reserved to Advokats and the regulations for education are not of excessive nature. The Danish Bar and Law Society (Advokatsamfundet) has a membership of lawyers holding the Danish title "Advokat" authorised to practice law whether conducted in Denmark or abroad. The membership of the Society is mandatory and the Society today comprises approximately 4,000 lawyers. The Society was established in 1919. By law it is vested in the Society to supervise that lawyers adhere to the legal and ethical rules regulating the legal profession. The Board of the Society has in that capacity adopted a professional Code of Conduct with guidelines stating the rights and duties of lawyers. Within the Society, the Council has founded the "Advokaternes Serviceselskab", a company offering services and information to the members on a subscription basis, with seminars and 134 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S educational courses on legal subjects as the primary services. Further, the company conducts the mandatory pre-lawyer education and the bar exam. Separated from the Society is The Disciplinary Board which handles complaints lodged against lawyers. The Disciplinary Board is chaired by a Supreme Court Judge and the members are representatives of the public and the legal profession. The chairman and the vice-chairmen are appointed by the Ministry of Justice on the request and the nomination of private organisations. Complaints regarding fees chartered by lawyers are handled by the local complaints boards of the 11 constituencies, the decisions of which may be appealed to The Disciplinary Board. Market Entry Tasks and exclusive tasks provided by legal professions in Denmark As already mentioned above, the only important exclusive task performed by Danish lawyers is the representation of clients before courts, whereby in most cases one has the right to plead the case oneself. Two other fields reserved to Advokats are, according to information by the Advokatsamfundet, real estate sales (may as well be done by estate agents and debt collection (may as well be done by Debt-collecting offices with public authorisation). Notwithstanding the situation in some other countries of the European Community legal advice (for reward) in Denmark is not a monopoly of lawyers or other professions. – any profession may perform this task. The profession of Advokat is unified, with no distinction being made between attorneys operating in different legal areas. While any qualified attorney has a right of audience before City Courts, attorneys must pass an additional examination in order to obtain rights of audience before the High Courts. Rights of audience before the Supreme Court are granted to any attorney, who has been admitted to the High Courts for at least five years and holds a certificate stating same from the High Court. Education and Entry to the Profession There are several requirements to become an Advokat in Denmark. First, an attorney must hold a university law degree. There are only two universities that provide Law Degrees, the University of Copenhagen and the University of Aarhus. The law degree is divided into two parts. The first, three year, "basic" part (grunduddannelsen) consists of all compulsory courses. The major examinations are taken at the end of the first and third years (BA Law). The second part (candidatus (candidata) juris or cand.jur.) has 12 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 135 courses including two obligatory elements (Tax Law and Economics). The Law Faculty will typically offer between fifty and fifty-five courses to choose from. These are examined at the end of each semester in the fourth and fifth years. Once the individual has the cand. jur. law degree there follows a three year period of postgraduate training which consists of practical training with an advocate, including going to court. The Administration of Justice Act Section 119(3) specifies: "The training in practising law referred to in paragraph 4) of sub-section (2) above shall consist of participating in general legal practice, including conducting (Note: broad interpretation, t. a.) cases as an Articled Clerk of an advocate practising law, or through employment in a legal position with the courts, the Director of Public Prosecutions, or the police, provided that conducting cases forms a substantial part of such employment." The Minister of Justice is empowered to decide that work in legal positions other than those mentioned in Article 119(3) can be included in the time required by Article 119(2)(4), provided that such work does not account for more than two years. Article 119(5) allows the Ministry of Justice to certify a person as trained "in practising law at a level fully comparable with that referred to in sub-section (3) above". Before the end of 1996, once one had fulfilled this three year post-graduate legal training (more or less equivalent to traineeship) the individual could get his practising certificate from the Ministry of Justice. Since Jan. 1 1997 the rules require that the series of professional training courses are taken and a professional law exam is passed, unless specially exempted by the Minister of Justice. The course lasts for 36 days over 4 terms. Regarding the professional examination it is the Minister of Justice who appoints an examination committee. As mentioned above a special test in advocacy must be passed for the right of audience before the High Court (Landsret) and Maritime and Commercial Court of Copenhagen (Soeog Handelsretten). The right of audience before the Supreme Court (Hoejesteret) is granted to those with at least five years experience of practice as advocates having a right to appear before the High Court (Landsret). 136 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conduct Regulation Prices and Fees In determining the fee, Advokats have, until recently, followed the guidelines on fee calculation set out by the Advokatsamfundet. However, these guidelines were revoked (as of 1 August 1996) by a decision of the Danish Board of Competition and, consequently, the calculation of attorneys' fees is now regulated solely by the Administration of Justice Act. This means that the only criterion for determining a fee is that it must be reasonable. It must be assumed, however, that the factors for fee calculation mentioned in the old guidelines, such as the value of the case, the amount of time needed, and the outcome of the case, can probably be used as a basis for assessing a reasonable fee. Complaints concerning attorneys' fees are dealt with by the law society's regional boards. Appeals are lodged with the disciplinary tribunal. Generally a lawyer is not entitled to make a “pactum de quota litis” agreement, i.e. an agreement whereby the lawyer is to receive a share of the result regardless of whether this is represented by a sum of money or by any other benefit achieved by the client upon the conclusion of the matter. Advertising Until the mid-1990s there existed rather broad regulations on advertising by lawyers. Major changes have been set in order as from 1 July 1995. Together with later changes this lead to a situation, whereby now, according to the Code of Good Conduct, only is stated, that advertising and personal publicity must not contain incorrect, misleading or unreasonably faulty information. The regulation is similar to the regulations contained in the Marketing Act. Forms of Business, Inter--professional Co-operation, Location and Diversification Danish law firms may be organised as individual law practices or partnerships of two or more sole practitioners. However, since 1990, law firms can be set up as limited companies. Both forms of incorporated forms (A/S or ApS) are public limited companies, but with different requirements as to capital invested. As a general rule law firms shall have no other purpose than to practise as lawyers. This means that partnerships as well as incorporated firms may only be owned by lawyers being members of the bar, and the only business to be carried out in these companies is legal counselling. As a consequence inter-professional co-operation in a joint firm is forbidden ( c.f. Retsplejeloven Article 124 and Ethic Rules of the Danish Bar, Article 2.4.1.). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 137 According to information provided by the Advokatsamfundet the question of business structures at the moment is under consideration for re-regulation. Continuing Education Continuing education is not an obligation for members of the profession, as there is no specific regulation concerning this. Specialisation in the Profession Concerning specialisation in the profession there are separately organised groupings in the profession, e.g. concerning handling of real estate and mediation. This kind of specialisation may be advertised. Compulsory Indemnity Insurance Every attorney is required to have professional indemnity insurance with a coverage of EUR 190,000 per case in order to cover any financial losses caused to a client or to a third party. Most firms hold policies with much higher coverage. Economic Characteristics Denmark – Structure and dynamics (NACE 7411) Enterprises, Turnover, Employment:1: The nominal turnover of legal services enterprises in the Denmark reached a level of nearly 900 million Euro in 2000, equivalent to exactly 0.5% of GDP, the second lowest share after Finland. Although the median value is only 0.69% in the member states surveyed (c.f. corresponding Overview-table in Chapter 5). Output of the sector rose however at a yearly average of 5.7% during the 1990’s, exactly the same rate of annual growth in GDP per annum over the same period 1992-2000). This represents a real growth in legal services of just 2.3% per annum, narrowly behind the growth in employment which has been calculated to be 2.4% over the period 1992-2000; so productivity has been virtually stagnant. In fact, the real turnover per employed person was slightly down by just 1.4% over the whole period. 1 EUROSTAT; Danmarks Statistik (Statistics Denmark) 138 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-1 Firms, Turnover and Employment; Denmark 7411 Number of Firms Turnover in Mio. EUR Employment 1992 2 051 561 11 963 1993 2 147 590 11 873 1999 1 673 782 14 035 2000 1 658 876 14 507 No. of Professionals 4 359 Source: EUROSTAT, Danmarks Statistik, IHS The exact development of employment in this branch in Denmark is unclear, however, due to it being “practically impossible to produce time series which are reliable and coherent from 1990 and onwards, due to a lot of changes in methods, sources, definitions, etc. during this period".2 Our estimate of employment figures for 2000 shows a rise of 3.4% over 1999. This estimate is based on data for employees measured in full-time-equivalents,3 which increased by 5.4% from 1999 to 2000. The number of legal firms in Denmark decreased remarkably in the 1990s from a number around 2000 in 1992 to about 1650 in 2000, an average yearly rate of decrease of 2.6% (see Table), which is to be compared with the corresponding yearly growth rate for employment over the period 1995-2000 of 2.4%. The decline in the number of enterprises and simultaneous increase in employment means that a concentration has taken place in legal services such that fewer, but larger, firms exist at the start of 2000 than a decade earlier: indeed the average firm gave employment to 8.8 persons in 2002, up by an average of 3 from 5.8 persons in 1992. The relative number of enterprises, at 311 per million of population, is the third lowest in our surveyed countries, being ahead only of the Netherlands and Finland. The average turnover (2000) per legal services firm in Denmark of 528,000 Euro is higher than the correspondingly value for accountancy services firms (335,000 Euro) but considerably less than the corresponding value for technical services (664,000 Euro). The growth rate in the 1990s (a nominal yearly average of 8.6%) was less than for accountancy services (11.3%), but much lower than for technical services (16%). However the level of business of Danish legal enterprises is the fifth highest of the 13 member states surveyed here, behind UK, Netherlands, Ireland and Belgium, but considerably higher than the median value of 387,000 Euro. 2 Communication with Danmarks Statistik IHS estimate of employment for 1999 and 2000 converts full-time-equivalent data to an employment figure in line with the EUROSTAT data used in the study and takes into account studies of the empirical relationship between these variables and also the general decline in the number of self-employed and assisting spouses in Denmark since 1995 (Denmark Statistics Yearbook 2002.) The full-time-equivalent employees figures are 8796 in 1999 and 9272 in 2000. 3 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 139 The level of employment, at approximately 2.7 in 1000 of the population in 2000, is just above the median and the turnover per employed person of 60,000 Euro is the third lowest after Germany and Spain in nominal terms, and indeed the lowest in our survey after adjusting for relative prices and economic output. Table 7-2 Key Statistics, Legal Services; Denmark 7411 Turnover per Firm Employment Turnover per Employment Firms per per 1000 person per Mio. of Mio. of firms employed Pop Population 1000 EURO 1000 EURO 1992 274 5 833 47 2 317 397 1993 275 5 530 50 2 292 414 1999 467 8 389 56 2 641 315 2000 528 8 750 60 2 722 311 Source: EUROSTAT, Danmarks Statistik, IHS The differential rates of growth in enterprises, turnover and employment are illustrated in the chart below, with the 1992 values indexed at 100. Chart 7-1 Relative Growth Rates, Denmark 7411 180 160 140 120 100 80 60 40 20 0 1992 1993 1994 1995 1996 No. of Firms Turnover 1997 1998 1999 2000 Employment Source: EUROSTAT, Danmarks Statistik, IHS Profit Ratios:4 Despite the low turnover per employed person relative to other member states referred to above, the legal services branch in Denmark appears to be in a healthy state: this can be seen in the profit ratios in the table, where the Danish legal services are compared to the other branches studied in this report, namely pharmacies, accountancy services, and architecture and consulting engineering services. 4 Source: Danmarks Statistik; IHS. 140 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-3 Profit Ratios in Professional Services, Denmark Year 2000 5231 7411 7412 7420 Pharmacy Legal services Accounting services Architecture/ engineering Turnover in mio. EUR Profit or loss before tax in mio. EUR PLBT as % of turnover 876 651 1 024 28 211 210 2 822 248 3.2% 32.4% 20.6% 8.8% Number of firms 288 1 658 4 104 5 719 PLBT per firm in 1000 € 98.4 127.4 51.3 43.4 4 262 9 272 17 024 29 742 6.6 22.8 12.4 8.3 Employed persons (full time equivalent) PLBT per person employed in 1000 € Source: EUROSTAT, Danmarks Statistik, IHS The profit before tax in legal services, over 30% of turnover in 2000, went beyond the 20% achieved by accountancy services, the next most profitable branch. The profit per Danish legal firm was in fact more than twice that of accounting firms, the profit per person employed in Danish legal practices not quite twice that of that for Danish accounting firms. Legal Form of Companies4: The legal form structure of legal services enterprises is shown here in conjunction with the other professional services for Denmark. The concentration referred to above is clearly evident in the trend away from sole proprietorship in all four branches during the 1990s, as well as by a decline in partnerships, and is marked by a corresponding increase in the prevalence of private companies and joint-stock companies throughout the 1990s (see table on next page). Single professional practices are evidently least common among legal firms compared with the other services studied; the rate of partnerships, while declining, is still higher, while the trend towards private and stock companies has been strongest. Professionals: The Danish Bar and Law Society, Advokatsamfund, reports a membership of 4,359 in 2000/01, 63% of whom work in their own single-professional firm. At the other end of the scale as regards firm size, there are over 20 firms employing over 30 professionals5. 5 Source: IHS Questionnaire from Advokatsamfund.. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 141 Table 7-4 Legal Form of enterprises, Professional Services, Denmark Business units registered for VAT purposes % in 1999 5231 Pharmacy 1996 1997 1998 % in 1999 1999 0% 0 0 0 0 0 0 0 0 0% 6 5 6 12 16 17 16 16 5% 95% Sole proprietorship 97% 321 313 311 311 308 292 295 289 Partnership 0% 1 1 0 0 0 0 0 0 0% Private (close) company 1% 3 1 0 0 0 0 0 0 0% Co-operative society 0% 0 0 0 0 0 0 0 0 0% Ordinary joint-stock company 3% 59 92 94 95 91 89 98 98 5% 2% 39 35 31 27 30 43 32 25 1% Sole proprietorship 64% 1 177 1 165 1 139 1 137 1 124 1 126 1 105 1 079 61% Partnership 24% 444 400 378 357 350 339 345 334 19% Private (close) company 6% 112 192 225 230 231 239 242 246 14% Co-operative society 0% 0 0 1 0 1 0 0 0 0% Ordinary joint-stock company 5% 363 383 400 414 410 386 364 363 6% Sole proprietorship Partnership 2% 118 108 46 45 42 37 35 28 0% 72% 4 804 4 845 4 895 4 896 4 691 4 704 4 686 4 688 75% 6% 380 374 349 340 308 288 272 261 4% 15% 1 023 1 092 1 077 1 045 986 967 940 941 15% Co-operative society 0% 14 11 7 3 4 7 5 4 0% Ordinary joint-stock company 7% 735 737 743 776 784 746 750 785 8% Other Sole proprietorship Partnership Private (close) company Co-operative society Source: Danmarks Statistik 1995 2% Private (close) company 7420 Architecture/ engineering 1994 Other Other 7412 Accounting etc. 1993 Ordinary joint-stock company Other 7411 Legal services 1992 3% 265 260 181 177 174 175 167 165 2% 71% 7 183 7 055 7 055 7 075 6 717 6 797 6 743 6 825 71% 5% 506 484 456 430 420 413 390 389 4% 14% 1 471 1 425 1 408 1 361 1 370 1 313 1 357 1 414 15% 0% 28 25 20 20 15 13 12 12 0% 142 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Summary Denmark today is a good example for a country with medium grade market entry regulation, and, after some steps of liberalisation, low grade conduct regulation. Interestingly the liberalisation concerning prices and advertising, and, to some degree concerning forms of business etc., was combined with some complication of the process of market-entry. A new final admittance examination has been introduced in 1996, exactly the time when some regulations concerning conduct were liberalised to some degree. Currently there are considerations under way to reform the regulations of business form and inter-professional co-operation. The outcome will show, if the legal professions, after a long period of opposition on this point, will go a step further than opening up some possibilities in respect of business form; they may allow inter-professional co-operation. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 143 7.2 Legal professions in Italy: an overview The statute governing the legal profession dates back to 1933. Subsequent amendments until recently have not substantially modified its provisions. Following heavy criticism of the formulation of the statute, recently attempts have been made to introduce various programs of reform to the legal profession. Traditionally the most relevant in legal professions in Italy have been two groups of lawyers (the avvocati and procuratori legali) and the notaries (notaio). According to the Law of 24 February 1997 (Legge 24 febbraio 1997, n.27 GU 27 Febb. 1997), the distinction between two groups of attorneys - avvocati and procuratori legali is no longer made. The profession of the Procuratore Legale has been abolished. From an international comparative point of view the market entry regulation for Italian Lawyers is rather strict, conduct regulation is even more rigid. Our market entry index is 2.66 an in the upper medium field of the EU. The conduct regulation index is as high as 3.88 – the highest of all EU-Member States. The other important legal profession in Italy are the notaries (notaio). There are many occasions in Italy where the consultation of a notary is obligatory. It must be stressed that the access to public registers (immovable, ships, cars, enterprises) is possible only for public deeds or private deeds with authentication of the signature by a Notary. For both professions (notaries and lawyers) membership in the respective professional bodies is compulsory. For Notaries both national (Consiglio Nazionale del Notariato, CNN, National Board of Notaries) and local (Consigli Notarili Distrettuali, Notarial District Boards) associations are established by law, and their members are elected democratically by the notaries themselves. The National Board of Notaries represents Notaries at a national level and has many functions, among them the production of ethical rules. Furthermore, the C.N.N., with a formal resolution, formulates the Notaries professional fees (honorarium, accessory rights, allowances and principles for reimbursement of expenses); this resolution is submitted to the final approval of the Minister of Justice (Law 5th March 1973, n. 41). The Notarial District Boards hold the register of Notaries and has many functions concerning the regularity of the exercise of the profession. Italian lawyers are organised in regional/local Bar Associations, which are unified at national level in the Consiglio Nazionale dell'Ordine Forense on national level. Every lawyer has to be admitted to the albo (roll or register) of the avvocati. All Avvocati are obliged to become a member of and be registered with one of the regional Consiglii dell'Ordine degli Avvocati e Procuratori. 144 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Market Entry Tasks and exclusive tasks provided by Italian legal professions The Italian judiciary system is divided into three types of courts: ordinary courts, administrative courts and tax courts. In the given context the ordinary courts are of highest relevance. They deal with civil as well as criminal matters. Each branch of jurisdiction has its own stages of appeal. Generally, there is a first instance, an appeal instance and a hearing before the Court of Cassation - Corte di cassazione. The Corte di cassazione merely performs a judicial review of issues of law rather than fact. With few exceptions parties must be represented before the court by a lawyer. In civil matters, one of these exceptions was that parties may represent themselves merely in proceedings before the Giudice Conciliatore - now the Giudice di Pace - that is, as long as the value in dispute does not exceed Lire 1,000,000. The task of the attorney is to assist and advise his client in judicial as well as extra-judicial matters, and to represent him in civil and criminal, as well as in all other proceedings. Only members of the legal profession have rights of audience before the courts. An exception to this rule are proceedings before the Tax Revenue Commissions; here, members of other professions may take over the representation of clients (see chapter on accountants in Italy). As already mentioned above, according to the Law of 24 February 1997 (Legge 24 febbraio 1997, n.27 GU 27 Febb. 1997) regarding lawyers the distinction between two groups of attorneys - avvocati and procuratori legali is no longer made. In the past, noticeable differences existed between the activity permitted for Avvocati as compared to those of the Procuratori Legali, but, pursuant to the Law n· 406 of 1985, art. 4, the only difference was that while a Procuratore Legale might exercise his activity in his Court of Appeal district only, an Avvocato, under specific preconditions (see below), could practise in all the territory of the Italian Republic. As to the non juridical activity, this limitation did not apply even for the Procuratore Legale. According to the former legislation an Avvocato was a lawyer who had practised as a Procuratore Legale for at least six years and then was admitted to the albo (roll or register) of the avvocati. Now potential Italian lawyers become avvocati straight away, if they fulfil the relevant preconditions (see below). Not all avvocati are allowed to appear in every court. The audience at so-called superior jurisdictions is reserved to specially qualified lawyers. Only those attorneys (all of whom are now called "avvocati") who have practised for twelve years as Avvocato (legge 1997/12, art. 4), or those who have passed a special examination have rights of audience before the Corte di cassazione and other superior jurisdictions (Constitutional Court - Corte I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 145 Costituzionale, Council of State-Consiglio di Stato). Such lawyers are listed in a special register. In order to take the above-mentioned special exam, an Avvocato must have practised as such for at least five years. Regarding extra-judicial activity, no reserved tasks in favour of attorneys exist. There are many specialised law firms in fields such as contract, corporate or tax law. These firms employ experts in commercial law, as well as accountants and auditors. There has been some discussion on the need to regulate extra-judicial advice; however, up to the present, no formal restrictions on non-attorneys operating in this field have been enacted. There are many situations in Italy, where it is obligatory to employ a notary. It has been mentioned above, that the access to public registers (immovable, ships, cars, enterprises) is for public deeds or private deeds only possible with authentication of the signature by a notary. In addition the Italian Notary is the only “official” in Italy who can legally public deeds concerning private rights. As from the 4th of September 1993 (Act n. 310/1993) a notarial deed is compulsory for all transfers of property or firm management and for the transfer of shares of limited liability companies. A public deed is the only legal form for gifts, marriage conventions, public will, articles of association and incorporation of a recognised association, foundation, company limited by shares, company with limited responsibility, limited partnership by shares and a co-operative. Other certifications also can only be authenticated by notaries, but in most cases they are not ‘compulsory’ (i.e., it is the parties to an agreement that want their signatures certified,). Additionally as from the 8th of September 1998 (Act n. 302/1998) the tribunals may delegate the transactions of auction sales of movables and immovables to notaries. The following table gives an overview over the services provided by notaries. 146 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-5 Demand of notary services by type and category of client (%) Notary services Enterprises, lib profs. tot. population Buying/Selling 74.5 66.0 Establishing Acts 47.2 17.3 Mortgages 19.8 15.9 Heritages (wills) 19.8 21.6 Donations 4.7 7.4 Marital Agreements 9.4 6.8 Certifications 21.7 11.2 Consulting 12.3 6.3 -- 0.8 Other Total is not equal to 100 because multiple replies were possible. Source: Report on the liberal professions in Italy by the Italian Competition Authority. Education and entrance to the profession In order to become Avvocato, one normally must hold a degree in law from an Italian university – laurea. The law degree takes a minimum of four years study. The law student is required to pass at least 26 examinations , 14 compulsory and 12 optional subjects. The law graduate who intends to become an Avvocato is requested first of all to enter the register. In order to do this, he has to • file a request to the Law Society Office of the district where he resides together with • evidence of his Italian citizenship (this condition cannot apply to EC nationals as a matter of EC law, and has been suppressed for others by the effect of the law of 6 march 1998) art. 35, • have an Italian law degree and • be of an upright conduct. After completion of university education and registration with the bar the candidate has to complete a two-year traineeship as practicante Avvocato in the law firm of an Avvocato. An examination, which is held once a year at the various Appellate Courts - Corti d'Appello must be passed by the candidate at the end of the traineeship. Following this examination, it is possible to request directly admission as an Avvocato. After completion of the first year of traineeship and fulfilling certain prerequisites, the candidate may be admitted as praticante Avvocato. As such, he may request rights of audience - patrocinio - before the Giudice di Pace and the Pretore of his own district. The “Justice of the Peace” - Giudice di Pace (which has replaced the former Giudice conciliatore) deals with disputes with a value of up to Lire 5,000,000 (ca. EUR 2.500) and all claims involving damages arising from road traffic accidents with a value of up to Lire 30,000,000 (ca. EUR 15.000). The first instance for disputes with a value of up to Lire 50,000,000 (ca. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 147 EUR 26.000) the so-called the Pretore (the Magistrate). A candidate may not practise as a praticante Avvocato for a period longer than six years. The exams take place in the month of December of each year in all the appellate Courts (Art. 2 of the Law of 20 April 1989 n· 142). The board of examiners is appointed by the Ministry of Justice; in each board there are two lawyers (practising for at least 8 years), two judges and a university professor in law (art. 22 LPF as amended by the provisions of art. 1 of the Law dated 27 June 1988 n· 242). The tests are written and oral. The candidates that pass the written test are admitted to the oral test. In order to become a notaio the following steps are required (Law 16th February 1913, n. 89 and 6 August 1926, n. 1365): - First one has to gain the Laurea in Giurisprudenza (university graduation in law). This takes a minimum of four years. There are many Notarial Schools, organised by the Notarial District Boards. They do not issue diplomas or certificates and have only a private nature and function. They prepare candidates for the notarial examination. - Second, the candidates have to complete a two year traineeship period. - In a third step candidates have to succeed in several examinations. The examinations, all in all, consist of seven different tests: one admission test is held as electronicallyorganised examination based on the choice among multiple answers to single elementary legal questions. After that, to become a self-employed notary, it is necessary to pass a national examination for the fixed number of positions of notaio. The examination is organised by the Ministry of Justice. The subsequent exam is based on three written tests (one about a inter vivos deed, another about a mortis causa deed and a third one about "jurisdiction gracieuse" (volontaria giurisdizione). Those who succeed the three written tests pass to the oral exam, which has three parts as well. The Examining Commission is composed of two judges, two notaries (even retired) and one university professor in law. The successful candidates can choose which of the vacant seats they would like, and they are attributed in order of priority on the basis of the results of the exam. According to information submitted by the Consiglio Nazionale del Notariato exams to get a notaries seat are taken by over 3,000 candidates for a normally small number of available posts (200300). As already mentioned above the number of notaries seats is fixed. The overall distribution of notary seats maybe revised every 10 years by decree of the head of State, after consultation with the Notary professional bodies. In any case, a new seat can only be created if it corresponds to at least 8000 inhabitants. 148 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Currently there are attempts under way to reform the education of legal professions in Italy. Decreto legislativo 398/97 (17 November 1997) establishes the principle of specialised schools for the legal professions (scuola di specializzazione per le professioni legale) (art.16). The professions in question being judges, avvocati and notaio. The new schools shall be run by universities in co-operation with these three professions. There will be a competitive entry by exam (art. 16(5)). according to these plans, once the schools are established would-be legal professionals will have to take a two year course there. The first year will be common for the three professions. The second year will provide separate courses for notaries on the one hand and magistrates and avvocati on the other. After successfully passing the course, the candidate will have only one year of pratica instead of the current two year requirement. Conduct Regulation Prices and Fees In Italy lawyers' fees are regulated. They are set out in special tariff scales issued by the Italian Ministry of Justice. However, parties are free to negotiate fees which depart from those contained in the table, as long as the minimum and maximum rates given for each service are followed. The calculation of the attorney's fee is a somewhat complex procedure. The official tariffs differentiate between the attorney's services in and out of court, as well as whether the matter pertains to criminal or civil law. The tariffs depend on: - the outcome of the proceedings, - the value of the litigious matter - as well as on the court that is competent for the proceedings. The different legal services are classified disregarding the amount of time invested in the case. There are minimum and maximum rates given for each service; this allows the lawyer a certain amount of discretion in determining his fee. In addition, there are specific rules for the calculation of travel and office expenses, as well as those for the preparation of legal documents. According to the code of conduct, the Italian lawyer is required to issue bills for their services that are very detailed, so that clients or other attorneys can examine these bills more easily. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 149 It is important to note that Italian law prohibits any agreement on a contingency fee - pactum quota litis. Any agreement on such a contingency fee is null and void according to art. 2233, s.2, of the Italian codice civile, and therefore not binding on the parties. Up to now all fees of notaries in Italy have been fixed as min/max prices . There exists a discussion on “modernising” the notaries fee system (proposed by the profession). The outcomes are not foreseeable at the moment. The arguments for reform, as stated by the professional organisations, are “modernise the system and make fees for notarial activities more transparent” (Questionnaire provided to IHS by the Consiglio Nazionale del Notariato). However, in the public discussion fear of an increase of the fees themselves dominates. Advertising Advertising by lawyers in Italy traditionally has been totally prohibited. But in October 2002 Art. 17 of the code was changed to allow some types of publicity, in particular concerning the form: As to form: Allowed are now: signs outside one’s office, brochures, internet sites, juridical publications or ‘annuaires’, brochures etc. as well as relationship with the press/media about a case, where the relevant information is non confidential. Such contacts with the press/media for self-publicity are not allowed, even indirectly. Still forbidden are: publicity in print media, TV or radio. Forbidden is also advertising via billboards or flyers as well as soliciting by phone call, sponsorships, using the internet to offer free advice, either on one’s own website or on a third party’s website. Seminars and conferences organised directly by lawyers’ cabinets are allowed forms of publicity in some cases, but prior authorisation by the professional body is obligatory. Concerning the substance: Allowed are: personal information, listing of publications, information on the professional practice, a logo, indication of ‘quality certificates‘ (this has to be approved by the professional body). It is also allowed to offer consultancy services via internet. Preconditions are that the service is not offered for free and that the lawyer that will treat the case is clearly identified. Additionally it is allowed to continue the name of a dead partner if he (or his heirs) expressly agreed to it. Still forbidden are: all information regarding third parties, the name of clients (even if they have given their permission), specialisation (except those allowed by law), prices of each service (it is forbidden to indicate that the first meeting is free), the percentage of cases won, the turnover of the cabinet, the offer of services. 150 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S For notaries all forms of advertising are still forbidden. Forms of Business, Inter-professional Co-operation, Location and Diversification The subject of forms of business for lawyers has traditionally been regulated very rigorously by a statute of 1939. This statute contained a provision whereby law firms may not be established in the form of a company of any kind. As a consequence, attorneys according to this statute were only able to work together in partnerships known as the associazione professionale. The relevant Article 2 of the legge 23 novembre 1939 n.1815, which forbade the practice of law except in a Studio legale, has been repealed by article 24 of legge n.266 of 7 August 1997. However the replacement law has not yet been adopted. It was expected to allow incorporated practice and partnerships between lawyers, and may even contemplate multidisciplinary practice (Disegno di legge: agosto 1998). In fact the law does not yet provide positive rules on what is allowed, and paralleling the situation for accountants it is evident that “there still is a blank space to fill through legislation”. This means that at the moment for lawyer neither incorporation nor inter-professional co-operation (in a joint firm) is possible. The lawyer is obliged to notify the competent Bar Council - the Albo - of his seat of practice. Admission must be requested in the district, in which the attorney resides. However, this does not prevent an Avvocato from setting up practice at other law firms in different locations. Similar regulations apply for notaries. The Law provides only for notarial associations, provided that the notary's seal and his activity is strictly personal and so is his responsibility. As for lawyers also for notaries the Law that forbade every professional society (no matter which profession could be involved) has been abolished (see above) and has been delegated to issue a decree which will discipline the subject, but what it will provide is still an open question. Apart from formal co-operation in companies and partnerships, Notaries can collaborate with all professionals, provided that their professional activity remains strictly personal. Notaries in Italy are not allowed to open branch offices. Continuing Education For notaries in Italy there is no mandatory continuing education. However, the National Board of Notaries, through its institutions, frequently promotes seminars and congresses about legal issues and releases studies about diverse matters that are of interest to the notarial profession. For lawyers we do not have any relevant information at the moment. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 151 Specialisation in the Profession Traditionally lawyers in Italy were not allowed to call themselves “Specialists” in the one or other field of professional activity. Each legal professional can undertake the defence of the party without any limitations with regard to the subject matter he normally deals with. This means that customarily no "specialist" avvocati existed as a matter of law. The disegna di legge (agosto 1998) proposed to allow some avvocati to call themselves specialists (articolo 7). As to our current knowledge, lawyers are allowed to call themselves specialist only for specialisations that exist in the law. For notaries there are no specific regulations for specialisation in the profession. Compulsory Indemnity Insurance For notaries there is no obligation of professional insurance, but the Consiglio Nazionale Notariato has already signed a national insurance scheme on a voluntary basis. It is planned to impose a system of mandatory professional indemnity insurance for all notaries. For lawyers we do not have any relevant information at the moment. Economic Characteristics Italy – Structure and dynamics (NACE 7411) Enterprises, Turnover, Employment6: The nominal turnover of legal services enterprises in Italy reached a level of nearly 11,300 million Euro in 2000, equivalent to just under 1% of GDP, the highest share after the UK and with the exception of Belgium (c.f. Overview-tables in Chapter 5). Output of the sector rose however at a very high yearly average of 14.1% during second half of the 1990’s, faster than the growth in GDP (an average of 6.8% p.a. over the same period 1995-2000). This represents a real growth in legal services of 11%, outstripping the growth in employment of just 2.5% over the period 1995-2000; so large productivity gains have also been made. In fact, the real turnover per employed person rose by an enormous 49% over the period. 6 EUROSTAT; Instituto Nazionale di Statistica (ISTAT) 152 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-6 Firms, Turnover and Employment; Italy 7411 Number of Firms Turnover in Mio EUR Employment 1995 74 158 5 818 131 184 1996 77 367 7 824 131 409 1997 80 241 7 824 136 694 1998 70 254 8 222 128 185 1999 79 093 9 104 135 842 2000 87 608 11 273 148 665 No. of Professionals 2001 139 500 Source: EUROSTAT The number of firms increased correspondingly from about 74,000 in 1995 to approximately 88,000 in 2000, an average rate of 3.4 % p.a. (see Table) - also above the corresponding yearly growth rates over the period 1995-2000 for employment of 2.5% . The higher rate of increase in enterprises relative to employment is indicative of a slight trend towards less concentration i.e. relatively more firms with fewer employees: indeed the average firm gave employment to 1.70 persons in 2002, down from an average of 1.77 persons in 1995. The relative number of enterprises is typical, being the median of the member states in our survey, at over about 2600 per million of population. The average turnover (1999) per legal services firm in Italy of 129,000 Euro is more than the corresponding figure for accountancy services (105,000 Euro) and considerably more than the corresponding value for technical services (81,000 Euro), and growth rates in the second half of the 1990s (a yearly average of 10.4%) were also much higher than for accountancy services, and for technical services. However the level of business of Italian legal enterprises is the second lowest after Spain of all the 12 member states surveyed here (and third lowest, ahead of only Spain and Luxembourg after the branch output figures are adjusted for relative price levels and the overall production of the economy). The level of employment, at over 1.7 per 1000 of the population in 2000 is low by international comparison (only Spain employing relatively fewer persons), but the level of productivity, as measured by a turnover of 76,000 Euro of per employed person, is fairly typical for the survey, being the median value, in relative terms, after adjusting for relative prices and overall level of economic output. It is the third highest in the survey after Belgium and Finland. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 153 Table 7-7 Key Statistics, Legal Services, Italy 7411 Turnover per Firm Employment Turnover per Employment Firms per per 1000 person per Mio. of Mio. of firms employed Pop Population 1000 EURO 1000 EURO 1995 78 1 769 44 2 291 1 295 1996 101 1 699 60 2 292 1 349 1997 98 1 704 57 2 379 1 396 1998 117 1 825 64 2 227 1 220 1999 115 1 717 67 2 358 1 373 2000 129 1 697 76 2 577 1 519 Source: EUROSTAT The differential rates of growth in enterprises, turnover and employment are illustrated in the chart, with the 1995 values indexed at 100. Chart 7-2 Relative Growth Rates, Italy 7411 220 200 180 160 140 120 100 80 60 40 1995 1996 1997 No. of Firms 1998 Turnover 1999 2000 Employment Source: EUROSTAT Growth of Sole Proprietors:7 The high growth rate of legal services firms in the early part of the 1990s is reflected in a correspondingly yearly increase in employment of over 6.5%. The growth in the number of self-employed, at over 10%, is especially remarkable, so that the proportion of self-employed in the legal services workforce rose from approximately 57% to approximately 68%. 7 Source: ISTAT: Censimento intermedio industria e servizi. Note: some figures for 1996 differ slightly from previous section; IHS. 154 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-8 Self-employment and Employees, Italy 1991 in % 1996 % Change p.a. 91-96 in % Firms 45 454 45.7% 79 423 57.9% 11.8 Self-employed 56 406 56.7% 92 960 67.8% 10.5 Employees 43 019 43.3% 44 198 32.2% 0.5 Total 99 425 100.0% 137 158 100.0% 6.6 Source: Istituto Nazionale di Statistica (ISTAT) That this development was due to an overwhelming increase in sole practitioners is shown in the table below. Table 7-9 Legal Form of Companies 1991 in % 1996 in % 41 300 90.9% 75 335 94.9% Partnerships 965 2.1% 3 892 4.9% Private* Companies 122 0.3% 176 0.2% 12 0.03% 9 0.01% 3 055 6.7% 11 0.01% 45 454 100.0% 79 423 100.0% Sole Practitioners Co-operatives others Total * definition unclear Source: Istituto Nazionale di Statistica (ISTAT) This trend was also accompanied by an increase in the percentage of partnerships among firms, but also by a relative decline in joint-stock enterprises. These trends are also reflected in the statistics of one office versus multi-office firms. The Consiglio Nazionale del Notariato reports in the IHS questionnaire, however, that 80% of notaries’ firms have one qualified professional, 18% have two qualified professionals, and 2% have between 3 and 5 qualified professionals. The Consiglio Nazionale also reports 32% notaries’ firms as having 2-5 offices. This contrasts with overall statistics shown below. Table 7-10 Offices 1991 in % 1996 in % one office 43 018 94.6% 79 031 99.5% more than one office 2 436 5.4% 392 0.5% 45 454 100.0% 79 423 100.0% Total Source: Istituto Nazionale di Statistica (ISTAT) I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 155 Starting from a very high percentage by 1991 – 95%, by 1996 nearly all firms operated out of one office, a mere 0.5% having other branch offices. The trend to de-concentration is ultimately demonstrated in the breakdown of firms by size, in terms of employment: the sole practitioner category has increased its majority dramatically in the five years to 1996, so that it may be regarded as the norm for the profession. Table 7-11 Firm Size by Employment Employment 1991 in % in % 1996 1 24 292 53.4% 57 075 2 10 609 23.3% 11 075 71.9% 13.9% 3 -- 5 7 771 17.1% 8 120 10.2% 6 -- 9 1 936 4.3% 2 280 2.9% 10 -- 15 655 1.4% 705 0.9% 16 -- 19 100 0.2% 104 0.1% 20 -- 49 85 0.2% 56 0.1% 50 -- 99 6 0.0% 7 0.0% 100 -- 199 Total 0 0.0% 1 0.0% 45 454 100.0% 79 423 100.0% Source: Istituto Nazionale di Statistica (ISTAT) Among notaries’ firms the Consiglio Nazionale del Notariato reports, however, that 74% of firms have between 3 to 10 employees, and 19% have between 10 and 50 employees8. Professionals: Whereas the number of lawyers has more than doubled during the 1990s, only a small increase in the number of notaries has occurred. For this reason the percentage of lawyers within the legal professions has risen to over 96% from around 92% in 1990. Table 7-12 Number of Legal Professionals 1990* in % Notaries* 4 473 8.2% Lawyers 50 000 91.8% Total 54 473 1995* in % 2001** in % 4 551 5.2% 4 620 3.3% 83 090 94.8% 135 000 ** 96.7% 87 641 139 620 Source: Lawyers -"La regolamentazione dei servizi professionali - aspetti settoriali", Italian Competition Authority, 1997; * Notaries - Questionnaire from Consiglio Nazionale del Notariato ** Source: based on a communication with the Italian Competition Authority Trainee Notaries: The Consiglio Nazionale del Notariato reports a two thirds increase in trainees, from approx. 3,000 in 1990 to approx. 5,000 in 2000, out of a constant number of law graduates of 18,000-20,000. The pass rate for trainees taking final qualifying examinations varied from 6.1% of 2,296 in 1990 to 11.5% of 1,560 in 2000. 8 IHS Questionnaire. 156 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Summary As for the accounting professions several attempts have been made in the recent years to deregulate the legal professions in Italy. The system of market entry has been changed (and liberalised to some degree). The same is true for regulations on marketing and advertising as well as the system of fee setting and the regulations for business structures and interprofessional co-operation (also the last point has not been implemented up to know). Also the overall picture points to the direction of some liberalisation, however, the overall regulatory system for legal professions in Italy is still rather rigid. Currently new rules concerning the educational system are under consideration. It is not yet clear if this will lead to some liberalisation in market entry or not. We have the impression that regulatory changes in Italy take a very long time to be decided, and if they are decided, it takes even longer to implement them, if they are implemented (and not abolished at a later stage) at all. This leads to a considerable lack of transparency and insecurity, whereby it is unclear how a more dynamic market should evolve in such a situation. The respective professional bodies of established licensed professions appear to be rather defensive in regards to liberalisation, whereas some other professions make attempts to be equipped with reserved rights to offer services as well. In such a situation it appears to be rather difficult to liberalise the respective markets to a certain degree, especially concerning market entry, the questions of business-forms and inter-professional co-operation. However, in the long run the rather small-scale structure of legal (and accounting) services will not be competitive, even more in an increasingly internationalised market. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 157 7.3 Legal professions in England & Wales: an overview Legal services are regulated separately in the three jurisdictions of England & Wales, Scotland and Northern Ireland. In each jurisdiction there is a separate profession of solicitor, regulated and unified by/in the relevant Law Society, and of barrister (in Scotland “advocate”), regulated by and unified in the relevant bar Council (in Scotland “Faculty of Advocates”). The rules are broadly similar for solicitors and barristers (advocates) respectively in each jurisdiction. Also several differences are obvious, in this report we decided to provide information on the regulatory systems in England & Wales only. As already mentioned above in England & Wales there exist two main legal professions: the solicitors and the barristers. The solicitor is the first point of contact for individuals or organisations seeking legal advice and he may be called upon to deal with a wide variety of problems. Solicitors now are, under specific preconditions, allowed to represent parties before all kinds of courts (see below for details). A Barrister is essentially a consultant offering specialised services as an advocate and an adviser in all matters involving litigation and, as a main field of activity, the practice of the courts. A barrister does not normally deal directly with members of the public but is instructed by a solicitor. (However, reform of this under consideration.) Generally speaking only those who are qualified as a lawyer (solicitor or barrister) may represent parties before English Courts. But the rules in relation to the capacity of the representative before some specialised tribunals are considerably more relaxed. In Industrial Tribunals, for instance, the representative needs no specific qualification and, in practice, parties are often represented by trade union officials. It should also be noted that parties to small claim arbitrations can be represented by anyone they wish. There is no monopoly on the giving of legal advice in the United Kingdom. The only limitations to this are areas restricted to solicitors and barristers by statute, that is the formalities concerning real property transfer and conduct of litigation (see below for details) and the representation of clients before the courts. Anyone, whether a qualified lawyer or not, is able to give legal advice. Extra-judicial legal advice is often given by non-lawyers in, for instance, the fields of tax, business and planning. The market entry-index we have calculated for legal professions for England & Wales with a value of 2.82 is considerably higher than for example those for Finland (0), Sweden (1.98), Denmark (2.08) or even Belgium (2.52), but still lower than e. g. the one for Austria (4.08) or Germany (3.7). The figure for the conduct-index is 1.175, which is towards the lower end of our ranking. 158 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S For solicitors the membership a the relevant professional association (Law Society of England & Wales) is not compulsory. However, the Law Society is the representative and regulatory body for solicitors of England and Wales. In order to practice, all solicitors must have a Practising Certificate, which is issued by the Law Society on an annual basis. The Law Society governs admission to the Roll, that is entry to the profession, ensuring that all new solicitors are fit and proper persons and have undergone the necessary training. Currently, there are over 85,000 solicitors on the Roll. Anyone wishing to train for the Bar must join one of the four “Inns of Court” in London. Although barristers are primarily regulated by the Bar Council, the Inns of Court have an important role in their education and training. Indeed, you can only be a barrister if you have been "Called to the Bar" by an Inn of Court. The Inns provide support for barristers and student barristers through a range of educational activities, lunching and dining facilities and provision of various grants and scholarships etc. The Bar Councils’ functions as the governing body include laying down and implementing policies affecting the Bar on Education and Training, rules of conduct particularly with regard to rights of audience as required under the Courts and Legal Services Act 1990 and the Access to Justice Act. The Council represents a wide variety of interests at the Bar and is made up of 115 barristers who are elected or represent the Inns, Circuits and Specialist Bar Associations. Market Entry Tasks and exclusive tasks provided by Legal Professions in England & Wales Solicitors act as legal advisers to clients and conduct legal proceedings on their behalf. Until 1990, they had rights of audience only in the County Court, Magistrates' Court, and certain other tribunals. The Courts and Legal Services Act 1990 removed the monopoly which allowed only barristers to appear as advocates in higher courts, and solicitors are now acquiring rights of audience in the higher as well as the lower courts. They have now been given rights of audience in the High Court, Crown Court and appellate courts, subject to obtaining a special additional qualification. At present, however, it remains common practice for a solicitor to instruct a barrister to appear in these courts. In this respect, although most advocacy is undertaken by solicitors, barristers are often instructed to conduct a case because of their expertise and experience in pleading before the courts. It is worth mentioning that parties may represent themselves before any court in England, except, in the absence of special permission, the House of Lords. Apart from representation of clients before courts the formalities involved in real property transfer and succession form a significant share of the work of solicitors in general practice. This field of activity, conveyance, until the beginning of the 1990s was a service reserved to the profession of solicitors. This monopoly has been abolished with the „Administration of I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 159 Justice Act 1990“ and now several other professions are allowed to offer that kind of service as well. As already mentioned legal advice is not an exclusive task of specific professions in the United Kingdom. However, it is the solicitors who are the main profession doing this kind of service. Solicitors advise private persons on all kinds of legal questions as well as businesses on such issues as employment, contracts, company formation and competition policy. Barristers (also known as counsel) have rights of audience before all courts and tribunals. They are specialist advocates. They also act as legal consultants. Barristers will generally draft the written pleadings used in litigation and advise on particular points of law and, in addition, as to the conduct of the case. Barristers are legal consultants offering specialist services, in particular as advocates or advisors in matters involving litigation. Many barristers are specialists in one area of law almost to the exclusion of all others. Barristers as a general rule can only receive instructions to appear or advise in cases before the English courts from solicitors and members of certain other professions. For example an accountant or a tax specialist could approach a barrister for advice directly on a taxation problem or an architect could approach a barrister directly in relation to a planning matter. In relation to matters before foreign courts and the European Court of Justice, they are allowed to receive instructions directly from lay clients and foreign lawyers. They can, and often do, advise on questions of English law which fall to be considered in foreign courts. Barristers' training concentrates on the art of advocacy, court procedure and the rules of evidence. Since 1999 in specific cases there exists the possibility of direct access to barristers without the need first to instruct a solicitor, mainly for advice work by individuals or organisations licensed by the Bar Council. This deregulation has occurred to enable those equipped to instruct barristers without the intervention of a solicitor to do so, in cases where the law does not require a solicitor to be on the record. Currently there are regulatory changes in preparation to permit access to barristers by lay clients without the need first to instruct a solicitor, for competition reasons. In opinion of the Council of the Bar there is potential for difficulty with clients who are ill-equipped to carry out themselves the role that would normally fall to a solicitor if one were instructed. Another potential problem could be that barristers would be taking on an administrative role for which they currently have no training or support infrastructure, neither of which is necessary as they currently operate (source: questionnaire forwarded by the General Council of the Bar of England and Wales). This regulatory change has been proposed by the Office of Fair Trading. As Solicitors, apart from representation of clients before court, barristers have the (reserved) right to offer conveyancing services. 160 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Education and Entrance to the Profession There are two main routes for admission into the solicitors' profession in England & Wales: one via a university degree (in law or an other subject) and an other via obtaining employment in a legal office and joining the Institute of Legal Executives. The quickest and most common route to qualification is by means of a qualifying law degree. If a student decides to take a degree in a subject other than law, he will have to complete a one year full-time (or two years part-time) course leading to the Common Professional Examination (CPE) or the post-graduate Diploma in Law. These courses are offered at a number of institutions. The course gives the basic grounding in law to qualify as a solicitor. After successful completion of the law degree, or CPE, or Diploma in Law, would-be Solicitors have to undertake the Legal Practice Course (LPC), which is the professional training for solicitors. This course takes one academic year, or two years if studied part-time. Again, competition for a place on the LPC is very tough. Good academic grades are essential. The course is offered by a number of different colleges and universities. Having successfully completed the Legal Practice Course, the candidate enters a two year training contract with a firm of solicitors or other approved organisation (such as a local authority or the Crown Prosecution Service), gaining practical experience in a variety of areas of law. At this stage, the candidate is paid a salary. He holds the title of a trainee solicitor. Furthermore the Training Regulations 1990 require everyone wishing to qualify as a solicitor to have successfully completed the Professional Skills Course (PSC) after the Legal Practice Course and during the course of the training contract prior to admission. The course is offered by a number of different institutions. For those who do not wish to take a degree, it is possible to qualify as a solicitor by obtaining employment in a legal office, joining the Institute of Legal Executives and taking the examinations to qualify as a member and subsequently a Fellow of the Institute of Legal Executives. The process is lengthy and demanding, but enables the non-graduate to qualify as a solicitor. Would-be solicitors have to provide a minimum of five years of relevant practise, and visit two courses and sit the respective examinations. The first course is the socalled MILEX: “Member of the Institute of Legal Executives” (MILEX). This course normally takes four years. The second course is called FILEX. With this the candidate gets „Fellow of the Institute of Legal Executives”. After this, as for other would-be Solicitors, the LPC has to be done (see above), but the need for further training and PSC is waived. To qualify as a barrister there are 3 main stages to be completed: I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 161 1. Academic Stage: undergraduate degree in law, or undergraduate degree in any other subject plus a CPE conversion course (see above). 2. Vocational Stage: the Bar Vocational Course, one year full time or two years part time. Thos course combines practical assessed work and examinations at all stages. Once the would-be Barrister has successfully completed the BVC he will be called to the Bar by the respective Inn. Competition for places on the Bar Vocational Course is highly competitive. For the 2001/2002 course, approximately 2,116 candidates applied for 1,540 places. Course fees for the 2001/2 intake range from £ 6400 to £ 8750. The course is offered by several institutions (c.f. http://www.legaleducation.org.uk/BVC/thebvc.php). A would-be Barrister also has to undertake 12 qualifying sessions (previously known as "dining") before Call to the Bar. 3. Pupillage: a year's supervised practical experience, which is generally taken with a barrister in practice, although part of it can be completed in another approved legal environment. The chart below provides an overview on the entrance schemes for solicitors and barristers in England & Wales. Although the respective systems appear to be rather complicated, they appear to be of rather flexible nature as well. BARRISTERS SOLICITORS law graduate graduate law graduate graduate non-graduate A Levels A Levels A Levels A Levels 4 GCSE Passes degree in law Degree in any Degree in law degree in any subject MILEX I + II subject BVC; 1 year CPE or Diploma in Law; 1 year LPC; 1 year CPE or Diploma in Law; 1 year Pupillage; 1 year BVC; 1 year 2 years practise incl. PSC LPC; 1 year (min 3 years) 2 years qualifying + over 25; FILEX Pupillage; 1 year 2 years practise incl. PSC LPC; 1 year (training contract waved) 162 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conduct Regulation Prices and Fees As a basic principle the prices and fees of Solicitors in England & Wales are not regulated and freely negotiable. Usually a solicitor's fees will be calculated on the basis of an hourly rate agreed between the client and solicitor and will not correlate directly with the value of the claim. Some solicitors will work on the basis of a fixed fee for the conduct of a piece of work, most often for non-contentious business. If a solicitor and client disagree as to the level of fees ultimately incurred in relation to contentious business, the solicitor's bill may be assessed at the request of the client. The bill is subjected to an independent evaluation of its reasonableness by an officer of the court and the excess assessed off. In the case of noncontentious business, a similar process will be carried out at the client's request by the Law Society. It is, however, unusual for a client to take either of these steps if the basis of payment was made clear from the outset, the case has been properly handled and he has been kept fully informed about all matters as it proceeded. It should be noted that the basis of assessment of a bill between a solicitor and his own client is more generous to the solicitor than that of the assessment of costs awarded against an unsuccessful party at the conclusion of a case (see below). In particular, any costs which have been impliedly or expressly authorised by the client will be allowed, although they might strictly be considered unnecessary. It is unusual, therefore, for the successful party to litigation to have all his costs paid by the party who is unsuccessful. Many solicitors will also undertake work on the basis of a contentious business agreement. Under this arrangement, the client cannot apply for assessment of the bill. The solicitor enforces the agreement by applying to the court in which the business was done, not by suing for the debt owed. The court will only allow enforcement if the agreement is fair and reasonable. The agreement will be considered unfair, if it is unreasonable and the client did not fully understand and appreciate its effect before making it and/or, if it amounts to excessive profiteering by the solicitor. The court only examines the agreement, not the sum payable under it, unlike an assessment, where the court inquires into the reasonableness of the bill ultimately submitted and each item thereon. If, however, the number of hours claimed under a contentious business agreement is excessive, the court may not allow enforcement of the agreement as regards that excessive time. A non-contentious business agreement may also be made under which the fees payable are sued for as a debt, but the client only has a limited entitlement to assessment. In court actions, solicitors may not enter into contingency fee agreements under which their fees will be a percentage of the damages or the property gained. Even a conditional fee agreement ("no win no fee") is banned in criminal and matrimonial cases. However, in civil cases, a conditional fee may be agreed. Barristers' fees are generally negotiated between the solicitor and the barrister's clerk. In relation to drafting and advising barristers generally charge an hourly rate. For appearances I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 163 in court, a lump sum fee will be charged (a brief fee) for the preparation and first day in court together with an appropriate daily sum for each day in court thereafter (a refresher). The brief fee must, in general, be agreed in advance of any attendance at court. Advertising Broadly speaking, solicitors are allowed to advertise their services to potential clients subject to certain limited controls. Publicity Code 2001 for Solicitors states that publicity must not be misleading or inaccurate. Any publicity as to charges or a basis of charging must be clearly expressed and it must be clear whether disbursements and VAT are included. Practitioners must not publicise their practices by making unsolicited visits or telephone calls to a member of the public. "Member of the public" does not include: (a) a current or former client, (b) another lawyer; (c) an existing or potential professional or business connection; or (d) a commercial organisation or public body. As for Solicitors also for Barristers the regulations on advertising recently have been liberalised. The most recent liberalisation was to allow comparative fee advertising (2002). According to information provided by the Council of the Bar of England and Wales for barristers now only adverts including statements about a barrister's success rate are forbidden (c.f. paragraph 710.2 of the Code of Conduct). Forms of Business, Inter-Professional Co-operation, Location and Diversification Solicitors' firms can comprise either sole practitioners, private company (“unlimited company”) or limited liability partnership. In case of the latter two the firm may only be hold by members of the profession. This means that inter-professional co-operation in a joint firm (incorporation or partnership) has not been allowed up to now. In respect of the question of location following occurs: Solicitors in general serve the local community, solving the legal problems of the public. They are not however, nor indeed are barristers, tied to any particular court: a solicitor can act throughout England and Wales. Barristers are all self-employed, but generally join together in sets of chambers in order to share office accommodation and administrative staff. Barristers' clerks act for a set of chambers in negotiating and collecting fees on behalf of each member of the set. Partnerships between barristers are not allowed, nor are they allowed to form limited companies for the purpose of providing legal services. Inter-professional co-operation is forbidden. Furthermore employed barristers until recently had only very limited rights to practise. But as from 2000 employed barristers got allowed to exercise full rights of audience. 164 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S For Solicitors there are no specific regulations on the opening branch offices. The same is true for Barristers (Source for both professions: questionnaires provided to IHS by the respective professional bodies). Continuing Education Continuing Professional Development (CPD) for Solicitors in England & Wales is compulsory. Solicitors must complete 16 hours of CPD each year. At least 25% must be from attendance at accredited courses; the remainder can be obtained from research, writing, speaking at conferences etc. Solicitors must keep their own records and are asked each year to confirm on the renewal of their practising certificate that they are in compliance. They may be asked at any time for their CPD records and persistent non compliance may result in disciplinary action. These requirements are waived for solicitors in practice overseas. Accredited courses are provided by market providers who are quality controlled by the Law Society. For Barristers there now exists an obligation for continuing education as well (recently introduced: 2001). The Bar Council requires established practitioners to complete a record card of their continuing professional development (CPD) hours and submit this to the Education & Training Department on an annual basis. These records are randomly checked and if a barrister is found not to have completed their hours they will not be issued with a practising certificate. Those subject to the New Practitioners Programme (NPP) have their records logged on a database at the Bar Council. Providers of NPP courses are required to confirm the barristers’ attendance with the CPD Department who ensures their records are up to date. The Bar Council introduced the New Practitioners' Programme on 1 October 1997 for barristers in their first three years of independent practice. This was extended on 1 October 1998 to barristers entering employed practice. The Bar Council has also introduced a continuing professional development scheme for established practitioners. This was introduced from Jan. 1 2001 for all barristers who have completed the New Practitioners' Programme. Other practitioners will be phased in by year of Call as follows: In or after 1990 from January 2003, between 1980 and 1989 - from January 2004, before 1980 - from January 2005. Specialisation in the Profession While a single firm might offer a full range of services, increasingly, individual solicitors and firms are specialising in areas of law in which they are experts. This is particularly true of firms dealing with business clients, more often found in the major cities: their specialisms include banking law, entertainment law, corporate and commercial law, construction, trusts, environmental law, insurance, intellectual property, tax, competition, shipping and arbitration. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 165 As the law has become more complex, barristers increasingly specialise in particular areas of work. A number of Specialist Bar Associations (SBAs) exist to provide support, training and representation for their members. Compulsory Indemnity Insurance For Solicitors a professional indemnity insurance is compulsory. It has to cover a minimum sum or 1.6 Million EUR per case. For Barristers professional insurance is mandatory as well. Minimum sum of insurance is 392,419 EUR per case (£ 250,000) Economic Characteristics United Kingdom – Structure and dynamics (NACE 7411) Enterprises, Turnover, Employment:9: The nominal turnover of legal services enterprises in the UK reached a level of nearly 28,000 million Euro in 2001, equivalent to over 1.8% of GDP, the highest share after the exception of Belgium (c.f. Overview-tables in Chapter 5). Output of the sector rose however at a very high yearly average of 16.3% during second half of the 1990’s, faster than the growth in nominal GDP (an average of 9.9% p.a. over the same period 1995-2001). The annual growth rate from 1998 to 2001 continued at 16.1%. This represents a real growth in legal services of 12.5%, outstripping the growth in employment of 4% over the period 1998-2001, so large productivity gains have also been made. In fact, the real turnover per employed person rose by as much as 27% over this period. Table 7-13 Firms, Turnover and Employment; U.K. 7411 Number of Firms No. of Turnover in Employment Professionals Mio EUR 1995 21 620 11 326 1996 22 490 13 047 1997 22 988 16 217 1998 23 491 17 894 254 000 1999 24 106 21 077 276 000 2000 24 416 25 062 272 000 2001 24 763 28 032 286 000 111 772 Source: Office of National Statistics, IHS The number of firms increased correspondingly from about 21,600 in 1995 to 23,500 in 1998 to approximately 24,800 in 2001, an average growth rate of 1.8 % p.a. from 1998 to 2001 9 EUROSTAT; Office of National Statistics, ONS 166 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S (see Table), below the corresponding yearly growth rates over the period 1998-2001 for employment of 4% . The lower rate of increase in enterprises relative to employment is indicative of a trend towards more concentration i.e. more firms with relatively more employees: indeed the average firm gave employment to 11.6 persons in 2001, up from an average of 10.8 persons in 1998. The UK is indeed the second largest employer of personnel in legal enterprises after the Netherlands (see chapter 4). The relative number of enterprises is however typical, being the median of the member states in our survey, at over 410 per million of population. The average turnover (2001) per legal services firm in UK of 1,132,000 Euro is considerably higher than the correspondingly values for both legal services and for technical services, which have similar outputs per firm (795,000 Euro and 779,000 Euro respectively). The recent nominal growth rate since the second half of the 1990s - a yearly average of 13.7% were also a little higher than for accountancy services (11.6%) and for technical services (12.3%). Along with this strong growth in enterprises, the level of business per firm in UK is by far the highest among all the 12 member states surveyed here even after the branch output figures are adjusted for relative price levels and the overall production of the economy.) The level of employment generated by UK legal firms, at over 4.6 per 1000 of population in 2000 is also the second highest in our international comparison (only Belgium employing relatively more persons) and the turnover per employed person of 92,000 Euro in 2000 is third in absolute terms after Belgium and Finland, but only fourth highest after adjusting for relative prices and economic output and not greatly higher than the median value of the member states in the survey. Table 7-14 Key Statistics, Legal Services; U.K. 7411 Turnover per Firm Employment Turnover Employment Firms per Mio. of per person per Mio. of per 1000 Population Pop employed firms 1000 EURO 1000 EURO 1995 524 370 1996 580 383 1997 705 1998 762 390 10 813 70 4 299 398 1999 874 11 449 76 4 647 406 2000 1 026 11 140 92 4 562 410 2001 1 132 11 549 98 4 780 414 Source: Office of National Statistics, IHS The differential rates of growth in enterprises, turnover and employment are illustrated in the chart, with the 1998 values indexed at 100. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 167 Chart 7-3 Relative Growth Rates, U.K. 7411 180 160 140 120 100 80 60 40 1995 1996 1997 1998 Number of Firms 1999 Turnover 2000 2001 Employment Source: Office of National Statistics, IHS Turnover Size Class of Firms:10 Unlike the situation in many other EU member states, the largest proportion of legal firms are not to be found in the smallest categories (The high proportion of small accounting services category is certainly influenced by the inclusion of tax advice services in this 4-digit NACE (SIC) code). There are in comparison, however, relatively less large legal services firms with a turnover in excess of ca. 7,400 euro (500,000 GBP). Table 7-15 Professional Services Firms: Size Class by Turnover, UK Turnover classes1 in 1 000 GBP as of April 1998 0-49 SIC (NACE) Code 0-72 50-99 100-249 250-499 500-999 10004999 Equivalent turnover classes2 in 1 000 EUR 147873-146 147-368 369-738 739-1477 7390 5000+ 7391+ TOTAL TOTAL 7411 Legal 4 475 5 535 5 890 3 030 1 740 1 400 275 22345 7412 Accounting 6 520 5 195 3 980 1 775 945 625 90 19135 7413 305 315 330 195 150 170 45 1510 7414 13 280 13 790 7 310 2 420 1 245 1 045 245 39340 7415 7420 Arch/Eng 310 16 950 480 13 525 840 7 400 875 3 610 630 2 200 685 1 935 135 440 3950 46065 7411 Legal 0.20 0.25 0.26 0.14 0.08 0.06 0.01 100% 7412 Accounting 0.34 0.27 0.21 0.09 0.05 0.03 0.00 100% 7413 0.20 0.21 0.22 0.13 0.10 0.11 0.03 100% 7414 0.34 0.35 0.19 0.06 0.03 0.03 0.01 100% 7415 0.08 0.12 0.21 0.22 0.16 0.17 0.03 100% as percentages of total 7420 Arch/Eng 0.37 0.29 0.16 0.08 0.05 0.04 0.01 1 Excludes units with zero VAT turnover and all enterprises without a VAT basis. 2 Approximated by 1998 ECU/GBP exchange rates. Source: Office of National Statistics 10 Source: ONS, IHS. 100% 168 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S England and Wales: Solicitors11 Concentration: The market for solicitors’ legal services nevertheless does not exhibit as high a degree of concentration as has been reached in the market for accountancy services in UK. Whereas the ‘big 5 accountancy firms’ (in 2000) had a market share above 70%, the top 5 solicitors’ firms had a share of 32%, increasing to nearly 47% for the share of the top 10 firms. Chart 7-4 Market Share of Top 15 Law Firms by Turnover in 2000 12,0 10,0 % 8,0 6,0 9,7 6,5 6,3 5,3 4,0 4,0 4,0 3,5 2,8 2,0 2,3 2,3 2,3 2,2 1,9 1,4 1,4 Li C n k liffo rd la te C rs ha an nc d e Al lia nc Fr e es hf Al ie le ld n s Sl & au O v gt he er y r& M ay Lo v Ev ells er sh H er ed be s rt S m N or ith to C n M R S os C e am er D on As LA M hu c rs K en tM Si m n or m ris a on C s ris & p Si m m H a m De o n s rt m o n on H d S u all dd ar ds 0,0 Source: The Lawyer op. cit. LECG Report, see footnote. Solicitors’ Revenue and Profit: The single major contributing area to revenue is business and commercial law (28%), followed by commercial property (15%). Civil law areas such as personal injury, conveyancing, probate, family, housing and employment together make up 39%, crime another 7%, and sundry others 11%. Solicitors’ fees increased by 31% in real terms from a gross fee revenue of 6,600 Mio. EUR (4,700 million GBP) in 1990 to 9,200 Mio. EUR (6,200 million GBP) in 1998.The increase was steady and evenly spread over these years. Real growth in fees exceeds real growth in GDP from 1990-92 and again from 1996-98. In the most recent year reported, 1998, revenue from fees grew in real terms 3.5 percentage points more than GDP, at around 5%. 11 Source: LECG Report “Restrictions on Competition in the Provision of Professional Services”, for OFT, 2001. including the graphics. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 169 Depending on GDP growth, solicitors’ fees have been more or less around 1% of GDP since 1991 (+/- 0.02 percentage points). Chart 7-5 Solicitors’ Real Gross Revenue 7,0 6,0 GBP bn 5,0 4,0 3,0 2,0 1,0 0,0 1990 1991 1992 1993 1994 1995 1996 1997 1998 Source: Trends in the Solicitors Profession 1995-98, ibid. In the following charts law firms are broken down by their number of ‘principals’, defined as equity or salaried partners. In general, the larger the firm in terms of its principals, the larger the profit, whether gauged by a profit per equity partner or profit per solicitor in the firm. Chart 7-6 Average real profits per equity partner – by size of firm (Principals) Source: Trends in the Solicitors Profession 1995-99 and Economic Trends 1999 Annual Supplement (ONS), ibid. 170 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Whereas the profit on a per equity partner basis increased in recent years, this is not the case when the profit per solicitor in the firm is calculated. Chart 7-7 Average real profits per solicitor – by size of firm (Principals) Source: Trends in the Solicitors Profession 1995-98, ibid. Average earnings for solicitors are by far the highest of comparable professional groups, at 787.90 GBP per week being 26% higher than those for certified and chartered accountants, and 42% higher than the average earnings of architects. Chart 7-8 Average weekly earnings by occupation 7,0 6,0 GBP bn 5,0 4,0 3,0 2,0 1,0 0,0 1990 1991 1992 1993 1994 1995 1996 1997 1998 Source: New Earnings Survey 1995-99, ibid. The growth in nominal earning of solicitors between 1995 and 1999 was 19%, a little behind the figure for chartered and certified accountants – 23%, but ahead of architects – 15%, and the average of all professional occupations, of 17%. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 171 Solicitors – members and entrants: The total number of registered solicitors rose steadily at a (compound) average annual rate of increase of 5.1% from 1996 to 2000, reaching a total number of just under 101,000 by 2000. Chart 7-9 Growth in the number of solicitors 120000 10% 9% 100000 8% 7% 80000 6% 60000 5% 4% 40000 3% 2% 20000 1% 0 0% 1996 1997 % Change 1998 1999 2000 Total number of Solicitors on the roll Source: Trends in the Solicitors Profession 1995-99, ibid. The intake of newly registered solicitors was 3,058 in 1989 and rose to 4,827 in 1999, an average annual increase of 4.7%. The year to year variation can deviate a lot from this average as is illustrated by the intake rates of 17%, 2% and 0% for the three years 1997-99. The Law Society of England and Wales reports a membership of 86,603 with certificates, and 22,950 without practising certificates, in 2001.12 England and Wales: Barristers: 13 Barristers – members and entrants: The increase in the total number of barristers has been steady, just as for solicitors, as is shown in the chart, even if the percentage growth rate in individual years varies somewhat. 12 IHS Questionnaire. Source: LECG Report “Restrictions on Competition in the Provision of Professional Services”, for OFT, 2001. including the graphics. 13 172 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The average growth rate of barristers over more than a decade to 1999 was 4.8%: in the second half of the 1990s the rate of 5.2% p.a. was comparable with that for solicitors. Chart 7-10 Growth in the number of barristers 15% 12000 13% 10000 11% 8000 9% 6000 7% 4000 5% 2000 3% 1% 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 % growth Total number of Barristers Source: Report on the survey of Barristers Chambers 1999 and 2000, BDO Stoy Hayward, ibid. In recent years, starting in 1997, the net growth in barristers has diminished. This reflects a net change in the number of barristers (i.e. new entrants less the number of those exiting the profession, for example retirees) of around 440 in 1997 down to around 240 in 1999. This kind of variation in numbers is fairly typical, but the LECG report suggests that the decline may be due to recent regulatory changes, namely the increased costs of qualifying to enter the profession and the impact of the government’s recent reform programme (‘Woolf’), among a number of other factors. “Thus it is possible that a combination of the Woolf reforms promoting settlement of litigation at an early stage, government promotion of alternative dispute resolution (ADR) and the extension of rights of audience to solicitors, have together reduced the demand for advocacy services in litigation. Solicitors may be less likely to use barristers, following the emergence of solicitor-advocates, and because solicitors are tending to do traditional barrister work inhouse (such as drafting pleadings). A report by the Goldsmith Working Party on Financing Entry to the Bar (July 1998) illustrated the recent increase in the costs of qualifying. In 199091 over 60% of students taking the Bar Vocational Course (BVC) received some kind of local I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 173 authority grant, and over 50% received a full grant. By 1996-97, however, only 6% of BVC students received a grant, fewer than 3% received a full grant.” 14 Table 7-16 Growth rates of solicitors and barristers in the 1990s Solicitors total Barristers entrants total QC applications QCs 5 642 1987 1988 3 058 1989 1990 736 1991 1992 1993 1994 8 095 1995 1996 82 820 1997 1998 4 827 1999 2000 9 932 100 957 1 072 c.a. growth rate 5.1% 4.7% 4.8% 4.3% 5.75%* period 95-00 89-99 87-99 91-00 92-99 c.a. growth rate period 5.2% 95-99 Source: LECG Report; *average rate The above table shows that the rate of growth in the number of Queen’s Counsel (QCs) has fallen behind that of barristers in general: the increase in QCs has, however, also been steady as the chart below illustrates. Once again, the size of intake varies from year to year, from a low of 60 new QCs in 1998, to a high of 78 in 2000 (average intake of 70 over the period). 14 Source: LECG Report “Competition in professions” para. 230, 231. 174 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 90 1300 80 1100 70 60 900 50 700 40 500 30 Total Number of QCs 20 00 19 99 19 98 19 97 0 19 96 -100 19 95 10 19 94 100 19 93 20 19 92 300 Total QC awards 1500 19 91 Total Numbers of QC Chart 7-11 Total number of QCs vs. Total QC awards Total QC awards Source: The Lord Chancellors Department and Parliamentary Questions, Andrew Dismore MP, ibid. The chart below shows that the number of QCs as proportion of barristers remained constant around a figure just over 10% throughout the 1990s. The average rate of applications for QC status, which was 5.8%, exceeded the growth rate of barristers, unlike the growth rate in actual appointments of QCs (see Table above). Chart 7-12 Number of QCs 12% 10% 8% 6% 4% 2% 0% 1992 1993 1994 1995 1996 1997 1998 1999 Number of QC's as a ptoportion of numbers of Barristers Number of QC applications as a proportion of numbers of Barristers Source: The Lord Chancellors Department and Parliamentary Questions, Andrew Dismore MP. Ibid. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 175 Barristers’ Chambers: Barristers are organised into Chambers, i.e. groups separately negotiating on behalf of barristers within certain units of specialism. The LECG report makes the observation that competition takes place at the level of Chambers rather than at the level of individual barristers. The numbers of chambers competing within each specialism is shown in the chart below. Unlike, say the field of competition legislation, there is thus less competition in the areas of EU Competition Law or Pensions: LECG believes that mergers between Chambers are likely in future because there will be increased competition from solicitor-advocates. Chart 7-13 Number of chambers by specialism 14 13 12 12 9 10 9 9 7 8 6 4 3 2 2 Pe ns io ns IP /IT en t pl oy m Em pa ny om C om C at io n Li tig Ba nk in g m er ci al n Ar bi tra tio EU C om pe tio n 0 Source: www.chambersandpartners.com Professionals:15 Altogether there are 86,603 practising professionals, a rise of over 50% in the years since 1990 reported by the Law Society of England and Wales (LSEW). This development is accompanied in a increase in the percentage of non self-employed from 15.8% to 20.9%. Further, the number of holders of LSEW practising certificates who practise abroad has nearly doubled to about 3,100 since 1995. Firms: LSEW reports the number of private practice firms varying between ca. 8,100 and 8,700 over the last decade. The trend towards a higher proportion of large firms (with 11 or more partners) – 5.7% of firms in 2001 compared to 4.9% in 1990 – that is also indicated by the increase in non self-employed, has also been accompanied by an increase from 37% to 15 IHS Questionnaire 176 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 42% in the number of single qualified professional firms. Together with two partner firms, these account for over 82% of all lawyers’ firms. Turnover: LSEW reports a branch for legal services firms turnover before tax of 10,552 million GBP (approx. 17,500 euro) in 200116. In terms of prevailing Euro/ECU rates, this represents an increase of over 70% in nominal terms from 6,977 million GBP in 1995, a very high rate of growth indeed. Summary Like Denmark, England & Wales from an international comparative point of view shows a medium grade of entry regulation and, after several steps of liberalisation, a rather low grade of conduct regulation. A peculiarity of the entry regulation system in force is, that it is rather flexible and that there a several different routes of entry. At the same time it appears to be cost intensive and places for education appear to be rather scarce. The professional division between Solicitors and Barristers has been discussed for quite a while now. Whereas at first instance there may be no direct negative outcomes of this separation (as a monopoly for barristers in representation in high jurisdiction does not exist any more), for the external observer it is rather unclear what, apart from tradition, the advantage of this separation is. 16 c.f. a figure of 28,032 mill. Euro reported for entire UK 7411 branch in 2001 – see Overview table in Chapter 5. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 177 7.4 Legal professions in Germany Lawyers The lawyer today is an independent adviser in legal matters and representative of the interests of individual persons, legal entities, and public institutions in and out of court and before authorities. The lawyer renders, as an independent organ of the judicature, as stipulated in §1 of the Federal Lawyer Order (BRAO), in judicial proceedings an independent contribution to the finding of justice. As representative of his client’s interest he has to prevent that his client from suffering disadvantages that are not justified according to the law. Every lawyer becomes a member of the lawyer chamber (“Rechtsanwaltskammer”) by act of law when he is accredited as a lawyer. In the Federal Republic of Germany there are 28 such lawyer chambers. The lawyer chamber is a statutory body for self-administration of the legal profession and as such guaranties the independence of the law profession and protects it from the influence of the state and at the same time accentuates the status of the lawyer as an independent organ of the judicature. The German lawyer chamber system is thus based on obligatory membership of every lawyer in a lawyer chamber. The duty of the Federal Lawyer Chamber (“Bundesrechtsanwaltskammer – BRAK) is to safeguard, advance and represent the interests of its members. The administrative tasks of the regional lawyer chambers are the participation in the procedures of accreditation for new lawyers, reprimanding in case of misconduct und the involvement in procedures regarding professional issues. Furthermore the lawyer chambers perform social duties for their members, they are responsible for the vocational and professional competences and duties as well as further education and training of its members. Besides the lawyer chambers there exist the so-called lawyer societies (“Anwaltsvereine”) which are voluntary associations, based on the German society law (“Vereinsrecht”). The umbrella organisation of the approximately 190 associations in Germany is the German Lawyer Association (“Deutscher Anwaltverein – DAV) based in Berlin. Market Entry Tasks and exclusive tasks provided by German Lawyers The lawyer is according to § 1 BORA, paragraph. 3 (professional code of conduct “Berufsordnung Rechtsanwälte”) an independent adviser and representative in all aspects of law. The main tasks are: advising and consulting in matters of taxation, pensions and insurance, collecting of claims, patents and insolvency administration. 178 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The tasks of lawyers today do not only encompass the judicial procedural aspects. Rather the modern occupational image is characterised, and this despite a rise in cases that come before courts, mainly by task that involve advising, consulting and helping. According to § 1 Legal Advice Law (“Rechtsberatungsgesetz”) the agency and procuration of legal matters for others, including the consulting and getting claims, can only be carried out with an official licence. At the same time the §§ 1 et sqq. BRAO not only regulate the title (name) security in terms of the certificate model (“Bezeichnungsschutz i.S. des Zertifikationsmodells”) but it is also a strong prohibition with an approval provision (“Verbot mit Erlaubnisvorbehalt”) (Herrmann 1996: 346). For the field of activity of legal advice it means that legal advisers that are not lawyers need a specially permission of the provincial court president of the state, where the job is carried out (§ 11 Abs. 1 RBerV). Exempted from this rule are primarily patent lawyers, notaries, public appointed tax consultants and certified public accountants, public authority representatives, liquidators, cooperative auditors (“genossenschaftliche Rechnungslegerprüfer”). The lawyer chambers are not involved in the otherwise applicable licensing procedure, (cp. Herrmann 1996: 347). The accreditation is given only for a specific subject field and regional area. According to the law (§ 1 Nr. 1-6 RBerG) the following subject areas come into question: pension advisers, insurance advisers for the out of court representation of clients against insurance companies, out of court collection of claims and lawyers versed in foreign law. To be able to represent a client before court the lawyer has to be registered as a lawyer in the respective register (for more details see par. Location below). Exceptions are when cases are brought before the Court of Finance where - even up to the Supreme Court for Financial Issues (Bundesfinanzhof) - tax advisers, auditors and certified public accountants are allowed to represent their clients without being officially registered as lawyers. Education and Entrance to the Profession The judicial schooling and education in the Federal Republic of Germany is traditionally based on a dual step procedure of university education and following this legal clerkship (“Referendariat”). The university study is the first phase which provides the theoretic, academic knowledge and lasts for at least seven semesters (usually far longer) and ends with the first state exam (“Erstes Staatsexamen”). The focus of the second phase, the legal clerkship (“Referendariat”) is on the practical implementation of the gained theoretic knowledge and the gaining of experience. The prescribed length of the clerkship is two years and ends with the second state exam (“Zweiten Staatsexamen”). It is important to note that in Germany, as a key difference from other systems relying on university education, there are no university exams as such for the law degree. The Staatsexamen are, as their name I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 179 already indicates, carried out by the state, which implies comparatively stronger state control. The clerkship encompasses several stations, e.g. the jurisdiction (“ordentliche Gerichtsbarbeit”), public prosecutor, public service and law firms. The duration of the stay at a law firm can be varied between four and twelve months. Normally it lies between four and six months. The two state exams have to be taken before a public authority, the judicial examination board and not at the university or lawyer chamber. The judicial examination board is part of the state justice department. A jurist that has been educated according to this system may call himself a “complete jurist” (“Volljurist”), another term often used is that of “Einheitsjurist”, which roughly translated means “unity-jurist”. With this education he has fulfilled the requirements to become a lawyer, a notary, a state prosecutor or a judge in the Federal republic of Germany. After passing the second state exam the “complete jurist” can endeavour to become accredited as a lawyer at a specific court at the relevant state justice department. The accreditation can principally be refused when one of the grounds mentioned in § 7 BRAO exist: the forfeiture of a basic right, previous convictions, dwindling of assets or if gainful employment (“erwerbswirtschaftliche Tätigkeit”) is exercised. Before accreditation of the lawyer an approval by the executive board of the responsible lawyer chamber is needed. Even if the lawyer chamber rejects the accreditation for no apparent reasons the state justice department cannot just overrule this rejection. The affected jurist in this case can apply at the Lawyer Court (“Anwaltsgerichtshof”-AGH) for a court order for his instatement as a lawyer. The same procedure is to be followed if the state federal department refuses the accreditation (§ 11 BRAO). Conduct Regulation Prices and Fees Basically one has to distinguish in Germany between extra judicial (out of court) representation and client representation before court. In legal matters that are settled out of court the lawyer is free to determine his rates (§ 3 Abs. 5 BRAGO), there are no minimum or maximum fees that he may charge. Nearly 70% of all cases in which a lawyer is active can be settled out of court. Despite being able to charge flexible rates in out of court cases, more than 80% of lawyers charge rates according to the Federal Tariff for Lawyers (Bundesgebührenordnung für Rechtsanwälte) according to information provided by the Federal Lawyer Chamber. For court cases the rule is that the prices set by the state in the Federal Tariff for Lawyers (“Bundesrechtsanwaltsgebührenordnung”) are minimum tariffs that have to be charged (§ 49b Bundesrechtsanwaltsordnung). This principle stipulates that the party losing the case has to cover the cost of the lawsuit. This does not only include the court costs, but also the 180 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S cost for own lawyer and for the lawyer of the opponent. However, only the fees that the looser has to pay for the lawyer of the winning opponent are fixed as a maximum rate. From their “own clients” lawyers are permitted to charge higher rates. In Germany it is however forbidden to link the price to the outcome of the case (§ 49b Bundesrechtsanwaltsordnung) or to demand a certain part of the remuneration if the case is won (quota litis, § 49b Bundesrechtsanwaltsordnung). Advertising Until 1994 there existed a far reaching prohibition of advertising for lawyers. § 43b BRAO (since September 9, 1994 in effect) loosened the very strict advertising ban that was based on traditional professional class status law. However the direct and targeted advertisement for a lawyer or law firm is still prohibited according to § 43b BRAO, as well as and especially deceptive and impertinent or un-objective advertisement. In § 6 paragraph 1 of the BORA (professional code of conduct - “Berufsordnung”) it is stipulated that the lawyer may inform about himself as a person and the service he offers. According to paragraph 2 booklets of the practise or law firm, circular letters and other equivalent forms of information material are allowed. It is however forbidden to mention success rates or revenue volumes according to paragraph 3. Details of clients may only be published with their express consent. Apart from mentioning the respective specialisation or specialist title (see below) a lawyer is only allowed to mention a maximum of five areas of special interest and/or focus of activity, of which only three may be areas of main activity. Regarding an internet presence (homepage) attention has to paid to the new regulations according to law on online services, § 6 (n.F. des Teledienstegesetzes - TDG) where the identification and information requirements have been extended. Under the new law the following information generally has to be provided: address, contact details, public oversight, register entry details, sales tax identification). Lawyers especially have to list the following: lawyer chamber, occupational title and professional regulations. Reference also has to be made of the Federal Lawyer Order (“Bundesrechtsanwaltsordnung - BRAO), the Federal Tariff for Lawyers (“Bundesgebührenordnung für Rechtsanwälte” - BRAGO) and the Professional Regulatory Order for Lawyers (“Berufsordnung für Rechtsanwälte - BORA). Forms of Business Lawyers can practise as an individual lawyer, in the form of a co-partnership / joint practise (“Sozietät”), as an office partnership, as a freelancer, as employee or as a syndic-lawyer. The office-partnership or -sharing is simply a cooperation in terms of combined usage of technical and personnel resources to lower costs. In the case of a joint practise (“Sozietät”) the lawyers join forces to practice their profession together as one entity and practice. They I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 181 accept and represent the clients together, fees and remuneration are received collectively and they are collectively liable. Apart from the practising as an individual lawyer it is technically also possible to practise ones profession in the form of a company according to civil law (“Gesellschaft bürgerlichen Rechts” - GbR). Since 1998 it is furthermore possible to form a limited liability company (“Gesellschaft mit beschränkter Haftung - GmbH) and lastly it is possible to form a cooperation with other professions, as is described in detail in the next chapter. Inter-professional Co-operation German lawyers can form, since the mid nineties, national and even international cooperations with tax advisers, chartered accountants, legal advisers (“Rechtsbeiständen”) and patent lawyers (also in the form of a limited liability company). The limitation to these professions is made to protect the consumer says the Federal Lawyer Chamber. Consumers in Germany enjoy a number of protective measures. The lawyer may not disclose any information out of the counselling interview with the client to a third party. The documentation of the lawyer is protected from access or confiscation by other parties (freedom of confiscation). The lawyer has above these the duty to deny testimony if the client does not allow him to give this information to others. With the argument that these clients’ protective rights and measures could be circumvented if the lawyer cooperates with persons who’s professional relationships and contacts do not have these protective rights and obligations, the cooperation possibilities are limited to the above mentioned professions Location and Diversification The lawyer is obliged to open a practice to carry out her/his business. If a lawyer works in an EU state he can exempt himself from this duty according to § 29a Bundesrechtsanwaltsordnung. Until the year 2000 a localisation imperative existed. The admittance of a case to a county /magistrates court (“Landesgericht”) or the higher regional court (“Oberlandesgericht”) was based on the localisation of the law practise. This rule, which implied a certain territorial protection, was finally scrapped in 2000 as far as the county/magistrate courts (“Landesgericht”) are concerned. If a lawyer is registered at one county/magistrate court, he is automatically authorised to represent clients before the other similar German courts as well. However, lawyers licensed at one higher regional court (“Oberlandesgericht”, OLG) are still not automatically authorised to represent before other OLGs, as the licensing procedure before OLGs is more comprehensive. 182 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Furthermore until now it is forbidden for lawyers to run several branch offices (§ 28 BRAGO). On the other hand it is allowed that every lawyer may cooperate with other lawyers, not only within Germany, but also worldwide. Continuing Education Every lawyer is obliged to continue his education on a permanent basis according to § 43a Abs. 6 Bundesrechtsanwaltsordnung. How and on what scale is not stipulated further in the professional code of conduct. Specialist lawyers (“Fachanwälte”, see par. Specialisation below) have to study yearly a certain amount of hours in their field of speciality. If they don’t comply with this regulation their licence can be withdrawn. To acquire this further and specialised knowledge various courses are offered. The German Lawyers Institute (Deutsche Anwaltsinstitut e.V) of the Federal Lawyer Chamber offers every year a huge number of courses and lectures for this purpose. The same applies to the German Lawyers Association (“Deutsche Anwaltverein” - DAV). Specialisation in the Profession Lawyers in Germany can acquire so called specialised lawyer titles (“Fachanwaltsbezeichnungen”). The rules and regulations of these specialised lawyers are stipulated in the Federal Specialised Lawyers Order (“Fachanwaltsordnung” - FAO). According to § 1 FAO and § 43 c paragraph 1 sentence 2 BRAO there are currently the following specialisations: tax law, labour law, social law, family law, criminal law and insolvency law. According to § 43c Abs. 1 BRAO a lawyer may only specialise in a maximum number of two areas. The decision to grant a specialised lawyer title rests with the lawyer chambers. Prerequisites to obtain such a title are that the lawyer has gathered special theoretical knowledge in the particular field of law. Mostly this qualification is obtained by writing an exam about this subject after having attended courses on it for at least 120 hours. Besides this practical experiences in the relevant field have to be documented. In the particular field a minimum number of cases has to be completed and the lawyer must at least have practised for three years. That it is allowed to advertise with further “fields of interest and specialisation“ has already been mentioned above. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 183 Compulsory Indemnity Insurance For lawyers in Germany indemnity insurance is compulsory. The minimum amount for which professionals must be insured is 250,000 € per case and 1,000,000 € per business and year. If the risk is higher than this amount, then the lawyer, according to § 51 BRAO, has the obligation to insure himself for a higher amount. For many lawyers, especially those who are doing international business, the insurance covers much higher sums than those mentioned above. Actual challenges and recent changes in regulations There are possibilities of widening the activity field of lawyers in the future, in particular in the field of preventing law advice, which is supported by outsourcing of entrepreneurial services due to cost and flexibility considerations. Because firm successor problems will definitely endure in the coming years, additional lawyer activities will be demanded. With regard to future market fields according to the environment, labour, social and data processing laws and according to economic consulting an increase in consulting needs can be expected. During the next years a change in the kind of services is to be expected. Catchwords are: specialisation, inter-professional joined work and fusion. In the last years an extension of the specialised lawyers denominations were discussed. According to §1 FAO (1.1.2003) denominations now can be awarded for: administrative law, tax law, labour law, social law, family law, criminal law and insolvency law with respective specialised knowledge according to the regulations of the specialised lawyers (FAO). Lawyers, but also accountants and tax advisers, face a growing competition via economic jurists (Wirtschaftsjuristen): Law faculties in Germany are starting to certificate a diploma for the examined person receiving practical training in judicial or other legal work after having passed the first state examination (Rechtsreferendar), if they did not continue their education within the last ten years to achieve an „Assessor“. One of the essential legal changes with regard to an inter-professional joint work in the 1990s in Germany was the “Partnerschaftsgesellschaftsgesetz”. This law was amended 1998 and provides a regulation frame for partnerships among professionals. The lawyers’ organisation is asking for a structural revision of the Federal Tariff for Lawyers (Bundesgebührenordnung für Rechtsanwälte). An expert commission of the Federal Ministry of Justice (BRAGO structure reform commission) presented in August 2001 a concept. This 184 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S concept now is the basis of the recent government law concept „Gesetzes zur Neuordnung des Rechtsanwaltsvergütungsrechts – RVNeuOG“ (BT-Drucksache 14/9037). Notaries The German Federal Notarial Code - the relevant statute for the whole profession - classifies the Notary as a holder of a public office. A constitutional state owes a duty of legal security to its citizens, and therefore disputes have to be settled, or prevented from happening. An essential precondition for this security is the reliability of legal documents and other important legal statements. The legislator has entrusted the function of an impartial, public institution primarily to Notaries. This special status is marked by the official seal, which is applied to all instruments issued by a Notary. The importance of such notarial deeds is shown for example in court where they are accepted as one of the best means of evidence. This is also the case in enforcement proceedings: since it is an extremely severe intrusion into a person's privacy, it is only legally possible based on a final judgement or a notarial deed. Furthermore, public registration authorities – the companies' registry, land registry, register of associations - rely on the correctness of notarial deeds when they make an entry. Such bodies are thereby relieved of the manpower and time-consuming examination of often very complex facts, whilst still retaining their controlling function. Notarial deeds have a special warning function: citizens are protected from the consequences of hasty actions by statutory provisions stipulating special formalities before taking important steps such as the purchase of real estate or the setting up of a binding mutual will. Organisational structure of Notaries The independence of Notaries is traditionally reflected in their self-governing bodies, the Notarial Associations. They represent the interests of the profession with regard to third parties, and at the same time operate as a regulatory authority for their members. In this way the Associations supervise professional compliance within their districts, and are authorised to issue binding professional ethical guidelines. Further, if a client has a complaint, he can apply to the Notarial Association. They also provide professional education to singleprofession Notaries. The Bundesnotarkammer (Federal Chamber of Notaries) in Cologne is the umbrella organisation for all the Associations. It works out common guidelines to all notarially relevant I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 185 questions, develops new concepts and acts on behalf of Notaries, in particular with political and economical institutions. The Federal Chamber of Notaries consists of the Council of Representatives with delegates sent by 21 associations. The members of the chambers, with around 11.000 Notaries (Dec. 2002), elect the Boards of the Chambers. The Federal Association of Notaries also advises on legislation. Beyond this, many Notaries have joined together in Notaries’ Societies. Notaries, like advocates and tax advisers, have professional indemnity insurance. However such insurance generally excludes responsibility for intentionally caused damage. Contrary to other advisory professions, the clients of a Notary are protected in these situations: every Notarial Association has fidelity insurance, which covers such damages. Since 1981 a fund exists in Cologne into which every Notary contributes. The Deutsches Notarinstitut (German Institute of Notaries) was created in Würzburg in 1993 as an initiative and institution of the Bundesnotarkammer. Any Notary can refer to it when he comes across an unusual or particularly complicated legal problem in his practice. The Institute supplies Notaries with technical publications and other professional information. There is the Fachinstitut für Notare (Notarial Institute) within the Deutsches Anwaltsinstitut (German Institute of Advocates) in Bochum. The Institute offers continuing education and specialist courses to Advocates who wish to go on to become a Notary, and also to trainee Notaries. Controlling Notaries As a rule the Notary is not a civil servant, but is self-employed. He works at his own risk: the Notary is liable with all his property for damage caused by him. Because he is not a civil servant, the Notary works independently from any directions of a public authority. Unlike an Advocate, the Notary does not have to focus on the interests of only one party. Thus in a real estate purchase contract the Notary must has to point out the consequences of a clause to both parties involved. Conditions for admission: Each Notary must be personally and professionally qualified and must swear an oath that he will conscientiously conduct his office. Periodically the President of the competent Regional Court inspects for compliance with all relevant statutes and regulations, as well as correct billing of the Notary's clients. In the case of complaints a disciplinary procedure can be instituted, and for very grave offences the Notary may even be dismissed from office. 186 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Notaries international In the light of increasingly complex international structures and integration fewer and fewer legal problems can be solved on a mere national level. As a consequence German Notaries have co-operated with foreign partner organisations. Thus the Bundesnotarkammer also has an office in Brussels. For example, a close interchange of experience and work on common concepts takes place in subjects such as electronic commerce, data security or cross border conveyance. On a European level, in order to represent common interests to the consumer, various European notarial organisations have formed the Conference of the Notarial Associations of the European Union which runs an office in Brussels. There Notaries co-operate in the lawmaking process and give expert opinions in close contact with EU Institutions. Notaries strive to introduce common standards of service on a European level. A first step in this direction was the European Code of the Notarial Professional Ethics (Deontology) adopted in 1995 by the Conference of the Notarial Associations of the European Union in Naples. It sets out ethical principles such as independence, confidentiality, impartiality and also conditions of a Notary’s function such as training or professional indemnity insurance. On an international level the Union Internationale du Notariat Latin - U.I.N.L. - serves as a forum for information and exchange of opinion. More than 60 national Notaries’ organisations belong to the to U.I.N.L. Market Entry Tasks and exclusive tasks provided by German Notaries At first sight, notarial activity is restricted to certification and authentication. However before certifying a document, the Notary must ascertain the real intentions of the parties, draft and read out the relevant contracts and statements, advise on the consequences and point out any risks and dangers. When authenticating, that is to say when confirming the authenticity of a signature or a document, the Notary examines the identity of the signatory or the conformity of the copy to the original produced and thereby protects commerce from forgeries and the parties involved from damage. In practice, Notaries act in many fields. Some examples: Real estate law This is one of the main areas of a Notary's activity. He acts in purchase contracts for land, houses and apartments, as well as in real estate donations, either in connection with estate I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 187 planning or the transfer of a business to the next generation. The Notary not only drafts the necessary documents and certifies them but also impartially assists the parties involved in the execution of these contracts. Thus, he obtains - if necessary – consents from public authorities, sees to the removal of charges in the land register, protects the buyer by lodging a caution in the land register and handles monies entrusted to him in a client account. For the security of loans he certifies land charges and mortgages. Finally the Notary is competent to auction real estate and to partition real estate rights in the new federal states between owners deriving their ownership from titles acquired before 1945 and the actual users of such real estate. Commercial law and the law of associations If a person or a company wants to do business at large, it must be registered in the companies' register. The Notary drafts and arranges the notifications and authenticates the signatures of the persons involved. Furthermore he drafts, produces and certifies the statutes for partnerships and limited partnerships (personal corporations), and for private and public limited companies (capital corporations). Alterations to the statutes of a corporation such as the change of domicile or an increase in capital must be certified by a Notary and notified to the companies' register, as do changes in the management or the board. Advice on foundation, registration in the register of associations and help with changes in the statutes in addition has to be done for the law of associations. Family law When parents adopt a child, the Notary drafts the necessary applications to the Guardian’s Court. Before or after a marriage he advises on and certifies the marriage contract, which for example may provide for the separation of the spouses' property, maintenance and custody. The Notary can draft a tailor-made agreement on the distribution of the assets earned by the spouses during their marriage. If the marriage should fail, the Notary can certify agreements on the distribution of assets, pension rights or maintenance. In doing this he is legally bound to remain impartial. Law of succession In consultation, Notaries not only focus upon the fiscal aspects of wills and contracts of inheritance, but also consider family matters such as support to dependants or the 188 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S avoidance of quarrels and disputes within the family. Also when passing a business on to a suitable successor, a contrived succession arrangement can avoid protracted and costly conflicts. Finally, but not least, the Notary can assist in the issue of the Certificate of Inheritance, or, generally in the case of insolvent estates, if the inheritance is to be declined. He drafts and submits the relevant applications to the Probate Court. Education and Entrance to the Professions A Notary has to be a German citizen with qualification to be a justice according the German Justice Law (§5 BNotO). In Germany, for historical reasons, three different types of Notaries have been evolved: the "single profession Notary", the "Advocate Notary" and the "state-employed Notary". As the name implies, single profession Notaries practise exclusively as Notaries, Advocate Notaries exercise the profession of a Notary alongside the profession of an Advocate. Both of them are still self-employed, and therefore practise independently and at their own risk. State-employed Notaries are paid by the state. Whatever the type of Notary may be, all have studied law and undergone practical training with above average grades, and are qualified to be judges (except for the state-employed Notaries in the district of the Higher Regional Court of Stuttgart who receive special legal training). Furthermore, the personality of applicants for the position of a Notary must be suitable for an office that is considered by the general public as especially trustworthy. If there are several applicants for a single vacant notarial office, the Minister of Justice for the relevant federal state will decide according to the merit principle. Prospective single profession Notaries must pass the Second State Examination with particularly good grades in order to be admitted to the three years of preparatory training as a trainee Notary, during which they have to prove their practical suitability for the profession. Prospective Advocate Notaries must have practised at the bar for five years successfully and without any complaints. During this time they have to undergo continuing education by acting as locum Notaries and attending courses in order to acquire the professional knowledge especially relevant for work as a Notary. Their marks in the Second State Examination are also taken into consideration when they are appointed. State-employed Notaries are selected in accordance with the principles applying to civil servants. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 189 Further detailed information for the entrance conditions for notaries are given in: Bundesnotarkammer 2002, Der Zugang zum Anwaltsnotariat, Köln (available via the secretariat of the Bundesnotarkammer). Conduct Regulation Prices and Fees Notarial tariffs are regulated by law. The fees are determined solely on the basis of the importance and value of the business transaction and not by the amount of the notary's work input necessary. There is a single federal system of costs, related to the kind of business transaction. Actual fees are calculated from the corresponding tariff schedule. The fee for certifying a document takes into account the notary’s advice, production of the document, and the act of certification as such. Further detailed information: Gesetz über die Kosten in Angelegenheiten der freiwilligen Gerichtsbarkeit (Kostenordnung) in der Fassung vom 26. Juli 1957 (BGBl. I S. 960), last change by the law of July 23, 2002 (BGBl. I S. 2850). Advertising The law on notaries - §29 BNotO (April 2002) - forbids any commercial undertakings, especially advertising that contradicts the notary’s public office status. Advertising is under discussion for almost all liberal professions. Advertising (so called information advertising) is discussed with respect to notaries by the following foci: - Internet presentation - Headlines according to catch-up advertising (‚Blickfangwerbung’) - Tendency: Development and care of office (‚Kanzlei’)-images will be allowed, if the professional background is visible - No self-evaluation - There are acceptance problems with regard to the new European § 2 UWG (Comparable Advertising) 190 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Forms of Business As mentioned before, single profession Notaries practise exclusively as Notaries, Advocate Notaries exercise the profession of a Notary alongside the profession of an Advocate. Both of them are still self-employed, and therefore practise independently and at their own risk. State-employed Notaries are paid by the state. The type of Notary varies from federal state to federal state. The single profession Notary is preferred by Bavaria, Brandenburg, Hamburg, MecklenburgWestern Pommerania, Rhineland-Palatinate, Saarland, Saxony, Saxony-Anhalt, Thuringia and the Rhine territories of North-Rhine/Westphalia. Overall there are 1700 single profession Notaries. Around 9,000 Advocate Notaries practise in Berlin, Bremen, Hessen, Lower Saxony, Schleswig-Holstein and the Westphalian territories of North-Rhine/Westphalia. State-employed Notaries - around 630 - are found in Baden-Württemberg, in the district of the Higher Regional Court of Stuttgart all three types of Notaries co-exist, and in the district of the Higher Regional Court of Karlsruhe judges act as Notaries. Forms of business is described in §20 pp BNotO with its areas - Recording (Beurkundungen und Beglaubigungen (§20 BNotO)) - Other legal forms (Sonstige Bescheinigungen (§21 BNotO)) -Taking oaths (Abnahme von Eiden; Aufnahme eidesstattlicher Versicherungen (§22 BNotO)) - Keeping of values (Aufbewahrung und Ablieferung von Wertgegenständen (§23 BNotO)) - Care and representation (Betreuung und Vertretung der Beteiligten (§24 BNotO)) Inter-professional Co-operation Though in many liberal professions the question of co-operation among professions is discussed, there is no co-operation allowed by the BNotO. I.e.: single profession Notaries practise exclusively as Notaries, Advocate Notaries exercise the profession of a Notary alongside the profession of an Advocate. Both of them are still self-employed, and therefore practise independently and at their own risk. State-employed Notaries are paid by the state. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 191 Location and Diversification Though the location is under discussion in the legal services in general, there is still a strict regulation concerning the location of a Notary. A certain location (Amtssitz) is assigned for the Notary (§10 BNotO). The authority area (Amtsbereich) is the area of the respective court (Amtsgericht). The Amtsbezirk of a Notary §11 BNotO is the Oberlandesgerichtsbezirk of the Amtssitz. According to §11 BNotO it is allowed to support a foreign notary. Continuing Education The Chamber of Notaries provides guidelines for the continuing education (§ 67 BNotO, Absatz 2, 10) notaries have to follow (§14 BNotO General Occupational Duties). Specialisation in the Profession According to the BNotO no specialisation is allowed. Thus, the entire tasks of a Notary as described above have to be fulfilled. There is a compulsory indemnity insurance (§19 BNotO Berufshaftpflichtversicherung) via the state specific justice administration. Actual challenges and recent changes in regulations Since the particular situation of notaries within the field of liberal professions is strongly regulated, and changes in the tasks of notaries only can be made by law, there are little changes with respect to the entrance conditions and the notary tasks to be expected. Though recent changes in different laws (Verfahrensrecht, Bürgerliches Recht, Handels- und Gesellschaftsrecht und Steuerrecht) will affect notaries in different ways, however, not changing their already defined tasks and dues (see internet page of BRAK: Gesetzgebungsübersicht). According to their occupational law (BNotO) only the conversion from DM to EURO and the novelation 1998 with a systematic new ordering with regulations of a computer assisted accounting or new regulation of the storage of documents has to be mentioned. 192 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Economic Characteristics (Lawyers and Notaries) Germany – Structure and dynamics (NACE 7411) Enterprises, Turnover, Employment17: The only data available for Germany at the 4-digit level are those recently made available by EUROSTAT for the year 2000. Table 7-17 Firms, Turnover and Employment; Germany 7411 Year Number of Firms 2000 Turnover in Mio. EUR 31 195 Employment 11 863 No. of Professionals 200 461 105 724 Source: EUROSTAT, IHS The key indicators are thus also restricted to the year 2000: Table 7-18 Key Statistics, Legal Services: Germany 7411 Year Turnover per Firm Employment Turnover Employment Firms per per 1000 per person per Mio. of Mio. of firms employed Pop Population 1000 EURO 2000 380 1000 EURO 6 426 59 2 440 380 Source: EUROSTAT, IHS Number of enterprises: In 2000 there are 31,195 enterprises in the legal services (NACE classification 7411). Dominant are the 22,922 single enterprises (Einzelunternehmen) (73.5%) followed by 8,152 personal associations (Personengesellschaften) (26.1%), 83 capital associations (0.3%) and 37 other legal forms (0.1%). Active persons (as of September 30, 2000): Altogether there are 200,461 persons active in the legal services with 151,532 wage and salary earners (76% of all active persons). Expenditures: Total expenditures are 6,162,876 EUR which are 51.4% of total turnover. Among the expenditures personal expenditures are dominant with 3,283,472 EUR, i.e. 53.3% of all expenditures. 2,879,404 EUR are material expenditures, i.e. 46.7% of all expenditures. Among the material expenditures let and lease is the main expenditure block with 849,112 EUR (74.1% of material expenditures). Wages and salaries: 15,532 persons are wage and salary receivers in the legal services. The total personal expenditures are 3,283 Bill. EUR (3,283,472,000 EUR). Among these expenditures wage and salaries count for 2.712 Bill. EUR, i.e. 82,6% of total personal 17 EUROSTAT I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 193 expenditures. Social expenditures are 571,430,000 EUR, i.e. 17.4% of total personal expenditures. Lawyers Members of the profession: Within the re-united Germany in the last decade the number of lawyers increased continuously. From 1990 with 56,638 lawyers to 2002 with 116,305 this is more than a doubling. It is to be noted that the Federal Chamber of Lawyers includes advocate notaries in their statistics of total number of lawyers. Remarkably there is a pronounced decrease in the relative proportion of advocate notaries (but still an increase in absolute numbers) over the years: the advocate notaries quota in 1980 of 18.4% decreased to 7.5% in 2002. Note, that there is no access to an advocate notary licence in the five new Federal states. Table 7-19 Quantitative development of lawyers 1980 to 2002 in Germany Lawyers without Advocate Notaries Year* Lawyers (1) Among them Advocate Notaries (2) 1980 36 077 6 633 29 444 18.4 1985 46 933 7 174 39 759 15.3 1990 56 638 7 877 48 761 13.9 1991 59 446 8 180 51 266 13.8 1992 64 311 8 657 55 654 13.5 1993 67 120 8 616 58 504 12.8 1994 70 438 8 650 61 788 12.3 1995 74 291 8 715 65 576 11.7 1996 78 456 8 857 69 599 11.3 1997 85 105 9 031 76 074 10.6 1998 91 516 9 045 82 471 9.9 1999 97 791 8 925 88 866 9.1 2000 104 067 8 838 95 229 8.5 2001 110 367 8 897 101 470 8.1 2002 116 305 8 765 107 540 7.5 Advocate Notaries % (1)-(2) * per 1.1. of each year, since 1992 with the new five Federal states Source: Federal Chamber of Lawyers (Bundesrechtsanwaltskammer, BRAK) 1.1.2002 The Bundesnotarkammer reported a total membership of 10,562 in 2001, up just slightly from 10,343 in 1995, having been 8,890 in 1990, (IHS Questionnaire). The Deutscher Anwaltverein reported a membership of 55,000 in 2001, up from 33,500 in 1990 (IHS Questionnaire). Women in the profession: Women increasingly participate in the labour market; the general female labour force participation rate increases from 31.3% in 1950 via 39.2% in 1990 (West 194 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Germany) to now 44% in 2001 (West and East Germany). In the former DDR (East Germany) the female labour participation rate was always higher from 52.5% in 1950 to 78% in 1990. The gap between West and East Germany is diminishing: the female labour force participation rate in East Germany now is 45.5% in 2001, in West Germany about 43.6% in 2001. All over Germany the general female participation rate now is 44% (2001). The importance of female lawyers increased within the last years by the absolute numbers as well as in its relative portion to all lawyers. As in the last years the female lawyer quota increased more than proportionally compared to the overall lawyer’s growth rate. Per 1.1.2002 there are 31.482 female lawyers with a female lawyer quota of about 27%18. An additional 358 female lawyers were licensed compared to 2001, the year before. That is a growth rate of 12.7% compared to 5.4% for all lawyers. The Federal Chamber of Lawyers (Bundesrechtsanwaltskammer, BRAK) expects a further increase because the number of female law students is still increasing. Age structure: The average starting age when for lawyers is about 30 years. The profession’s exit age is about 70 years (Rechtsanwaltskammer Koblenz 1992). The average age of active lawyers was about 44 years in the eighties with an increase within the last 30 years (Braun 1986). Economic Situation: The following economic indicators are based on the Cost Structure Statistic for lawyers of the Federal Statistical Office and on the Statistical Information System for Lawyers STAR 2001 of Institute for Liberal Professions (IFB, Nürnberg). Further information for the entire legal services is given in the notary chapter based on the Service Statistics of the Federal Statistical Office. In the following two tables: the personal yearly charge (fee) turnovers (without sales tax) of lawyers in self-employed activity are specified for the 1990s. In some Federal States (Bundesländer) there are no advocate notaries but only single notaries; i.e. a lawyer can not be a lawyer and a notary simultaneously. The numbers refer exclusively to lawyer activities without being a notary. Other income figures like from a syndic activity are not regarded. We inspect two groups: on the one hand lawyers exclusively active in an own office, and on the other hand exclusively self-employed with at least 40 working hours a week (so called full time lawyers). 18 Note, the BRAK lawyers data here encompasses advocate notaries. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 195 Table 7-20 Personal yearly fee turnover of lawyers exclusively active in own offices (without advocate notaries) in West and East Germany 1993 to 1999 Personal Yearly Fee Turnover of Lawyers Exclusively Active in Own Offices Year Lawyers in single offices active West East Lawyers in local copartnership active West East Lawyers in regional copartnership active West East in DM in DM in DM in DM in DM in DM 1993 212 000 175 000 291 000 219 000 800 000 - 1994 236 000 216 000 314 000 226 000 762 000 - 1995 251 000 204 000 322 000 257 000 1 069 000 - 1996 232 000 254 000 331 000 263 000 630 000 435 000 1997 241 000 233 000 344 000 274 000 519 000 394 000 1998 210 000 220 000 333 000 256 000 654 000 365 000 1999 218 000 216 000 329 000 215 000 549 000 298 000 Source: Statistisches Berichtssystem für Rechtsanwälte STAR 2001, Schmucker 2002 The personal yearly fee turnover of West German lawyers in own offices decreased till 1998 with a recent slight increase to 218,000 DM in 1999. Whereas in East Germany the decline is continuing: in 1999 they gained on average 216,000 DM, i.e. 1.8% less than the year before. Though East German lawyers turnover is lower now than their West German’s colleagues the discrepancy is only marginal now. The average turnover in local co-partnerships (lokale Sozietäten) in the last years is more than a third higher than in a single office situation. There is a recent decrease in both parts of Germany which is remarkably higher in East Germany with –16.1% than in West Germany – 1.3%. The highest reduction in turnover recently has occurred in regional co-partnerships (überörtliche Sozietäten) 1998 to 1999: West Germany by 16.1% and East Germany by 18.4%. Here the West East differences are most distinguished with 549,000 DM in 1999 for West Germany and 298,000 DM for East Germany in 1999. The full time lawyers show a similar turnover picture compared to the situation of lawyers exclusively with an own office (see table). 196 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-21 Personal yearly charge turnover of full time lawyers (without advocate notaries) in West and East Germany 1993 to 1999 Personal Yearly Charge Turnover of Full Time Lawyers Year Lawyers in single offices active West East Lawyers in local copartnership active West East Lawyers in regional copartnership active West East in DM in DM in DM in DM in DM in DM 1993 246 000 179 000 293 000 219 000 800 000 - 1994 265 000 217 000 326 000 226 000 931 000 - 1995 289 000 209 000 325 000 262 000 867 000 - 1996 266 000 268 000 346 000 267 000 668 000 465 000 1997 280 000 243 000 355 000 274 000 485 000 394 000 1998 254 000 231 000 348 000 260 000 654 000 376 000 1999 267 000 227 000 342 000 218 000 568 000 308 000 Source: Statistisches Berichtssystem für Rechtsanwälte STAR 2001, Schmucker 2002 Again, the turnovers in East Germany are lower than in West Germany with a larger recent difference between West and East Germany compared to the own office lawyers. In 1999 finally this gap was -15% for lawyers in single offices, 27.3% for lawyers in local copartnerships and even 45.8% in regional co-partnerships. Fee revenue: Besides the personal fee revenue the personal turnover of lawyers is of interest. The following Tables show the development in the 1990s. Table 7-22 Personal yearly turnover of lawyers exclusively active in own offices (without advocate notaries) in West and East Germany 1993 to 1999 Year Personal Yearly Turnover of Lawyers exclusively active in own offices in regional coin local co-partnership partnership active active in single offices active West East West East West East in DM in DM in DM in DM in DM 1993 92 000 71 000 151 000 99 000 351 000 in DM - 1994 92 000 73 000 166 000 112 000 338 000 - 1995 107 000 84 000 161 000 108 000 306 000 - 1996 94 000 93 000 162 000 115 000 249 000 164 000 1997 94 000 84 000 171 000 116 000 243 000 168 000 1998 84 000 84 000 161 000 124 000 273 000 148 000 1999 83 000 78 000 159 000 92 000 279 000 127 000 Source: Statistisches Berichtssystem für Rechtsanwälte STAR 2001, Schmucker 2002 The general picture: after a period of increasing turnovers in the early 1990s, from 1997 onwards the personal yearly turnover decreased regardless whether there is a single office, local or regional co-partnership activity. There is one exception: the growing regional copartnership personal yearly turnover in West Germany, which showed a slight increase from 1998 to 1999 by 9.9% to 279,000 DM. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 197 With regard to full time lawyers, the general picture is one of increased turnovers in the early 1990s but decreasing turnovers from 1997 onwards (see table). Table 7-23 Personal yearly turnover of full time lawyers (without advocate notaries) in West and East Germany 1993 to 1999 Year Personal Yearly Turnover of Full Time Lawyers Lawyers in single offices Lawyers in local coLawyers in regional coactive partnership active partnership active West East West East West East in DM in DM in DM in DM in DM in DM 1993 104 000 73 000 158 000 101 000 342 000 - 1994 104 000 76 000 164 000 111 000 323 000 - 1995 123 000 86 000 162 000 110 000 327 000 - 1996 107 000 99 000 168 000 120 000 262 000 172 000 1997 108 000 87 000 175 000 116 000 240 000 168 000 1998 101 000 89 000 169 000 126 000 273 000 151 000 1999 101 000 83 000 168 000 93 000 294 000 133 000 Source: Statistisches Berichtssystem für Rechtsanwälte STAR 2001, Schmucker 2002 However, the average personal yearly turnover of full time lawyers in all of the different partnerships is higher than for those lawyers who are exclusively active in an own office. The gap between West and East Germany is evident: in 1999 for the single office situation – 17.9%, for local co-partnerships – 45.6% and for regional co-partnerships even – 54.8% compared to West Germany. To summarize: the partnership situation results in quite different personal turnovers (charge turnovers or just turnovers) with higher turnovers in more widespread activities. Simultaneously, the gap between the turnover situation between West and East Germany is increasing in more widespread activities. The characteristic picture for all respective turnovers over the 1990s: after a period of growing turnovers from 1997 on turnovers are decreasing. The above figures may be compared with information from BRAK regarding the breakdown of turnover for 1999.19 For the three categories of lawyers - in single offices (55% of lawyers), local co-partnerships (35% of lawyers), and regional co-partnerships (10% of lawyers) - the average personal turnover was 76,694 Euro (150,000 DM), 146,229 Euro (286,000 DM) and 214,743 Euro (420,000 DM) respectively. Total costs amounted to 52%, 57% and 51% of total turnover, of which the costs of personnel accounted for approximately 47%, 49% and 54% of total costs, respectively. The average surplus before tax in 1999 was thus 29,655 Euro (58,000 DM), 63,400 Euro (124,000 DM) and 106,349 Euro (208,000 DM) for these three groups of lawyers respectively, while the 1999 after tax surplus amounted to 19 Accompanying information to IHS Questionnaire. 198 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 22,673 Euro (44.344 DM), 41,504 Euro (81,175 DM), and 61,698 Euro (120,671 DM) on average, respectively. Function as instructors: For the analysis of the importance of lawyers as instructors there are data available from 1990 to 2000 (see table). In 2000 the number of apprentices was 16,561. The new regulations for qualifying as a lawyer assistant (Rechtsanwaltsgehile/in) started 1995 with a crossover from two years to 1997. Over the1990s decade the number all of the different legal apprentices increased by 12.4%. Relatively constant is the female apprentice quota, which remarkably is about 97% from 1980 on to 2000. In West Germany legal advising professions together instructed between 23.000 in 1980 to 27,000 persons in 2000. Table 7-24 Apprentice lawyers - Germany, 1990 to 2000 Germany 1990 1995 2000 13 400 15 869 16 561 Notargehilfe/in bzw. Notarfachangestellte/r 720 1 513 1 043 Rechtsanwalts- und Notargehilfe/in bzw. Rechtsanwalts- und Notarfachangestellte/r 10 719 11 280 10 424 131 168 282 26 960 30 825 30 310 Rechtsanwaltsgehilfe/in bzw. Rechtsanwaltsfachangestellte/r Rechts- und Patentanwaltsgehilfe/in bzw. Rechtsund Patentanwaltsfachangestellte/r Total Source: Statistisches Bundesamt 1991, 1996, 2001: Bildung und Kultur, Reihe 3, Berufliche Bildung Altogether there are approximately 1,600,000 apprentices (all occupoations) in Germany. The percentage of legal apprentices in this total is about 2%.. Advocates instruct about 21% of all apprentices instructed by liberal professions. Students: Information about law students as beginners and about passed examinations (first and second legal exams) from 1959 to 2001 is shown in the table below. As the table shows there are distinct fluctuations, includin, of course, a specific increase since the re-unification of Germany in 1990. A peak of law studies beginners was reached in 1995. Since then a slight decrease to more than 18,000 beginners in 2001 can be observed. Note that the average study duration is around 10 to 11 semesters. Thus, roughly speaking, the 1995 beginners should have their second examination around 2001. If we compare two figures (20,153 beginners in 1995 and 10,697 in 2001 with passed second examination) we can estimate the drop out quota to be around 50%. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 199 Table 7-25 Law Students in Germany 1959 to 2001 Beginners Law studies Year First Specialized Semester Passed examinations First Legal Federal Examination Second Legal Federal Examination 1959 3 916 3 153 2 308 1960 3 173 3 400 2 173 1965 4 805 2 698 2 919 1970 6 703 3 712 2 758 1975 12 206 4 326 5 353 1980 14 446 5 750 4 123 1985 11 995 6 015 5 265 1990 15 953 8 127 6 853 1995 20 153 11 380 10 653 1996 19 907 12 573 10 689 1997 19 210 12 393 9 761 1998 19 198 12 153 10 397 1999 18 836 12 099 10 710 2000 18 455 11 893 10 366 18 143 11 139 10 697 2001 From 1992 including new Federal States; winter term (Semester) Source: Statistisches Bundesamt: Fachserie 11, Reihe 4.1. Studenten an Hochschulen In addition to university studies there are at least two years of being a referent (Referendar) for the prospective lawyer. Thus, there are at least 8 years of education and training: so, for example, study beginners in 2001 will enter the labour market around 2009. Even if we account for a constant drop-out quota of 50%, at the end of this decade nine to ten thousand new lawyers will enter the arena. Assuming that over the years there is an approximately constant distribution of ‘where to go’ among the new ‘full jurists’ (Volljuristen with second legal examination), then: 45% of these graduates will be lawyers, 45% will be in the civil service (with 18% as judges or attorneys) and 10% will be in the economic sector per se (Sahner et al. 1989, Hommerich 1988). Notaries Members of the Profession: The development from 1980 to 2002 of the number of notaries in Germany, is shown in the table below. The number of single professional notaries (further abbreviated as single notaries) increased from 942 in 1980 to 1,609 in 1994 (Jan. 1 1994). In considering this remarkable increase of about 70% till the mid 1990s one has to take into account the fact that there were 368 ‘new’ 200 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S single notaries in 1991 as a result of re-unification (485 in 1992). Since 1994 the number of single notaries in Germany has changed only slightly, a result of the regulations. Now and in the last years the number of single notaries is 1,663 in Germany. Table 7-26 Number of notaries in Germany 1980 to 2002 Year Total Advocate 2 Notaries 1980 7 567 6 625 Single Profession Notary 942 1982 7 844 6 881 963 1984 7 968 7 000 968 1985 8 164 7 174 990 1986 8 347 7 345 1 002 1987 8 493 7 490 1 003 1988 8 640 7 639 1 011 1989 8 724 7 710 1 014 1990 8 890 7 877 1 013 1991 9 562 8 180 1 382 1992 10 141 8 657 1 484 1993 10 179 8 616 1 563 1994 10 259 8 650 1 609 1995 10 343 8 715 1 628 1996 10 439 8 857 1 636 1997 10 691 9 031 1 660 1998 10 701 9 045 1 656 1999 10 588 8 925 1 663 2000 10 495 8 838 1 657 2001 10 562 8 897 1 665 1 10 428 8 765 1 663 2002 1 From 1992 inclusive the new five Federal states; - no information available. 2 There is no access to the profession of advocate notaries in the new Federal states. Source: Bundesrechtsanwaltskammer, Bundesnotarkammer: Notarstatistik (per 01.01. of each year) The highest number of advocate notaries was reached in 1998 with 9,045 persons. Since then there has been a slight decrease to 8,765 advocate notaries in 2002. Because the number of advocate notaries is dominant within all notaries, the total number of notaries has its peak 1998 too, with a slight decrease to 10,428 notaries in 2001 in Germany. Age structure: There is no individual age information about notaries in Germany available. However, the regional notary chambers estimate a starting age of ca. 35 years. In former times the profession’s retirement age was not limited. Now the profession’s retirement age is 70 years. The Federal Notary Chamber estimates the average age of leaving the profession at about 67 years. The average age of the active notaries in Germany is between 45 and 55 years. Women in the profession: There is a relatively low percentage of female notaries in the old Federal States (alte Bundesländer, former West Germany); the recent female quota is 5.9% I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 201 per Jan. 1 2002. In contrast, there is a quite high percentage of female notaries in the new Federal States (neue Bundesländer, former GDR, East Germany), about 45.3% per Jan. 1 2002. Altogether in Germany the female notary quota per 1.1.2002 was 18.6%. Function as employer: Statistics about the employment situation of notaries are neither available from the regional chambers, the federal notary chamber nor official statistics. The notary chamber of Koblenz estimates an average number of between five and seven employees in their region. The percentage of women seems to be as high as in ordinary bureau occupations. Function as instructors: Notaries educate and qualify specialised notary’s employees (Notarfachangestellte). 1995 the qualification changed: until 1997 there was a qualification as a notary assistant (Notargehilfe). The qualification period was two and a half years until 1988, since then three years. Since 1995 the number of apprentices is decreasing continuously. It decreased from 1,582 apprentices in 1995 via 1,321 in 1997 to 1,034 in 2000, where the number of notaries as instructors remains constant that period about 1,663 notaries. With several types of notaries as single notaries and advocate notaries the final qualification can be notary assistant or lawyer and notary assistant. 202 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Legal Services, Germany 7411 Table 7-27 Firms per legal form (2000) NACE Branch total 74.11 Legal services 31 195 Source: Statistisches Bundesamt individual enterprise Firms business partnership in units joint-stock company other forms 22 922 8 152 83 37 Table 7-28 Turnover and persons employed (2000) Total employment in units - point in time Employees in % of (Sept. 30th) employment in 1 000 EUR total Employees 74.11 Legal services 11 982 441 200 461 151 532 76 Source: Statistisches Bundesamt NACE Branch Total turnover Table 7-29 Total expenditure (2000) NACE Branch Total expenditure personnel costs material expenditure in 1 000 EUR 74.11 Legal services 6 162 876 Source: Statistisches Bundesamt 3 283 472 2 879 404 Material thereof leasing and Expenditure in Personnel costs expenditure in % renting % of total in % of total of total turnover expenditure expenditure 849 112 51.4 53.3 46.7 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 203 Table 7-30 Number of employees and personnel costs (2000) Number of employees NACE Branch (Sept. 30th) in units 74.11 Legal services 151 532 Source: Statistisches Bundesamt total 3 283 472 personnel costs gross wages and salaries in 1 000 EUR 2 712 042 Table 7-31 Turnover, stocks and material costs (2000) NACE Branch Total turnover 74.11 Legal services 11 982 441 Source: Statistisches Bundesamt stocks in 1 000 EUR at the beginning at the end of the year 378 045 451 126 Table 7-32 Investment, taxes and subsidies (2000) material total expenditure investment 74.11 2 879 404 344 275 Source: Statistisches Bundesamt all taxes subsidies 94 461 6 923 social costs to employer 571 430 social costs to employer as % of personnel costs in % 17.4 204 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 7-33 Firms in turnover size classes (2000) Firms Turnover NACE 74.11 in units total 31 195 more than less than 16 62050 000 4 374 50 000100 000 6 382 100 000250 000 9 964 250 000500 000 5 586 500 0001 Mio. 3 016 1 Mio.2 Mio. 1 222 2 Mio.5 Mio. 486 5 Mio.10 Mio. 95 10 Mio. 25 Mio. 28 25 Mio. and more 41 Source: Statistisches Bundesamt Employment - (Sept. 30th) number of total employees in 1 000 EUR 11 982 441 200 461 151 532 144 047 462 468 1 607 842 1 973 613 2 068 980 1 636 480 1 439 596 659 691 425 221 1 564 504 6 745 14 365 39 889 42 260 39 138 28 632 14 927 6 362 2 891 5 249 2 377 7 906 27 312 32 546 31 861 24 845 12 177 5 511 2 503 4 494 total expenditure personnel costs material expenditure in units thereof leasing and renting total investment all taxes subsidies 849 112 344 275 94 461 6 923 48609 44415 146746 141033 131675 93448 85408 33411 19400 104967 6903 36464 53919 67592 59341 40502 33837 15324 9290 21103 2248 8025 22613 16308 15661 9008 6469 4930 251 8948 389 982 2168 1875 660 420 291 35 1 102 in 1 000 EUR 6 162 876 3 283 472 2 879 404 thereof in turnover size classes 237 860 139 780 98 080 221 218 88 876 132 342 829 718 421 619 408 099 1 050 639 613 505 437 134 1 099 221 651 698 447 523 833 909 458 679 375 230 710 148 343 444 366 704 373 640 166 270 207 370 224 636 115 962 108 673 581 887 283 639 298 248 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 205 Table 7-34 Firms in employment size classes (number of persons employed) (2000) Firms Turnover NACE 74.11 Employment - (Sept. 30th) number of employees total in units total 31 195 more than less than bis 4 17 467 59 8 262 1019 4 169 2049 1 105 5099 122 100249 61 250499 . 500999 . 1000 and more . Source: Statistisches Bundesamt in 1 000 EUR 11 982 441 200 461 151 532 1 858 198 3 222 067 2 978 308 2 137 208 708 269 498 501 . . . 38 811 53 484 54 626 29 926 8 156 11 029 . . . 21 879 39 924 43 471 25 240 6 793 10 407 . . . total expenditure personnel costs material expenditure thereof total leasing and investment renting all taxes subsidies in 1 000 EUR in units 6 162 876 3 283 472 2 879 404 thereof in employment size classes 851 378 355 974 495 403 1 494 961 821 016 673 944 1 764 721 1 012 715 752 006 1 017 604 574 223 443 381 414 346 194 922 219 424 300 426 161 658 138 768 . . . . . . . . . 849 112 344 275 94 461 6 923 160 387 240 334 220 255 113 500 44 748 33 654 . . . 84 085 78 317 80 778 48 335 20 567 12 982 . . . 34 367 22 835 18 304 8 647 1 329 244 . . . 2 561 2 080 1 628 626 26 2 . . . 206 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 7.5. Legal Professions in France: an overview Lawyers The lawyers in France – as in other countries – generally are independent advisers in legal matters and representative of the interests of individual persons, legal entities, and public institutions in and out of court and before authorities. Following the reform in 1990, the differentiation between “avocats” and “conseil juridiques“ has disappeared. The consequence is that basically there is just the description “avocat” in this matter. The title “avocat” can just be used by persons if the person meets the professional requirements given by law. The title-protection is coupled with a strict ban from the profession if the requirements for the protection are not fulfilled. With the registration in the register of lawyers the lawyer becomes a member of a chamber (Barreau). The chamber has its own law identity and is situated within each "tribunal de grande instance", i.e. court area. As well as exerting an encompassing control, the chambers attend to the interests of their members. In particular they verify if the requirements for registration are fulfilled and check if the professionals carry out their duty. The chambers are allowed to impose administrative or disciplinary sanctions if they find offences against that. The organisational structure of chambers on a local level (conseil de l'ordre, le bâtonnier as well as l'assemblée générale) and the election procedure are defined by law not by the chambers themselves. In addition to the chambers, on a regional level there exists a national association for lawyers (Conseil national des barreaux). This association also has its own law identity established by the reform of 1990. Their functions are the representation of all lawyers in public and to harmonise the different regulations for professionalism given by the different chambers. Besides this, the association has the task of standardising vocational education, particularly in the matter of training centres, to improve the co-operation between them and to give regulations concerning job-specialisation of lawyers. Another institution for lawyers is the national lawyers association (Association Nationale des Avocats, A.N.A.). Their main task is the further development of job-related legislation. Moreover there are professional associations e.g. for lawyers specialised in taxation ("Institut Francais Des Avocats Specialistes Du Droit Fiscal"). The lawyer voluntarily can be a member of this association. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 207 Notaries The notary (notaire) is a public officer appointed by the Garde des Sceaux, Minister of Justice. He has a monopoly on documents that must be authenticated by deed, i.e. wills, marriage, contracts, document dealing with transfer of real property, and conveyancing. Furthermore he is allowed to give advice in these fields. Although he is a public servant the “notaire” runs his office on his own economic responsibility as his enterprise. Notaries are general practitioners of the law and the advice they give, as well as the instruments they draft, concern all legal areas including international and tax law (see www.notaires.fr). The competence of notaries covers the family, property, real estate, companies in all branches of activity, whether commercial, industrial, rural or a liberal profession, international private law, town planning, consumer law, the law of obligations, obligations in contract, tort and quasi-contract and statutory obligations, tax law, mortgage law and many others. The primary public tasks of the chambre de notaires are to control the professional exertion and to ensure the compliance with professional regulations. Besides they have the task of specifying the professional regulation, which has not to be against the Règlement du Conseil supérieur du Notariat. The present organisation of the profession is based on a plan set out in the order of 2 November 1945 and the decree of 19 December 1945. France's 7,600 notaries operate under the aegis of several structures. 95 Chambres operate at the level of the department [French administrative area] (sometimes between departments), 33 Regional Councils operate at regional level, and the Superior Council has authority nationwide (see www.notaires.fr, Jan. 7 2003). Several other bodies also contribute, each in their own way, to the life and development of the profession: the Assemblée de Liaison des notaires de France (Assembly of French notaries); Association pour le développement du service notarial (Association for the development of the notarial service) (A.D.S.N.); Centres for research, information and notarial documentation (C.R.I.D.O.N.); training bodies for notaries and their staff; company organisations etc.). 208 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Market Entry Tasks and exclusive tasks Lawyers The advocate (avocat) has exclusive rights of audience in all courts of general jurisdiction: - Tribunaux de Grande Instance - Cours d'Assises - Cours d'Appel - Tribunaux Administratifs - Cours Administratives d'Appel The avocat also has the exclusive right to represent a client in the pre-trial stage of a criminal case and may complete acts of procedure on his behalf. Since 1992 (merger between the professions of avocat and conseils juridiques et fiscaux), the avocat has a monopoly of giving legal advice, though this new legal monopoly contains a long list of exceptions. Notaries Notaries will typically assist those constructing properties: in the purchase of land suitable for construction, advise on the value of land, provide the appropriate legal form of tenancies and/or deal with mortgage arrangements. He also has some duties in the field of company law (as to declare the subscription of the capital of private companies). Notarial certificates are directly executable. These functions are different with regard to the different laws: association, real estates, family, donation and heir law: Association law: notaries are not as important as in other countries, because the foundation of an association does not need a notarial certificate. Real estate law: This is the most important area for notaries. Each sale needs a notarial certificate. A peculiar feature within the real estate business is that each partner – even the bank - has its own notary. Family law: Marriage contracts need a notarial certificate. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 209 Donation law: Within the French law system there is not only a "donation" (gift) but also a contrat de bienfaisance, a gratuitous contract. Both have to be certified by a notary. Heir law: Evidently, the notarial testament (last will) needs a notarial certification. Education and Entry to the profession Lawyers Since 1977, the intending avocats must first obtain the university law degree Maitrise de droits (Master of Laws) which requires four years of study. The first three years entitle the successful candidate to the degree of Licence en droit. The four-year programme for the degree follows the aim of guaranteeing a comprehensive knowledge of French law and procedure. It includes: Administrative Law, Business Law, Civil Law and Procedure, Company Law, Constitutional Law, Criminal Law and Procedure, EC Law, Economic Sciences, History of Law, Labour Law, Public Finances, Public Freedoms, International Law, Tax Law. In addition to the Maitrise (law degree), the intending avocat must obtain the certificate of aptitude for the profession of avocat (CAPA). The rules require the candidate for the CAPA to follow a one-year course of study of both theory and practice, after the passing of an examination. The programme consists of practical courses in oral expression, interviewing clients and preparing opinions, drafting of procedural requirements and pleadings, drafting of other legal documents and studying the rules of professional conduct. During the year, the candidate also undertakes periods of training in the office of an avocat or other practising lawyer, or accountant, or in legal departments of a commercial company, or court, or with a trade-union, or with a central or local government department in France or abroad. The entrance examination comprises both written and oral tests. In addition, the certificate for the CAPA is, of course, only granted after a further examination at the conclusion of the course. Once he has obtained his certificate, the intending avocat must undertake the period of practical training (stage). Admission to the stage is dependent on evidence of good character; the stagiaire must also show that he is going to serve his stage in the office of an avocat situated in the area of that particular Bar. He then takes the oath of admission to the Bar and becomes an avocat stagiaire (trainee) under the supervision of the centre of professional training of the regional Court of Appeal. The centre provides the practical course of tuition in the rules and customs of the profession; it arranges for each stagiaire to attend court hearings and generally ensures that he receives 210 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S an effective training. The period of training of a stagiaire is usually for a minimum period of two years, and a number of alternatives are allowed for where the training may take place. During his training, a stagiaire is entitled to do all acts which a full member of the profession can do. He may plead in court or give advice in chambers without restriction, although naturally subject to the supervision of his principal. Finally, the stagiaire receives her/his certificat de stage (training certificate) at the completion of his period of practical training, provided the governing body of the centre considers that he has satisfactorily fulfilled the requirements. The certificate is not subject to his passing any additional professional examinations. Each lawyer has to be registered in the profession’s register (tableau). The prerequisite is a certificat de fin de stage, which is the final exam of the legal studies in France. If a lawyer is coming from another European country, the lawyer can be registered if the foreign certification is comparable. Notaries For Notaries entry into the profession can be done by different routes and requires the completion of a professional examination process: university examination Maitrise en droit, or a similar valued examination, or, after the practical education the examination as Certificat d'aptitude aux functions de notaire, or, the examination as Diplôme supérieur de notariat. Furthermore it requires a permanent education, appointment and conditions of practise, governing bodies, professional activities, multidisciplinary activities. The nomination to a lifetime notary by the Ministry of Justice requires in addition one of the following situations: 1. An applicant wants to continue a given notariat (nomination sur présentation); 2. A notariat is vacant (nomination dans un office vacant); 3. A new notariat has to be opened (nomination dans un office crée). In France entry to the profession is subject to various general conditions set out in a decree of 5 July 1973 (see www.notaires.fr,): Candidates who already have a Master of Law degree (or a qualification which is recognised as the equivalent) are eligible to take a three-year course leading to the notaries' diploma (Total seven years' study after the baccalauréat (high school certificate)). Candidates who are working as notaries' clerks (who hold the clerks' first diploma) may be eligible to take the examination leading to the Certificat d'aptitude aux fonctions de notaire (Notaries' certificate) provided they have sufficient professional experience. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 211 Candidates who are working as legal professionals either as lawyers in a practice, in the public service or in a company, may become notaries provided they fulfil certain conditions. The initial training for notaries' clerks is open to candidates holding the baccalauréat (high school certificate) or candidates who have completed the first part of a degree course. Conduct Regulation Prices and Fees Lawyers Because there is no regulation of honoraria in France, each lawyer is free to negotiate his remuneration. However, he has to take into account the principles of the chamber. In addition, each lawyer has to give account to the question of the president of the chamber. Fees are generally negotiated with the client in advance. The majority of firms work on an hourly rate basis. Hourly billing rates range from € 140 for junior lawyers to € 360 for senior partners, though in some cases € 420 may be charged on particularly complex issues. Notaries The remuneration of notaries is defined by Art. 44 Décret 1973. There are fees and a honorarium. The fees can be divided in "Êmoluments proportionels" and "Êmoluments fixes“. In principle a notary can ask for a honorarium in addition to the defined fees. To be noted are (voluntary) public auctions of real estates which is done by the notary chamber of Paris. Fees amount to 2.5% for a value above 45,735 EUR (below that limit: 5%). Advertising Lawyers It is one of the lawyers’ chambers duties to give information about the tasks of the chamber as well as about the services of avocats. In contrast to the chambers, direct advertising for a single avocat is prohibited. „Necessary advertising“ is allowed but restricted, e.g., to information on opening and removal of an office or company plaque. Information about dominant areas of practice is not allowed to be given about a lawyer, singly; however, this is allowed for the chamber. 212 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Though the French legal profession is governed by a strict code of professional ethics (especially with regard to publicity), law firms are increasingly opening up to marketing. Notaries Whereas there is no advertising allowed for single notaries – he only is allowed to a starting announcement in two local newspapers within the first three months after beginning – the chambers are allowed to advertise. Forms of Business, inter-professional co-operation, location and diversification Notaries There are two traditional forms of a notary association: The "Société civile de moyens" which is an office community, and a "Société civile professionelle", which has legal personality. Both forms a private companies. Since 1990 also incorporation in form of a capital company is allowed. However, inter-professional co-operation of any form is forbidden for notaries. There are no geographical restrictions on offering services in France, but it is forbidden to run branch offices. Lawyers Same as notaries lawyers are allowed to run private companies and capital companies. but, as in the case of notaries, inter-professional co-operation of any kind is forbidden. There are no geographical restrictions on offering services and – as to our current knowledge – no restrictions on opening branch-offices. Continuing Education Lawyers The continuing education centre offers at least one course each year for all lawyers in their region. Up to now there is no compulsory requirement to participate. However, obligatory continuing education of 20 hours/year is under consideration. Notaries According to the questionnaire sent back by the French Notaries an obligation for continuing education exists. No more detailed information has been provided. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 213 Specialisation in the Profession For lawyers a list of specialisations is announced by the Ministry of Justice based on the proposal of the Conseil national des barreaux. In the 1990s 15 different specialized lawyer labels existed. A prerequisite is a four year practice within the office of an appropriate colleague, or within an enterprise or University institution with a respective specialized alignment. There is a special examination at the end of that time If the examination is successful, the specialisation is marked in the professional register. For notaries no specific models of specialisation exist. Compulsory Indemnity Insurance Both for notaries and for lawyers, an obligation for professional indemnity insurance exists. The minimum insurance sum for lawyers is 300.000 EUR/year. Concerning notaries, further to the general principles of French law, each professional is responsible to his clients for all loss resulting from any fault he commits in the course of his professional duties (see also in the following www.notaires.fr). If the notary's obligations were limited to this one principle, they would be the same as those incumbent on all citizens. But apart from the fact that the courts apply the law of liability with greater severity when a professional person is liable, the notary has two other obligations: first of all he must insure the financial consequences of his business activity with a reputable insurance company; second, he is also responsible, along with all the other members of the profession, for all clients. While the obligation to have insurance for civil liability is not unusual in itself as other professions of all kinds are in a similar position, the solidarity rule which exists in the profession is specific to notaries, which makes it unique. In order to cover all the risks which may arise from notarial practice, the profession has set up: regional guarantee funds, financed by contributions from notaries operating in the region concerned; a central guarantee fund, financed by contributions from all French notaries. 214 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Economic Characteristics France – Structure and dynamics (NACE 7411) Enterprises, Turnover, Employment:20: Note - In discussing the turnover of firms it is to be noted that only enterprises above 76.000 EUR turnover per year are incorporated in the French national statistics (INSEE), for which data on average turnover are available. Furthermore, statistics on employment include only units with 1 or more employees, so that single-person self-employed enterprises are left out. For that reason the tables below contain 1994 data from Eurostat, and 2000 figures based on extrapolation on the basis of growth rates from the INSEE statistics. Table 7-35 Firms, Turnover and Employment; France 7411 Number of Firms No. of Turnover in Employment Professionals Mio. EUR 1994 24 776 9 585 132 884 2000* 30 340 13 352 146 018 39 940 2001 * extrapolated value based on INSEE definitions (except No. of Professionals) Source: EUROSTAT, INSEE, IHS Table 7-36 Key Statistics, Legal Services: France 7411 Turnover per Firm Employment Turnover per Employment Firms per Mio. of per Mio. of person per 1000 Population Pop employed firms 1000 EURO 1994 2000* 387 440 1000 EURO 5 363 4 813 72 91 2 300 2 465 429 512 * extrapolated value based on INSEE definitions (except No. of Professionals) Source:EUROSTAT, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1996 values indexed at 100. 20 EUROSTAT, SIRENE (Système informatique pour le répertoire des entreprises et des établissements - Computer system for the companies and establishments directory) (INSEE) 2002 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 215 Chart 7-14 Relative Growth Rates*, France 7411 130 125 120 115 110 105 100 95 90 85 80 1996 1997 1998 No. of Firms 1999 Turnover 2000 Employment Source: INSEE, *based on INSEE defintions The following further analysis is based on the data obtained from INSEE. The quantitative development of enterprises in legal services in France from 1996 to 2001 is shown in the table. Table 7-37 Development of legal services enterprises in France 1996 to 2001 Legal active at 31/12 Enterprise demography 1996 34 855 Individual entrepreneur 26 642 1 589 6 624 1997 35 495 27 086 1 619 6 790 1998 36 358 27 823 1 625 6 910 1999 38 151 29 408 1 643 7 100 2000 39 895 30 979 1 677 7 239 2001 41 989 32 812 1 767 7 410 Year Sum Company Other Source: SIRENE (INSEE) (2002) From the mid 1990s to 2001 there was a growth rate for all legal service units in France of 20.5%, from 3,855 in 1996 to 41,989 in 2001. The dominant group is individual entrepreneurs which count for 76.4% of all units in 1996 and 78.1% in 2001. Their growth rate is 23.2%. Thus, compared to the overall growth rate this is more than proportional and the development of companies and other units is correspondinly less than proportional. 216 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Size of enterprises: The number of enterprises by numbers of employee classes in France from 1996 to 2001 is shown in the table. Table 7-38 Number of legal services’ enterprises in employee classes in France 1996 to 2001 Number of enterprises active at 31/12 Year 1996 0-5 29 490 Jun.19 4 863 20-49 455 50-249 42 250-499 4 500-1999 1 >=2000 0 1997 29 936 5 032 477 44 5 1 0 1998 30 739 5 090 478 44 6 1 0 1999 32 514 5 110 473 45 7 1 1 2000 34 167 5 152 517 51 6 1 1 2001 36 164 5 180 578 57 8 1 1 Source: SIRENE (INSEE) (2002) Small enterprises are still dominant. Typically there are small legal services enterprises in the 1990s and at the beginning of this century with a growth rate of 22.6%. However, larger enterprises, though relative small in their absolute number, show higher growth rates (27% in the 20-49 employee category, 36% in the 50-249 category). Thus, larger legal services enterprises are to be expected in the next years. Table 7-39 The average turnover in legal services’ enterprises in employee classes in France 1996 to 2000 Average turnover Year Legal active EUR 0-9 employees EUR 10-19 employees EUR 20-49 employees EUR 50-249 employees EUR >=250 employees EUR 1996 546 000 304 000 1 227 000 2 584 000 6 475 000 47 695 000 1997 524 000 309 000 1 120 000 2 689 000 6 844 000 58 605 000 1998 536 000 302 000 1 119 000 2 670 000 6 735 000 53 874 000 1999 570 000 311 000 1 174 000 2 878 000 6 390 000 55 400 000 2000 595 000 313 000 na na na na Threshold: Turnover > 76.000 EUR ; na: not available Source: Système unifié de statistiques d'entreprises (SUSE-INSEE) Average Turnover: For all legal activities in 2000 there was an average turnover of 595,000 EUR and since the mid 1990s the growth rate was about 9%. There was a particularly high rate of growth of firms with more than 250 employees (16%). Among these largest enterprises (>=250 employees) the highest turnover within the last years was in 1997 and amounted to 58,605,000 EUR. Turnover per employee would appear to increase with size of firm (but exact calculation is uncertain from these data). Employment structure by gender: The legal services employment structure measured as salary receivers by gender in France from 1996 to 2000 is shown in the table. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 217 Altogether in 2000 there were 92,068 salary receivers with a high female proportion of 81.6%. The employment grew by 6.4% with 86,461 salary receivers in 1996. The gender structure has remained constant over recent years in the French legal services employment. Table 7-40 Employment structure in legal services’ enterprises by gender in France from 1996 to 2000 Year Total employees at 31/12 All Men Women 1996 86 461 16 310 70 151 1997 89 715 16 682 73 033 1998 86 873 16 257 70 616 1999 91 523 16 986 74 537 2000 92 068 16 971 75 097 Threshold: Enterprises with 1 or more employees Source: Déclaration annuelle de données sociales (données d'entreprises) (DADS-INSEE) It should be noted that the above data applies to firms with more than 1 employee, hence there is a discrepancy with Eurostat data. The following information about lawyers and notaries was received via IHS questionnaires. Professionals: The membership of the Conseil national des barreaux rose by 66% from approx. 23,000 in 1990 to 38,140 in 2001.21 Of this number, registered professionals (Inscrits au tableau) account for 32,076 in 2001, 6,064 being stagiares. The proportion of self employed avocats was 92.5% in 2001. Just under half (475) of 1,034 avocats practising abroad in 2001 were in EU member states. The membership of the Conseil Supérieur du Notariat rose under 5% from approx. 7,500 in 1990 to 7.864 in 2001.22 Of this number, 1,274 were notaires assistants. The number of new entrants has varied around the 300 mark per year since 1990, whereas the number of new stagiaires entrants has increased from around 400 in 1990 to around 700 in 2001. Total employment (professionals and non-professionals) rose from 47,263 in 1990 to 50,052 in 2001. Firms: There were 19,020 avocats firms in 2001 (IHS Questionnaire)23 21.5% of which had incorporated status. Over 96.5% of avocats firms had between 3 and 10 non-professional employees in 2001, just under 3% had 10-50 employees, and 0.5% were very large firms with over 50 employees. 21 IHS Questionnaire. IHS Questionnaire. 23 C.f. the higher figures above for all legal firms (INSEE). 22 218 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S There has been a reduction in the total number of notaries’ firms, from 4,865 in 1990 to 4,540 in 2001, accompanied by a decline in the percentage of firms with incorporated status from 57.6% to 43.9%. A trend to larger firms on average is noticeable – only 52% of notary firms were single professionals in 2001, down from 62% in 1990. Likewise the proportion of firms with 3-5 professionals rose over the same period from 11.5% to 17%. Slightly more notaries’ firms (21.8%) have branch offices (i.e. 2 or more offices) in 2001, than the corresponding figure in 1990 (19%). Turnover: The Conseil national des barreaux reports a branch turnover for legal services in 2001 of 12.4 bill. FRF (1,890 million Euro), which is considerably less than the estimates we have made from the INSEE data (see above24). The Conseil national reports the remuneration of professionals in 2001 in the ‘median‘ firm as being 52,577 Euro. The Conseil Supérieur du Notariat reports a branch turnover of 4.324 bill. Euro in 2001, up in nominal terms by a third since 1990. Despite the trend towards larger notary firms noted above, the data from the Conseil Supérieur shows a de-concentration process between 1990 and 1995: the market share of the 5 largest firms was 3% and 1.8% respectively; the market share of the 10% largest firms was 40.4% and 33% respectively; and the market share of the 30% largest firms was 65.3% and 61.3% respectively. In 2001 the situation regarding concentration was more or less unchanged from 1995. 24 The Eurostat data for tunover in legal services in France was 9.6 bill. Euro/ECU in 1994, so the figure reported seems unreliable. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 219 8. Case Studies Accounting 8.1 The Accountancy Professions in Italy: an overview The “Steuerberater Handbuch Europa” (“Tax Advisers handbook Europe”), which is edited by the International Bureau of Fiscal Documentation, lists more than 15 different professions that can be found in the Italian accounting-market. But most of these terms for professions or even tasks are not “official” names for different professional groups. There exist two professions that are licensed by public law: The Dottori Commercialisti (Certified Public Accountants) and the Ragionieri e Periti Commerciali (Accountants and Trade Experts). Both groups show a long professional tradition, but both have undergone changes at the beginning of the 1990s, concerning their respective educational market entry systems. These changes were primarily induced by the adoption of EU-law on accounting standards. Both professional groups are – even from an international point of view – rather heavily regulated. This is reflected in a relatively high market-entry-index (3.16) and a very high conduct-index (2.925). Even though other countries in the European Union have stronger market-entry regulation (due to broader exclusive tasks reserved to the profession), conduct regulation in Italy is strongest from an international comparative point of view. For both professional groups membership in a professional association is compulsory: the Dottori Commercialisti with the relevant regional “Ordini di Dottori Commercialisti”. The Ministry of Grace and Justice, through the Directorate-General for Civil Affairs and Professions, supervises the practice of the profession. The management of the profession is, on the other hand, entrusted to the local branch of the association, with the same territorial area as the local Courts of Justice. Each Branch is headed by a Council elected by those included in the local rolls. There are currently 124 local Branches. The Branches have wide organizational and disciplinary powers over their members. A comparable structure of professional organisation is in place for the Ragionieri e Periti Commerciali, who are also registered on the regional level. The head organisation of this profession on a national level is the “Consiglio Nationale die Ragionieri e Periti Commerciali”. 220 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Market Entry Tasks and exclusive tasks provided by Italian Accounting Professions In principle Italian accountants provide the same services as their colleagues in other European countries. Traditionally the Ragionieri primarily serve the smaller companies or single persons. The Dottori Commercialisti are the typical advisers of the medium business sector as well as larger companies. Both professions have the same authorisations in regard to the services they may offer on the market. With three exemptions, all these tasks are not reserved to one or more professions. The first exclusive task provided by Ragionieri and Dottori Commercialisti is that of statutory audit. Both professions are licensed to be members of boards of auditors and function as auditors in commercial companies and in bodies where auditing is required by law (according to legislative decree n. 88/1992 acknowledging EC directive no. 8). The second is tax representation (in proceedings before the Tax Revenue Commissions) and the certification of tax declarations, whereas tax advice may be offered by any other profession. Apart from this, both professions are also licensed to work as trustees nominated by court, including insolvency trustees (lawyers may also execute this task). Important other services offered by both professions are not reserved tasks, but may be offered by any profession:: - administration and liquidation of business, estates and individual assets; - technical expert assessments and consulting; - administrative inspections and audits; - company and contractual advice; - organisation of companies, groups and legal-commercial assistance; - verification and inquiries regarding the credibility of balance sheets, accounts, book entries and other accountancy documents used by a business; - settlements and payments of damages. Education and Entry to the profession Both forms of accountants are academic professions, applicants for which must have an university degree in a relevant subject and several years of professional experience. After this they are allowed to do the State Exams in accounting. State exams Ragionieri e Periti Commerciali may be taken by those who have an Accounting and Trade Expert Diploma as well as a University degree in: Foreign trade, Economy of cooperative enterprises and non-profit organisations, Economy and Administration of I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 221 enterprises, Economy and Management of tourist services, Management of Public Administration, Management of Food Enterprises, Marketing and Corporate Communication, Degree in Business and Economics or in Law. Those that have started practising the profession after the Law dated 12.2.1992, n.183 came into force and before 21.12.1993 are admitted to take the State Exam whether or not they have a University degree or diploma, as long as they have obtained the diploma as Accountant and Trade Expert (art. 6 of Law 12.2.1992, n. 183). It takes a minimum of three years to obtain one of the mentioned university diplomas. A further requirement for being admitted to the exam is the training prescribed by Law 12.2.1992, n. 183. This has to be undergone under the control of a registered member of one of the two professions (Ragionieri or Dottori Commercialisti). Before 1993, only two years of accounting experience were required (by the ACA). The exams consist of a written and oral part. Only those who pass the written exam may take the second oral exam. State exams for Certified Public Accountant (Dottori Commercialisti) may be taken by those who have a University degree in: Degree in Business and Economics, Degree in Economic and Business Sciences, Degree in Economic, Political and Social Sciences, Degree in Economic-Maritime Sciences, Degree in Corporate Economy and Economic Politics, Degree in Economic and Banking Sciences, Degree in Economic and Social Sciences, Degree in Economic and Social subjects. On the basis of the decision dated 11.5.1990 of the State Council, graduates with a degree in Political Sciences may also be admitted to the State Exam for Certified Public Accountant. It takes a minimum of 4 years to obtain one of these university degrees. As for the Ragionieri, a further requirement for taking the exam is the completion of the training prescribed by Law of 17.02.92, n.206 and by ministerial decree n. 327/95. For this, each trainee is supervised by a practitioner who is considered as trainer and ethically responsible for the training. Every six month the professional who supervises the trainee signs a statement that the trainee has regularly followed the training tasks and assignments This documentation is sent to the competent local branch. During the training period the training may be suspended for a maximum of 18 months. The trainer – practitioner has to attest the reasons and give his consent. As for the Ragionieri, the exams for the Dottori Commercialisti have two parts: a written and an oral. Only those who pass the written exam may take the second step, the oral exam. Up to 1992/93 applicants to the profession of Dottori Commercialisti were not obliged to undertake the above mentioned three years of professional practice: a university degree was required, but no related work experience. 222 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conduct Regulation Prices and Fees The professional bodies of both professions indicated to us in the respective questionnaires that for the services offered only recommended non-binding reference prices exist. In fact before 2000 the fees of both accounting professions in Italy were “fixed” as a minimum and a maximum price for every service. In these margins the parties were allowed to agree freely on the respective price. Since 2000, for the concrete determination of price one has to take into account the characteristics and value of the service. These regulations are non-binding in nature, because the parties are allowed to agree on a different price. This kind of recommended tariff only applies if there is no agreement and applies to both professions. In 1997 the Ragionieri revised their tariffs. They are basically the same now as for Dottori Commercialisti. In 1998 the Italian Antitrust attacked the two professional bodies for co-ordinating the tariffs, but the decision was reversed on appeal, since the professional bodies have to fix a tariff according to the law. In November 1998 the Italian Antitrust Authority completed an investigation aimed at verifying possible violations of the prohibition on agreements restricting competition by the two professions. The object of the investigation primarily concerned the following practices: a) the active role played by the two bodies in determining professional fees, which – in the opinion of the Authority – went well beyond the advisory function attributed to them under current law; b) the invitation by the Consiglio Nazionale dei Ragionieri e Periti Commerciali to its members to apply the fee schedule it had approved before it was authorised by the Ministry of Justice; and c) the joint determination of fees by the two professional bodies in order to align their pricing policies. As regards the role played by the two bodies in determining fees for professional services, the Authority found that both bodies had engaged in the formulation and approval of schedules, not only to update existing price lists but also for the purpose of completely reorganising their form and contents. The Authority concluded that the resolutions adopted by the two bodies regarding the reformulation of the schedules for the various professional services, the invitation by the Consiglio Nazionale dei Ragionieri e Periti Commerciali to its members to apply fees in the absence of ministerial approval and the co-ordination practised by the two bodies to harmonise the fees applied by the two professions violated the prohibition of anti-competitive agreements. As mentioned above, the decision was reversed on appeal. Advertising Advertising for auditors has long been very rigidly regulated. Nearly all forms of advertising by Italian accountants have been forbidden. But now there is no general prohibition, rather, I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 223 the relevant codes provide guidance on forms and means that have to be respected. All in all the respective regulations are somewhat less restrictive than for Italian lawyers. Concerning form, everything is allowed except billboards, flyers, sending email/post/fax messages indiscriminately, soliciting by direct visits or phone call. Concerning substance, the following is forbidden: name of clients, the tariffs applied, academic or professional titles not linked to the profession. Organisation of and participation in conferences and seminars is allowed, as well as professional publications. Apart from that, a general mailing of technical information may be made to existing clients and to third parties who have explicitly requested it. Forms of Business, Inter-professional Co-operation, Location and Diversification According to the questionnaire responses by the Consiglio Nationale di Ragionieri e Periti Commercial and the Consiglio Nationale di Dottori Commercialisti, accountants in Italy currently may not incorporate in the form of a limited liability partnership or a public limited company. Nor may they form a private company. This means that an accountancy firm may not be established in the form of a company of any kind. As a consequence, accountants are only able to work together in partnerships known as the associazione professionale, and in consequence the form of the business is that of a sole practitioner. According to the questionnaire response of the Consiglio Nationale di Dottori Commercialisti, the elimination of the prohibition on partnerships between professionals (in form of a corporation) in principle has been enacted by regulatory reform in 1997. But the law does not yet provide positive rules on what is allowed, so, according to the Consiglio Nationale di Dottori Commercialisti “there still is a blank space to fill through legislation”. Currently there is no way for accountants in Italy to incorporate with other accountants, nor is it possible to form a company with members of other professions. Apart from this, to the best of our knowledge there are no further specific regulations on inter-professional co-operation. The same applies to the questions of location and diversification: there are no special rules in that respect. So Italian accountants may offer their services all over Italy and open branch offices. Continuing Education Continuing education for Italian accountants became mandatory only recently. The obligation for continuing education for both professions starts as from January 2003. Each professional has to comply with a minimum of 30 hours (credits) per year according to specific programs adopted by the national professional bodies, that co-ordinate the local branches’ activities. 224 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Specialisation in the Profession In Italy there are no specific regulations on specialization in the profession of accountants. Compulsory Indemnity Insurance According to the questionnaires responses, professional indemnity insurance is not obligatory for Ragionieri, nor for Dottori Commercialisti. Economic Characteristics Italy – Structure and dynamics (NACE 7412) Enterprises, Turnover, Employment1: The nominal turnover of accountancy enterprises in Italy reached a level of nearly 9,500 million Euro in 2000, equivalent to over 0,8% of GDP, which is slightly below the median of the sample of member states surveyed in terms of share of GDP. (c.f. Overview-tables in Chapter 5). Output of the sector rose however at a high yearly average of 10.3% during second half of the 1990’s, faster than the growth in GDP (an average of 6.8% p.a. over the same period 1995-2000). This represents a real growth in accountancy services of 7.2%, higher than the growth in employment of 5.1% over the period, 1995-2000, so slight productivity gains have also been made. In fact, the real turnover per employed person rose by 10% over the period. Table 8-1 Firms, Turnover and Employment; Italy 7412 Number of Firms Turnover in No. of Employment Mio EUR Professionals 1995 68 030 5 805 141 768 1996 70 677 6 654 144 684 1997 73 157 7 393 149 021 1998 72 785 7 954 148 673 1999 83 205 10 791 167 766 2000 90 216 9 460 182 211 2001 88 421 Source: EUROSTAT, IHS The number of firms increased correspondingly from about 68,000 in 1995 to just over 90,000 in 2000, an average rate of 5.8% p.a. (see Table). The corresponding yearly growth rates over the period 1995-2000 are 10.3% for turnover, and 5.1% for employment. 1 EUROSTAT; Istituto Nazionale di Statistica (ISTAT) I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 225 The higher rate of increase in enterprises relative to employment is indicative of a extremely slight trend towards less concentration i.e. relatively more firms with fewer employees: indeed the average firm gave employment to 2.02 persons, down from an average of 2.08 in 1995. The relative number of enterprises is very high, at over 1,560 per million of population, nearly double the median of 795 in our survey, and almost as high as for the special case of Luxembourg, which has a very large banking and financial sector for its size. The average turnover (1999) per accountancy firm in the Italy of 105,000 Euro is less than the correspondingly figure for legal services (129,000 Euro) but considerably more than the corresponding figure for technical services (81,000 Euro). Growth rates in the second half of the 1990s (a yearly average of 4.2%) have also been lower than for legal services, but higher than those for technical services. The level of business of Italian accountancy enterprises is the lowest of all the 12 member states surveyed here, even when the branch output figures are adjusted for relative price levels and the overall production of the economy. The level of employment, at over 3.2 in 1,000 of the population in 2000 is fairly ‘average’ by international comparison (just under the median value), but the level of productivity, as measured by a turnover of 52,000 Euro per employed person, is the second lowest in the survey after Spain in absolute terms, and second lowest in relative terms after Luxembourg after adjusting for relative prices and economic output. Table 8-2 Key Statistics, Accountancy, Italy 7412 Turnover per Firm Employment Turnover Employment Firms per Mio. of per person per Mio. of per 1000 Population Pop employed firms 1000 EURO 1000 EURO 1995 85 2 084 41 2 475 1996 94 2 047 46 2 524 1 188 1 233 1997 101 2 037 50 2 593 1 273 1998 109 2 043 54 2 583 1 264 1999 130 2 016 64 2 912 1 444 2000 105 2 020 52 3 159 1 564 Source: EUROSTAT The differential rates of growth in enterprises, turnover and employment are illustrated in the chart, with the 1995 values indexed at 100. 226 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 8-1 Relative Growth Rates, Italy 7412 200 180 160 140 120 100 80 60 1995 1996 1997 1998 Number of Firms Turnover 1999 2000 Employment Source: EUROSTAT, IHS Growth of Sole Proprietors:2 The high growth rate of accounting firms in the early part of the 1990s is reflected in a correspondingly yearly increase in employment of over 7%. The growth in the number of self-employed, at over 10%, is especially remarkable, the proportion of self-employed in the accounting workforce rising from approximately 50% to approximately 60%. Table 8-3 Self-employment and Employees, Italy 1991 in % 1996 in % of Total % Change p.a. 91-96 Firms 40 007 39.3% 71 003 49.2% 12.2 Self-employed 51 838 50.9% 86 537 59.9% 10.8 Employees 50 083 49.1% 57 863 40.1% 2.9 101 921 100.0% 144 400 100.0% 7.2 Total Source: Istituto Nazionale di Statistica (ISTAT) 2 Source: ISTAT: Censimento intermedio industria e servizi. Note: some figures for 1996 differ slightly from previous section; IHS. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 227 That this development was due to an overwhelming increase in sole practitioners is shown in the table below. Table 8-4 Legal Form of Companies 1991 in % 1996 in % 32 615 81.5% 61 087 86.0% Partnerships 3 293 8.2% 7 281 10.3% Private Companies 1 448 3.6% 2 188 3.1% 291 0.7% 332 0.5% 2 360 5.9% 115 0.2% 40 007 100.0% 71 003 100.0% Sole Practitioners Co-operatives others Total Source: Istituto Nazionale di Statistica (ISTAT) This trend was also accompanied by an increase in the percentage of partnerships among firms, but also by a relative decline in joint-stock enterprises. These trends are also reflected in the statistics of single-office versus multi-office firms. Table 8-5 Offices 1991 in % 1996 in % one office 38 452 96.1% 70 276 99.0% more than one office 1 555 3.9% 727 1.0% 40 007 100.0% 71 003 100.0% Total Source: Istituto Nazionale di Statistica (ISTAT) Starting from a very high percentage in 1991 – 96%, in 1996 nearly all firms operated out of one office, a mere 1% having other branch offices. Professionals: Membership of the two key professional bodies increased over the latter half of the 1990s, but the annual rate of increase of 2.6% is well below the rate of increase in the overall number of firms, a clear indication that the trend of the early 90s towards single professional firms continued, even if at a slower rate. While membership is split fairly evenly, the slight numerical superiority of the Dottori Commercialisti continued. 228 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-6 Membership ragionieri 35 021 46.3% 36 881 45.8% 39 421 % Change p.a. 91-96 44.6% 2.0 dottori commercialisti 40 600 53.7% 43 678 54.2% 49 000 55.4% 3.2 Total 75 621 100.0% 80 559 100.0% 88 421 100.0% 2.6 1995 in % 1996 in % 2001* in % Source: consiglio nazionale dottori commercialisti e consiglio nazionale dei ragionieri e periti * from IHS Questionnaires Consiglio Nazionale dei Dottori Commercialisti: The number of firms is approximately 4,000 (IHS Questionnaire). Clearly the number total number of firms recorded in the statistics of firms in the NACE 7412 branch cited in the preceding paragraphs includes a large number of tax advisers’ firms. Among these firms, 10% have 3-5 qualified professionals, and 5% have 5-30 qualified professionals. Approximately the same proportion of firms have 2 qualified professionals3 as single office firms (85%), and this ‘typical firm’ employs 1-2 persons. The Consiglio Nazionale reports that of accountancy and auditing firms whose head office is not in Italy, the highest number are from the USA, followed by UK, then Germany and France. Summary In February 1999, in response to a request from the Ministry of Justice under Article 22 of Law no. 287/1990, the Italian Competition Authority sent the Parliament and the Government a report with its opinion on bill no. 5092 delegating the reorganisation of the professions to the Government. This report dealt not only with accounting professions but also with lawyers, notaries and others. The Authority reaffirmed that the reserved activities system and the related professional orders should be an exception. As regards the regulation of the performance of reserved activities, the Competition Authority reaffirmed that it should be designed primarily to correct possible information asymmetries in markets and should avoid introducing unjustified limits to competition. The Authority accordingly expressed a favourable opinion on the publication and dissemination of quality standards for services and codes of conduct, the elimination of the prohibition on advertising professional services and the dissemination of information on their prices, provided such 3 It appears that ‘qualified professionals’ includes trainees in the IHS Questionnaire from Consiglio Nazionale. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 229 information is gathered ex post by independent observers. On the other hand, it objected to the provision permitting professional orders to adopt non-binding price schedules, albeit only as guidelines, since this was more likely to limit competition among members of the profession than safeguard users. The adoption of binding price schedules that the bill prescribes for obligatory services should be limited to the cases where the prices are the maximum allowed and users are in an especially weak position. The Authority considered that the contents of the codes of conduct that professional orders are required to prescribe should not cover the economic behaviour of the members of the professions. It also recommended that the legislation governing professional firms should permit a wide range of organizational solutions from which members of the professions would be free to choose. Lastly, the Authority recommended easing the current rigid rules on the incompatibility between professions, which are often unjustified or disproportionate with respect to the objectives they are intended to achieve. The regulatory system of accountants in Italy in the last ten years has undergone several changes. Some of them led to a higher degree of freedom for professionals. Regulatory changes of this kind primarily occurred concerning prices and fees, forms of advertising and forms of business (the last one also has not really been implemented yet). However, the market for accountants in Italy still is rather heavily regulated and liberalisation reforms in most cases have been opposed by the relevant professions. The regulations that still occur e.g. in respect of advertising and especially in respect of business forms may impede a more dynamic development of the market. It is obvious that they contribute to the perpetuation of a rather small-scale market structure that may be sub-optimal in respect of innovation in the professional field, as scale-effects stay unused, which may lead to only limited product innovation. 230 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 8.2 Accounting professions in the Netherlands: an overview The Dutch accountancy profession was officially created when the Netherlands Instituut van Accountants (NIvA) was founded in 1895. Two bodies currently represent the accounting profession in the Netherlands: Royal NIvRA (Nederlands Instituut van Registeraccountants), whose members use the title RA (Registeraccountants), and Administratieconsulenten), NOvAA whose (Nederlandse members use Orde the title van Accountants- AA (Accountants- Administratieconsulenten). Both have the status of public bodies and both are responsible for parts of the qualifications and regulation of the profession. The title of both bodies is covered by law. The accounting profession in the Netherlands was regulated by law under the “Registeraccountants”-Act (Wet op de Register accountants) in 1967, which, inter alia, authorised the incorporation of the Royal NIvRA. A subsequent law was enacted in 1974, authorising the incorporation of NOvAA. Although both professions in principle fulfil the same tasks, for a long time there have been some differences between them. The activity field of accountants organised with NIvRA traditionally includes the auditing of large enterprises, whereas the AA (members of NOvAA) concentrates on small- and medium-sized firms (SMEs) and apart from auditing do lots of advice work and consultancy in that field. But things have begun to change in recent years. Also 98 percent of statutory audits are still performed by an RA but the role of adviser to small and medium-sized enterprises is getting more important for this profession as well. Up to August 1993, NIvRA members were the only professional accountants who could give an audit opinion on the truth and fairness of financial statements (statutory audit). Since August 1993, NOvAA members also have been authorised, as a result of the incorporation into Dutch law of the 8th Directive. For this the nature of NOvAA has been changed from a private certification authority to a quasi-public licensing professional organisation. AAs who qualified before August 1993 are also entitled to issue audit reports if they have appropriate practical experience and pass an additional examination. Membership in NOvAA is compulsory for all Accountants-Administratieconsulent, and is, together with enrolment in the official register of AA's, an essential prerequisite for using the AA title. For the RA a membership in the NIvRA is compulsory. The rigidity of regulations concerning market entry in the Netherlands lies – from an international point of view – in the medium field. Our entry index is 3,08. It is higher than in England & Wales, Sweden or Denmark, but at the same time considerably lower than, for example, in Austria, Germany or Belgium. The entry index and also the conduct index I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 231 are of medium level. With a value of 1,425 it is higher than in England & Wales, Ireland, Denmark or Sweden but much lower than in Italy, Austria, Belgium or Germany. As mentioned above, nowadays for both bodies of accountants membership is compulsory for the respective professionals and only members of one of the both professions are authorised to offer statutory audits. The internal organisation of both professional bodies is rather similar. The highest body in both organisations is the general meeting, held yearly. The general meeting elects the members of the executive board as well as the president. At the same time the general meeting defines rules for the members through decree. The executive board consists of members of the general meeting. They are elected for a period of 4 years and responsible to the general meeting. Market Entry Tasks and exclusive tasks provided by accounting professions in the Netherlands In the Netherlands statutory auditing is reserved to the two categories of professional public accountants: Registeraccountants and Accountants-Administratieconsulenten. Apart from this, two other fields of activity appear to be exclusive tasks of the RA and the AA: Audit of mergers and contributions in kind as well as public sector audit. Contrary to this, nonstatutory audit, accounting (incl. public-sector accounting and book-keeping), insolvency practise, tax advice and tax representation, management consultancy, investment advice as well as expert witness in accounting may be performed by any profession. These fields of activity are not exclusive tasks reserved to accountants. For the professions of Administrateur (bookkeeper), Belasting-adviseur (tax consultant) as well as Organisational advisor (management consultant) no legal qualification requirements exist in the Netherlands. Unfortunately none of the two professional organisations of accountants in the Netherlands returned a completed questionnaire. Therefore we are not able to give any further details. Education and entrance to the profession To qualify as a Registeraccountant (NIvRA) as a principle requires a university-level education, which can be obtained through various streams: • VWO (pre-university education) followed by a part-time accountancy course organised by NIvRA and the Nijenrode University; 232 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S • for business school graduates, an accountancy course run by NIvRA/Nijenrode University, or a post-graduate accountancy course at the university, and • for graduates in economics, a post-graduate accountancy course that can be taken at the University of Amsterdam, Free University Amsterdam, University of Groningen, University of Limburg (Maastricht), Erasmus University (Rotterdam) or Brabant University (Tilburg). It takes four years to become a university graduate in economics, and another three years to do the post-graduate accountancy course. Most candidates follow the recently revised NIvRA/Nijenrode University Accounting and Auditing study programme, leading to the qualification of doctorandus and Registeraccountant. The course is structured to combine work and study, covering the various levels within the accountancy practice. The entire course takes seven and a half years. In compliance with the EC 8th Directive, candidates studying to become Registeraccountant must have three years' practical experience, although this can run concurrently with the final phase of the accountancy course run by NIvRA/Nijenrode University. The educational programme required by candidates to become NOvAA members takes 4 years of theoretical training, followed by a period of practical training of 3 years, of which two years under the supervision of an Accountant-Administratieconsulent. There are moves to restructure the educational programme, stipulating a three-year full-time training course followed by a further 3 years of part-time theoretical studies. Given its particular exposure vis-à-vis the SME sector, the courses on small- and medium-sized enterprises comprise a major section of the training programme. For both professions, would-be accountants at the end of their professional education have to take a specific professional entry examination (see Art 71ff of the Register Accountants Act, which can be found in English at http://www.nivra.nl/). Conduct Regulation Prices and Fees Prices and fees for accountants regarding all kinds of services are primarily a matter of free negotiation between the accountant and the client. The relevant rules only say that the priceperformance payoff has to be acceptable according to the professional code. In cases of doubt clients can have the fees reviewed by the NIvRA or the NOvAA. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 233 Advertising In principle the advertising rules for accountants in the Netherlands are very liberal, especially from an international comparative point of view. According to information we collected earlier from the relevant professional organisations (NIvRA, NOvAA) (c.f. Felderer et al. 1998), the uncalled direct contacting of clients (cold calling) is not allowed. The same regulations apply to lawyers. There have been negotiations concerning the abolition of this rule for accountants, but we are not sure about the final outcomes. Forms of Business, Inter-professional Co-operation, Location and Diversification According to the information of the professional organisation, there exist no specific rules concerning the type of business. Therefore accountants can work as independent smallscale entrepreneurs, as employees as well as in a corporation, which can also be a private limited liability company. But as a general rule, up to now, in the case of a corporation, the majority of the owners/directors have to be accountants. At the same time statutory audit duties only can be done by a natural person although this can be an employee or a legal person, i.e. the owner of an accounting firm. According to our current knowledge, as a general rule inter-professional co-operation is only possible with other liberal professions. But corporations combining accountants and lawyers are not allowed . According to wide-spread interpretation, the reason for this is the apprehension of lawyers for competition from the big accounting corporations. Anyhow corporations are possible with notaries, patent lawyers and tax-advisers which are members of a relevant professional organisation. As mentioned above, in the case of a corporation, accountants have to be the majority of the owners. Co-partnership with other professions is possible. In this case, however, the company is not allowed to act under a joint name. In the Netherlands there is an ongoing discussion on the question of inter-professional cooperation. As the Annual report 2000-2001 of the NIvRA states it: „One of the more protracted issues concerns the opportunities for and barriers to interdisciplinary collaboration. NIvRA has been discussing this for a considerable time with the professional organisations of tax advisers, attorneys at law and civil-law notaries. Collaboration between accountants and lawyers in particular is a delicate issue for the lawyers. NIvRA’s basic view is that such collaboration must be possible. (...).‘The essential test for collaboration is that it should allow each professional group involved to continue providing its professional services without any hindrance. If this can be safeguarded, we have no objection to collaboration. And this by no means implies that, as a professional group, you must always have a voting majority. (...) And there are no examples of harmful interdisciplinary collaboration. On the contrary, the available information indicates that the quality of the audit is in fact enhanced.“ (p. 5). 234 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The operation of branch offices is, according to the information available, allowed. It is permissible to have offices in every Arondissement in the country, as well as abroad. Continuing Education The obligation for further education exists for both professions. Members of NOvAA have to prove 40 hours further education per year. There is no detailed information for members of NIvRA. Specialisation in the Profession and Compulsory Indemnity Insurance As both professional organisations (NOvAA and NIvRA) did not complete the questionnaire we have no specific information on these points. Economic Characteristics Netherlands – Structure and dynamics (NACE 7412) Enterprises, Turnover, Employment4: The nominal turnover of accountancy enterprises in the Netherlands reached a level over 5300 million Euro in 1999, equivalent to over 1.4% of GDP, which represents the third highest percentage share of GDP, just behind UK and the high outlier, Luxembourg, among other countries surveyed (c.f. Overview-tables in Chapter 5). Output of the sector thus rose at a yearly average of 7.2% during most of the 1990’s, faster than the growth in GDP (an average of 5.1% p.a. over the same period 1993-1999). This represents a real growth in accountancy services of 6.5%, higher than the growth in employment of 3.5% over the same period, 1993 to 1999; so slight productivity gains have also been made. In fact, the real turnover per employed person rose 18% over the period. 4 EUROSTAT; Centraal Bureau voor de Statistiek I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 235 Table 8-7 Firms, Turnover and Employment; Netherlands 7412 Number of Firms No. of Turnover in Employment Professionals Mio EUR 1993 10 435 3 501 67 000 1994 11 879 3 624 67 601 1995 3 816 1996 12 030 3 844 70 600 1997 13 410 4 200 76 500 1998 13 630 4 717 81 200 1999 13 680 5 310 82 400 2000 2001 6 359 Source: EUROSTAT, Centraal Bureau voor de Statistiek, IHS The number of firms increased from about 12,000 in 1996 to almost 13,700 in 1999, an average rate of 4.4% p.a. (see table). The corresponding yearly growth rates over the period 1996-1999 are 11.4% for turnover, and 5.3% for employment. The lower rate of increase in enterprises relative to employment is indicative of a slight trend towards concentration i.e. relatively fewer firms with more employees: indeed the average firm gave employment to 6 persons in 1999, up from an average of 5.7 at a low-point in 1997. The number of enterprises, over 13,600 since 1998, which represents over 860 firms per million of population, is somewhat above the median of 770 in our survey, but far less in relative terms than Luxembourg, Italy and Sweden among member states in our survey. The average turnover (1999) per accountancy firm in the Netherlands of 388,000 Euro is less than the correspondingly figure for technical services (490,000 Euro) and far less than the corresponding value for legal services (959,000 Euro), resulting from average yearly growth levels of 2.5%, 1.8%, and a huge 12.8% in these respective branches over the period 1993-1999. This level of business of Dutch accountancy enterprises is the median of the 12 member states surveyed here. The level of employment, at over 5.2 in 1000 of the population in 1999, is very high in international comparison (after only Luxembourg with its large finance sector). Nevertheless, the level of productivity, as measured by a turnover of around 64,000 Euro of per employed person, is above the median of our survey, having greatly increased in the 1990s As mentioned above, it is, however, considerably lower than the corresponding figures for Luxembourg, Sweden and Denmark. 236 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-8 Key Statistics, Accountancy, Netherlands 7412 Employment Turnover Employment Firms per Mio. of per person per Mio. of per 1000 Population Pop employed firms Turnover per Firm 1000 EURO 1000 EURO 1993 335 6 421 52 4 397 685 1994 305 5 691 54 4 406 774 1996 320 5 869 54 4 557 776 1997 313 5 705 55 4 914 861 1998 346 5 957 58 5 187 871 1999 388 6 023 64 5 228 868 Source: Source: EUROSTAT, Centraal Bureau voor de Statistiek, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1993 values indexed at 100. Chart 8-2 Relative Growth Rates, Netherlands 7412 160 150 140 130 120 110 100 90 80 1993 1994 1995 Number of Firms 1996 Turnover 1997 1998 1999 Employment Source: Centraal Bureau voor de Statistiek Recent Performance:5 The costs of employment typically account for over 50% of turnover, nearly 80% of which covers remuneration, although this percentage was reduced in the years 1996-1999. The rate of growth of average wage and salaries, at just over 4% p.a. during the period, fell slightly behind the growth in employment in the branch. It is assumed that this effect is in part conditioned by the trend towards atypical employment, which has been a feature, especially in the Netherlands, in recent years. 5 Centraal Bureau voor de Statistiek, IHS I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 237 Investment in accountancy accounts for around 6.5-7% of turnover, a substantial third of which is accounted for by investment in information technology. Table 8-9 Performance of Accountancy Services, Netherlands Firms Turnover Employment mio. euro Profit Margin before Tax Total Personnel Costs Gross Wages and Salaries Avg. Wage / Salary Total Investment Computers % of Turnover % of Turnover % of Personnel Costs euro % of Turnover % of investments 1996 12 030 3 844 70 600 14.9 54 79.5 23 377 7.0 38.2 1997 13 410 4 200 76 500 15.5 54 79.8 23 784 6.9 29.6 1998 13 630 4 717 81 200 15.3 53 77 23 707 6.3 35.9 1999 13 680 5 310 82 400 13.6 53 76.9 26 336 6.4 37.2 4.4 11.4 5.3 -3.0 -0.5 -1.1 4.1 -2.8 -0.9 Change 96-99 Source: Centraal Bureau voor de Statistiek Concentration: Trends in the development of accountancy firms in the Netherlands are apparent in the data from the late 1990s. As the table shows, the most notable change is the relative increase in the number of large firms that have a turnover exceeding one million Euro. Such firms have grown in number at a rate more than twice overall rate of 4.4% p.a. Interestingly, the number of small firms has more or less increased apace. The relative decline of the number of middle sized firms, i.e. enterprises with an annual turnover of between 250,000 Euro and one million Euro, indicates that certain merger or acquisition activity has taken place. It is assumed that this fusion process is part of a longer enduring trend, but this will have to wait for confirmation when more recent data is available. 238 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-10 Netherlands Accountancy Firms and Employment by Turnover Size Class 1996 Total 1997 1998 % change 96-99 1999 Firms 12 030 13 410 13 630 13 680 4.4 Employment 70 600 76 500 81 200 82 400 5.3 5.9 E/F less than Firms 250 000 Employment euro E/F 250 000 to Firms 500 000 Employment euro E/F 500 000 to Firms 1 000 000 Employment euro E/F 1 000 000 Firms euro or Employment more E/F 5.7 6.0 6.0 10 610 11 890 12 080 12 160 4.7 19 000 21 300 21 700 20 100 1.9 1.8 1.8 1.8 700 790 750 1.7 700 0.0 5 100 6 100 5 600 4 700 -2.7 7.3 7.7 7.5 6.7 420 420 440 440 1.6 5 700 5 400 5 400 5 600 -0.6 13.6 12.9 12.3 12.7 290 310 360 380 9.4 40 900 43 700 48 500 51 900 8.3 141.0 141.0 134.7 136.6 Source: Centraal Bureau voor de Statistiek Legal Form: In addition to a trend in concentration, some accompanying trends in the types of legal form in which accountancy firms take place are noticeable. The table shows that, although sole proprietors account for nearly half of all enterprises, the relative growth area over the last decade is partnerships of various kinds, as well as plc’s. Table 8-11 Legal Form of Accountancy Enterprises, Netherlands 1993 public limited companies limited liability partnerships general partnerships cooperative associations sole proprietors private company public authority foundations other 1994 1995 1996 1997 1998 1999 2000 2001 2002 % in change 2002 93-02 35 50 45 50 55 65 65 80 85 85 0.1 10% 15 150 15 810 16 285 18 510 18 930 22 635 25 815 27 850 29 540 32 380 33.5 9% 5 700 6 625 6 590 7 800 9 045 9 765 10 815 11 705 12 220 12 335 12.8 9% 150 195 185 215 315 330 355 365 375 370 0.4 11% 29 005 30 905 32 065 33 455 37 770 40 045 43 735 44 915 44 370 47 090 48.7 6% 1 385 1 320 1 295 1 390 1 640 1 570 1 555 1 600 1 580 1 550 1.6 1% 30 10 40 10 15 10 10 10 15 15 0.0 -7% 880 970 995 1 070 1 180 1 115 1 070 1 105 1 230 1 225 1.3 4% 1 035 1 325 1 385 1 655 1 895 1 830 1 865 1 830 1 705 1 600 1.7 5% Source: Centraal Bureau voor de Statistiek I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 239 Entrance to the Accountancy Profession:6 Data available in a long time series from the 1980s to 1997 shows the extent to which the accountancy profession in the Netherlands opened itself to new members. The statistics refer to the largest of the accounting professional bodies NIvRA, ‘Registered Accountants’. Table 8-12 Entrance to the Accountancy Profession, Netherlands, NIvRA NIVRA Trainees Newly Qualified Entrants Entry Rate Newly Qualified per Firm Entrants as Trainees per Firm % of NIVRA Members 1980 4 908 222 4.5% 0.82 4.9% 18.1 1981 5 457 230 4.2% 0.86 4.9% 20.4 1982 5 845 228 3.9% 0.81 4.7% 20.7 1983 5 423 230 4.2% 0.77 4.6% 18.1 1984 5 073 261 5.1% 0.80 5.0% 15.5 1985 5 611 287 5.1% 0.85 5.3% 16.6 1986 5 863 324 5.5% 0.93 5.7% 16.8 1987 5 962 341 5.7% 0.93 5.7% 16.2 1988 6 199 371 6.0% 0.93 5.9% 15.6 1989 6 091 412 6.8% 1.00 6.2% 14.8 1990 5 607 544 9.7% 1.14 7.6% 11.8 1991 5 689 551 9.7% 1.05 7.3% 10.8 1992 5 707 598 10.5% 1.01 7.4% 9.6 1993 4 988 479 9.6% 0.77 5.6% 8.1 1994 4 399 464 10.5% 0.69 5.2% 6.5 1995 3 679 683 18.6% 0.93 7.1% 5.0 1996 3 260 744 22.8% 0.96 7.3% 4.2 1997 3 169 651 20.5% 0.81 6.0% 3.9 Source: NIVRA, IHS Although the number of NIvRA trainees varies from year to year, and shows a decline in the mid 1990s, the number of newly qualified entrants to the profession increased continuously. The entry rate, i.e. the ratio of new entrants to trainees was under 5% in 1980 and successively increased to over 20% in 1996. As the number of firms increased, the ratio of trainees employed per firm went down, but significantly the ratio of new entrants per year to firms remained close to 1:1. Overall, the accountancy profession has been opened successively to new entrants, as witnessed by the gradual increase in the number of entrants as a percentage of the NIvRA professional membership. 6 NIVRA, IHS 240 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Summary The regulatory systems for accountants in the Netherlands are a rather good example for a country where the market-entry regulations basically fulfil the minimum requirements of the EC 8th Directive on auditing, and where the conduct-regulations are rather liberal. This is especially true for regulation on fees and prices as well as advertising and, with some limitation, also for inter-professional co-operation. At the same time, in the case of the Netherlands, the co-existence of two professional bodies does not lead to specific problems of professional organisation (as has sometimes been argued in the case of Italy or for legal professions in the case of England & Wales). If the organisational separation of professions does not lead to monopoly structures regarding tasks provided by the two professions, some competition between the two professions may occur, which should certainly lead to a more dynamic market. From this example, it is evident that it is more the contents of regulations which make the difference, rather than the question of the number of professional bodies. Furthermore, the existence of more than one professional body may limit the lobbying-power of both of them and for this may help to prevent excessive economic and political power of the relevant professional organisations, c.f. Ogus (1995). Both professional bodies (the NOvAA and the NIvRA) appear to be rather open-minded as regards further liberalisation, especially concerning inter-professional co-operation. However, this, up to now, is strongly opposed by the Dutch lawyers, who worry about a possible market dominating position of the big accounting firms in legal services. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 241 8.3 Accounting Professions in Germany Accountants and sworn-in auditors With the introduction compulsory auditing for incorporated companies („Aktiengesellschaften“) and other companies in 1931 the profession of accountancy was born and the legal form of the accounting firm was created. In 1943 the title of sworn-in auditor (“vereidigter Buchprüfer”) was established and in 1961 the professional code of conduct for the accountants was enacted with the Accountants Ordinance (“Wirtschaftsprüferordnung” - WPO). Apart from the professional rules and regulations for accountants, the professional ordinance for a second occupation, that of sworn-in auditor, who has limited auditing authorisation, was also established and regulated uniformly for the whole Federal Republic. With this enactment the Chamber of Accountants (“Wirtschaftsprüferkammer”) was also established as a self-governing and self-regulating body for the accounting profession. In 1961 the profession of sworn-in auditors was abolished, with the possibility for those affected to be appointed as accountants for seven years to come if they had already passed the exam as a chartered public accountant. However, this profession was again reinstated – albeit with other duties – in 1986 with the adoption of the Balance Sheet Directive Law (“Bilanzrichtliniengesetz”). The occupational titles accountant and sworn-in auditor and the term accounting firm (“Wirtschaftsprüfungsgesellschaft”) and auditing firm (“Buchprüfungsgesellschaft”) are protected by law. The accountants as well as the sworn-in auditors are obliged to organise themselves in the Chamber of Accountants (“Wirtschaftsprüferkammer” - WPK). The WPK is a public statutory body (“Körperschaft des öffentlichen Rechts”). Besides this statutory association under public law there are two main private organisations of which accountants and auditors can become members: the Institute of Accountants (“Institut der Wirtschaftsprüfer in Deutschland e. V.”) and the Federal Association of Sworn-in Auditors (“Bundesverband der vereidigten Buchprüfer e. V.) Market Entry Tasks and exclusive tasks provided by German Accountants Fundamentally one has to distinguish between statutory professional duties of accountants according to § 2 WPO and those tasks that can still be regarded as similarwith the accounting profession (§ 43 WPO). 242 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The original professional duties of accountants encompass the field of annual auditing of financial statements, tax advising and legal consulting and representation relating to the profession. The central exclusive task of accountants is the auditing of the financial statements as prescribed by law for companies. Accountants are entitled to audit all forms of companies, e.g. large incorporated companies, banks and credit institutions, insurance companies, cooperatives (“Genossenschaften”), public enterprises, to name the most important forms. Additionally legally required audits (“Pflichtprüfungen”) of other companies and organisations that are subject to publication requirements are undertaken. Beside these audits required by law, accountants perform other audits and examinations that may be prescribed by other laws or that are done on a freely agreed contractual basis. The exclusivity of performance of audits (“Tätigkeitsvorbehalt”) however extends only to the audits prescribed by law. According to § 129 WPO sworn-in auditors also have authority to perform the statutory prescribed audits. This covers especially the auditing of so called “medium sized companies“ (“mittelgroße GmbHs”). Sworn-in auditors are however not entitled to audit those companies (“GmbHs”) that fall under the company disclosure law (“Publizitätsgesetz”) and those medium sized companies that have to be audited according to the Insurance Supervision Law (“Versicherungsaufsichtsgesetz”) or the Banking Law (“Kreditwesengesetz”). Exempt are public enterprises (“Wirtschaftsbetriebe der öffentlichen Hand”) and other private enterprises. Accountants are also entitled, according to § 2 Abs. 2 WPO, to function as consultants and representatives in tax related issues (cp. Wasilewski 1997: 221). Generally this field of activity is reserved for sworn-in auditors and tax advisers (cp. in detail the chapter on tax advisers). In criminal tax-law cases professionals of these two groups (accountants and sworn-in auditors) can appear as defence counsel, but only together with a lawyer. This is however not the case if the revenue service conducts the case on its own. Besides this, accountants can be consulting experts in general economic and commercial issues, law advisers (allowed, when the consulting is done in fields relating to accounting, financial statements etc.) as well as trustees (§ 43 Abs. 4 Nr. 4 WPO). These activities do not fall within the exclusive activities and thus they are freely negotiable services. Education and Entrance to the Profession There is no uniform education for accountants, however, but there are pre-requisites laid down by law for takingthe accountant exam (“Wirtschaftsprüferexamen”). The conditions for taking the exam for applicants with a university degree (which form by far the biggest group) are stipulated in the WPO. According to these specifications the candidate I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 243 must have a university degree in business economics, law, engineering or agriculture or another university course with emphasis on economic and business matters. A second precondition for admission to the examination is that the candidate has at least 3 years experience in auditing, of these two years under supervision of a licensed auditor. The obligatory practising times have been reduced recently. Previously at least five years experience, of these two years under the supervision of a licensed auditor, were compulsory. The proof that a university course has been successfully completed obtains if: a) the candidate has successfully completed a curriculum in business economics or another curriculum with emphasis on business matters at higher technical colleges (“Fachhochschulen”) and has completed in addition at least six years service at the organisations/persons mentioned in b) or has completed this education with another curriculum with emphasis on business matters at higher technical colleges (“Fachhochschulen”) and graduation as a "Master" or "Magister"; b) the candidate has completed at least ten years service with an accountant (“Wirtschaftsprüfer”), an accounting firm (“Wirtschaftsprüfungsgesellschaft”), a Cooperative Audit Association (“genossenschaftlicher Prüfungsverband”), a sworn-in auditor (“Vereidigter Buchprüfer”) or a firm of licensed auditors, the cooperative auditing office of the German Public Savings Bank “(Prüfungsstelle des Sparkassen- und Giroverbands”) or a nationwide auditing body for public statutory institutions (“überörtliche Prüfungseinrichtung für Körperschaften und Anstalten des öffentlichen Rechts”); c) the candidate has served at least five years as a tax adviser (“Steuerberater”) or as swornin auditor (“Vereidigter Buchprüfer”). In this case it is again a pre-condition for admission to the examination that the candidate has at least 3 years experience in auditing, of these 2 years under the supervision of a licensed auditor. No proof of auditing experience has to be submitted by applicants that have practised at least 15 years as tax advisers or sworn-in auditors. A maximum of ten years can be accredited towards these years for time worked as “tax authorised person” (“Steuerbevollmächtigter”). This exam has to be taken before a board of examiners that is constituted by the relevant provincial authority and comprises the following persons: a representative of the provincial authority, a university lecturer for business management, a jurist qualified for becoming a judge, a representative of the tax authorities (“Finanzverwaltung”), a representative of the business community, three chartered accountants, one of which must have experiences in auditing cooperatives (“genossenschaftliches Prüfungswesen”). To cite Klos (1991: 363), the accounting exam (“Wirtschaftsprüferexamen”) is one of the most difficult and challenging vocational exams in Germany. The pass rate is only about 50 – 60 % (cp. Bartels 1996: 217), however nearly half of the failed candidates are granted a 244 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S second chance, the so called supplementary exam (“Ergänzungsprüfung”) (cp. Bartels 1996: 217). The requirements to take the exam for a sworn-in auditor are that the candidate is a tax adviser (“Steuerberater”) or lawyer and that he has worked as such for at least five years and that he has at least 3 years experience in auditing (§ 131 Abs 1 WPO). No proof of auditing experience has to be submitted by applicants who have practised at least 15 years as tax advisers or sworn-in auditors. A maximum of ten years can be accredited towards these years for time worked as tax authorised person (“Steuerbevollmächtigter”). This exam takes place before a board of examiners that comprises the following persons: a representative of the provincial government finance department (“Landeswirtschaftsbehörde”) as chairperson, a representative of the business community, one chartered accountant and one sworn-in auditor or a second accountant who also is a tax adviser or lawyer. Conduct Regulation Prices and Fees For the auditing profession there exists no special fee regulation or tariff as for the lawyers in the BRAGO or for tax advisers in the StBGebV (see the chapters on lawyers and tax advisers in Germany for details). The fees are freely negotiable (except if tax advice is part of the service offered); there is – theoretically – a price-competition in the market. Provision for a uniform fee-scale have been made in § 55 Wirtschaftsprüferordnung (WPO): the Federal Ministry of Economics with the approval of the Federal Council and after consultation with the Chamber of Accountants (“Wirtschaftsprüferkammer”) and the working party on financial auditing may issue a scale of fees for statutory audits. Such a scale has however not yet been issued . However for tax advice given there is a general tariff, the “Steuerberatergebührenverordnung”. In addition the accountant is not permitted to enter into an agreement whereby the amount of his remuneration is dependent on the result of his work as accountant and he is not permitted to receive commissions for referrals and other such services. Advertising Advertising by accountants is regulated in § 52 WPO („Wirtschaftsprüferordnung”). With the 1995 enacted “Third Law to Change the Accountants Regulation” (“Dritte Gesetz zur Änderung der Wirtschaftsprüferordnung”) the ban on advertising by accountants has been eased. The WPO now stipulates that it is only forbidden to engage in advertising that is I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 245 “contrary to the ethics of the profession” (“berufswidrige Werbung”). § 57 (4) Nr. 4 WPO stipulates that rules and regulations regarding advertising can be prescribed by the professional chambers in the form of a professional ordinance. This ordinance however defines advertising that is contrary to the professional ethics fairly broadly. For example § 34 paragraph 2 of this ordinance prohibits the use of “commercial methods” (“gewerbsmässiger Methoden”) in advertising. Further fairly rigid rules of the professional ordinance (§ 33 Berufssatzung) imply that advertising is still largely forbidden for members of the Chamber of Accountants. This means that the advertising possibilities for accountants are fairly wide as far as the law is concerned, but largely restricted by the self-imposed rules of the Chamber of Accountants. Forms of Business and inter-professional Co-operation According to § 27 WPO accounting firms can have the legal form of a public limited liability company (“Aktiengesellschaft”), (“Kommanditgesellschaft auf beschränkter – Haftung a limited Aktien”), GmbH), partnership limited an liability ordinary company company partnership based on shares (“Gesellschaft company mit (“Offene Handelsgesellschaft – OHG), a limited partnership company (“Kommanditgesellschaft”) and partnership (“Partnerschaftsgesellschaften”). This means that virtually any form of company is possible. Pre-requisite for approval is that all members of the board, the executives, the partners liable to unlimited extent (“persönlich haftenden Gesellschafter”) or the partners are accountants. At least one accountant who is also a member of the board, CEO or partner must have his practise at the registered domicile of the company. Apart from accountants, sworn-in auditors, tax advisers and lawyers are permitted to be members of the board, to be chief executive officer or partner of the accounting firm. The Chamber of Accountants can approve that specially qualified persons, that are not accountants, sworn-in auditors, tax advisers or lawyers and whose occupation is closely related to the one of accounting can become members of the board, executives, the partners liable to unlimited extent or partners of the firm. The number of members of the board, executives, partners liable to unlimited extent or normal partners that are not accountants may not rise above that of those that are accountants. If the firm has only two members of the board, executives or partners, then at least one must be an accountant. Location and Diversification Until 1995 accountants were only allowed to open a single branch (previously § 3 paragraph 2 WPO). Accounting firms however were already permitted to have an unlimited number of 246 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S branches before 1995. Since 1995 this “privilege” has also been extended to single accountants. Continuing Education Accountants are obliged to extend and enhance their professional knowledge continually. The obligation of permanent education is stipulated in the Quality Assurance Standards (VO 1/1995 and VO 1/1993) and the Rules of the Professional Conduct of the profession. Specialisation in the Profession There are no specific forms of specialisation for accountants and sworn-in auditors comparable to those of German lawyers (“Fachanwälte”). According to §32 Professional Charter of the “Wirtschaftsprüferkammer”, both professions are only entitled to use designations of professional specialisation which they have legally acquired by the statutory prescribed process. They may publicise certain fields of specialisation in their professional activities. Other areas of specialisation may not be publicised. Compulsory Indemnity Insurance For accountants and sworn-in auditors in Germany an indemnity insurance is compulsory (“Wirtschaftsprüfer-Berufshapftpflichtversicherungsordnung” – WPHBV, enacted December 18, 1998). The minimum amount for which professionals must be insured is 1 Million Euro per case (§ 323 Commercial Code). Actual challenges and recent changes in regulations Until now the appointment as certified public accountant or as sworn-in auditor, as well as the accreditation of the respective professional associations, were done by the provincial ministries of commerce. With the fourth amendment of the Accountants Ordinance (“Wirtschaftsprüferordnung”), effective as from January 1, 2002, this duty was transferred to the professional organisations of the accountants and sworn-in auditors. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 247 Tax advisers The profession of tax advisers is still a „young” liberal profession, a first legal basis can be found in the “Reichsabgabenordnung” from 1919. The original job title ‘tax adviser’ was first used in 1933. Compared with most of the other EU member countries the services of tax advisers in Germany (as well as in Austria, Luxembourg and France) are subject to special regulations, through which relevant exclusive tasks are established. With regard to the organisation of tax advisers in Germany, there exists a compulsory membership of a profession chamber. The compulsory membership in one of corresponding regional Tax Adviser Chambers (“Steuerberaterkammer”) is stipulated in § 73 StBerG. The membership automatically begins with the appointment to tax adviser, or to be precise, with the acknowledgement of the tax adviser. The 21 regional Tax Adviser Chambers (“Steuerberaterkammer”) (16 in the old and five in the new federal states) build the Federal Tax Adviser Chamber (“Bundessteuerberaterkammer”). The Federal Tax Adviser Chamber is the professional association and elaborates such rules. The Bundessteuerberaterkammer – a public law corporation – is the statutory umbrella organisation for all tax advisers, authorised tax representatives and tax consultancies in Germany. The Steuerberatungsgesetz (“Tax Consultancy Act”) lays down and authorises its status and duties. The Bundessteuerberaterkammer has, in its capacity as a professional self-regulating association, been representing the interests of over 72,000 (Sept. 2002) German tax advisers at federal and European level since 1961 and adopts an active stance when any professional and tax law issues arise. Market Entry Tasks and exclusive tasks provided by German Tax Advisers The right for commercial help with tax questions “geschäftsmäßigen Hilfe in Steuersachen” is determined by §§ 2 and 3 StBerG. The main task of tax advisers is the tax declaration advice (help with the tax return and other declaration obligations: making of the bookkeeping, making of annual accounts, making of payroll accounting and wage-slip, making of tax return, list of all balance sheets, and so on). For the enforcement of tax advice belongs essentially the assistance when having an argument with the Inland Revenue or the Court dealing with tax disputes. As a third “Vorbehaltsaufgabe” (reserved task) we have to mention the arranging of the tax advice. It should be emphasized that tasks of day-to-day accountancy do not count as primary tasks for a tax adviser in Germany, in contrast to Austria. 248 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Besides tax advisers also lawyers, established European lawyers, auditors, sworn-in auditors, as well as corresponding profession societies are authorised according to § 2 Abs 1 StBErG. This authorisation is described by the phrase “"unlimited help in tax issues“ (“unbeschränkter Hilfeleistung in Steuersachen“). A restrictive authorisation for help with tax issues has existed for some other professions and organisations. The corresponding regulations are stipulated in § 4 StBErG. According to the Federal Notary Rules (Bundesnotarordnung) notaries are allowed to act as tax advisers in correspondence with their authorities. Almost the same applies to patent attorneys, to public corporations or cooperative auditorial. A general exception to the prohibition of unauthorised help with tax issues exists for the following activities (compare § 6 StberG): - The reimbursement of scientifically based expert opinions, - The help of relatives in tax affairs free of charge in terms of the § 15 of the General Tax Code (“Abgabenordnung”), - The execution of mechanical processes to keep accounts and records, which are important for taxation; this does not include the assignment of documents, receipts and the assignation of accounting instructions, - Under certain conditions the accounting of current business transactions, the current payroll accounting and the making of the wage-tax return. Education and Entrance to the Profession According to § 36 StBerG, aspirants for the tax adviser examination can choose between the following qualification possibilities in order to fulfil the admission standards: On the one hand a university education on the condition that the aspirant has finished a jurisprudential or economical study; alternatively another study at university with the field in economics and afterwards working as the main occupation in the area of taxation for two years (until the end of the nineties three years) (with a weekly work schedule of at least 16 hours). For alumni of a college of higher education with a jurisprudential study the time of their main occupation increases up to three years (before four years). On the other hand this profession can be achieved with a professional training / vocational education. Here, persons fulfil the requirements if they pass a final examination in tax and economical advisimg or a pursue a commercial career with working afterwards for ten years as a main occupation in the taxation field. After a successful examination for a „Steurfachwirt“ or to a certified balance-sheet auditor there are at least seven years practical work. On the other hand the prerequisites are also fulfilled by civil servants or employees of higher services of public finance departments I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 249 (gehobener Dienst) ( § 36 StBerG), which have been occupied in the field of taxation for at least ten years. The examinations is organised according to the relevant prior education Accountants and sworn-in auditors are allowed a shortened tax adviser examination on application. There is no tax examination necessary for: university professors, with relevant teaching for at least ten years, former finance judges with ten years relevant experience, former civil servants or employees of the finance departments or other fields of public services with years of relevant experience. All others have to pass a full examination. The examination is divided into a written part of three supervised workings and an oral examination. The examination committee consists of two tax advisers, three civil servants of higher services of public finance departments and a deputy of the economy. The tax adviser members of the examination committee are proposed by the Tax Adviser Chamber. Conduct Regulation Prices and Fees Tax advisers in Germany, in principle, are tied to a legal tariff, which is given by the Ministry of Finance via executive order with acceptance of the Federal Assembly. Pestke (1997a: 13) states that such a legal regulation for tax advisers is exceptional for Europe. On the substantial level the Tax Adviser Tariff Regulation (Steuerberatergebührenverordnung, StBGebV) – similar to the former Austrian regulation – constitutes a lower limit of the charge. An upper tariff limit is only effective if there is no written acceptance by the client for a free charge contract (§4 StBGebV). A contract with regard to a successful activity is – similar to Austria – not allowed. The same is true for relating payment to outcome, i.e. for the charge as a part of the tax savings to be achieved. Basically the charge be commensurate and has to reflect time expenses, value of the object and nature of the task. In principle there are three ways for accounting charges: value and time fees and a lump sum charge. Advertising Tax advisers have to exercise their profession according to § 57 StBerG independently, , faithfully, discreetly and without advertising § 57a StBerG only allows advertising if it is 250 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S reporting in form and substance about the professional activity and if it is not directed to a single determination. More details are given by the article assembly of the Federal Tax Adviser Chamber in their profession’s regulations. This “Satzung über die Rechte und Pflichten bei der Ausübung der Berufe der Steuerberater und der Steuerbevollmächtigten” was changed at last October 24, 2001. Tax advisers are allowed to provide information about their profession and their activities. The information, however, must be technically correct. The description has not to be ostentatious. Comparing, evaluating or misleading statements are not allowed. Advertising is not allowed if it is directed to a single determination. This is the case in particular if the directed person needs consulting or representation and this is the reason for the advertising. Tax advisers are allowed to make public areas of their professional fields or activities. In general the regulations on advertising were significantly liberalised for tax advisers in Germany in the 1990s. The former regulations were much more rigid. Forms of Business and Inter-Professional Co-operation Most of the tax adviser offices are offices of single tax advisers. Professional societies are allowed. Corporations, associations limited by shares, ltd. associations, general partnerships, limited partnerships and partnerships according the partnership associations are allowed to be tax adviser associations. . To be accepted by the Tax Adviser Chamber, the members of the board or the chairman has to be a tax adviser. At least one tax adviser which is a member of the board, a chair man or a personal liable chair man has to have its professional domicile where the organisation is based or in its vicinity. In this case the number of its members of the board, chair men and personal liable chair men has not to exceed the tax advisers in the board, within the chair men and within personal liable chair men. Besides tax advisers, also lawyers, settled European lawyers, accountants, sworn-in auditors and tax authorised persons (“Steuerbevollmächtigte”) are allowed to be members of the board, chair men or personal liable chair men. By a capital obligation (“Kapitalbindung”)(§ 50a StBerG) it should be assured that tax adviser associations are not controlled by externals. Associates therefore can be only tax advisers, lawyers, accountants, sworn-in auditors, tax authorised persons, tax adviser associations or persons occupied within the association. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 251 Location and Diversification Basically a tax adviser can have only one place of business. However, he can maintain another place of business, if the head of the other place of business is a tax adviser. This is the custom in particular with tax adviser associations. There is the possibility of an exemption to be the head of the other place of business. Localisation regulations, like those for for lawyers in Germany, are not imposed on tax advisers. Continuing Education The tax adviser is obliged to undertake continuing education in an appropriate manner (§ 4 Abs. 2 BOStB). However, there are no distinct legal guidelines. No certification is required for attending continuing education. Specialisation in the Profession There are no specific forms of specialisation for tax advisers comparable to those of German lawyers (Fachanwälte). Tax advisers are allowed to advertise with their main tasks /offered areas of specialisation. Compulsory Indemnity Insurance For tax advisers in Germany an indemnity insurance is compulsory. The minimum amount for which professionals must be insured is 250,000 Euro per case. The maximum amount insured may be fixed at 1,000,000 Euro per year. Actual challenges and recent changes in regulations The Federal Tax Adviser Chamber (“Bundessteuerberaterkammer”) emphasizes by a recent letter to the members of the European Convention (September 5, 2002) that “in a future Europe, it is crucial to strike the right balance between state and its citizens. Structures therefore need to be developed which ensure that there is a proper balance between state regulation and freedom to exercise a profession. In Europe there is already a system which achieves this aim and which has also proved itself in the past, namely the professional chambers, which act as self-regulating and monitoring bodies for the liberal professions in Germany.” 252 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The “Bundessteuerberaterkammer” in this recent statement further emphasizes that the selfregulation system has crucial advantages over regulation by the state of total absence of regulation which recommend it as a model for the European Union. With regard to the liberalisation in the field of advertising, several instructions in the professional regulations were revised (see 4.3.2 Adverstising). With the adaptation to the last judgement of the Federal Court of Justice e.g. brochures may be sent to non clients also without their demand. Economic Characteristics (Accountants, Sworn-in Auditors and Tax advisers) Germany – Structure and dynamics (NACE 7412) Enterprises, Turnover, Employment7: The only data available for Germany at the 4-digit level are those recently made available by EUROSTAT for the year 2000. Table 8-13 Firms, Turnover and Employment; Germany 7412 Number of Firms 2000 35 070 No. of Turnover in Employment Professionals Mio EUR 17 038 283 087 14 078 Source:EUROSTAT, IHS The key indicators are thus also restricted to the year 2000: Table 8-14 Key Statistics, Accountancy Services: Germany 7412 Turnover per Firm Employment Turnover Employment Firms per Mio. of per person per Mio. of per 1000 Population Pop employed firms 1000 EURO 2000 486 1000 EURO 8 072 60 3 445 427 Source: EUROSTAT; IHS Turnover and Expenditure: Accountants and tax advisers (NACE 7412) together produced an turnover altogether of 17 Bill. EUR (17,038,727 in 1.000 EUR) in the year 2000. (See Tables – Accountancy Services 7411 - at end of this section.) 7 EUROSTAT I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 253 The expenditures (i.e. costs of personnel, buildings etc.) in the accountancy services of about 12 Bill. EUR (12,383,780 in 1,000 EUR) amounts to 72.7% of the aggregate turnover. The dominant expenditure item is personal expenditure: their share of all expenditure is 64.8% with a total amount of 8 Bill. EUR (8,026 million EUR). The dominant part within personal expenditure is the wages and salaries with 82.7%; social expenditures counts for the remaining 17.3% (1,387,011 in 1,000 EUR). 254 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Accountants and Sworn-in Auditors Members of the Profession: The development of the number of accountants, accountant societies (Wirtschaftsprüfungsgesellschaften, WPG) and sworn-in auditors and sworn-in auditors societies (Buchprüfungsgesellschaften, BPG) from 1980 to 2002 is shown below. Table 8-15 Quantitative development of accountants, accountants societies, sworn-in auditors and sworn-in auditors societies in Germany 1980 to 2002. Sworn-in Auditors Societies - Year* Accountants Accountants Societies Sworn-in Auditors 1980 3 821 651 - 1985 4 637 920 - - 1990 6 344 1 215 2 782 32 1991 6 680 1 301 3 421 50 1992 6 953 1 363 3 831 70 1993 7 313 1 409 4 094 83 1994 7 617 1 471 4 225 94 1995 7 994 1 541 4 233 108 1996 8 352 1 615 4 205 113 1997 8 707 1 683 4 217 121 1998 9 156 1 759 4 238 135 1999 9 611 1 829 4 205 146 2000 9 984 1 879 4 094 166 2001 10 355 1 949 4 091 169 2002 10 881 2 032 4 068 166 * per 1.1. of each year, since 1992 with the new five federal states Source: Federal Chamber of Accountants (www.wpk.de, 2.1.2003) and Federal Chamber of Lawyers 1.1.2002 Accountants: As the table shows, there is a relatively small number of accountants in Germany. From 1990, the year of German’s re-unification the number rose steadily to 10,881 accountants in 2002 by a remarkable growth of 71.5%. Note that according to the statistical information given by the Federal Chamber of Lawyers (which serves the accountants statistics as well) the five new federal states are accounted for only since 1992. However, the re-unification certainly has had consequences on the growing number of accountants in the early 1990s in Germany. The growth rate of the number of accountants in the 1990s is even higher than in the 1980s with 66% from 1980 to 1990. With regard to accountants’ firms, the number rose from 1990 to 2002 by 2,032, a growth rate of 67.2%.. However, this growth rate is less pronounced than in the 1980s from 1980 to 1990 with 86.6%. Thus, this development is in contrast to the developments of accountants with their higher growth rate in the 1990s than in the 1980s. - Sworn-in auditors: Before 1986 there were only 89 sworn-in auditors in Germany. With the new opening of the profession according to the balance-sheet directions law I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 255 (Bilanzrichtliniengesetz) 1986 the number of sworn-in auditors increased significantly to 2,782 in 1990. This increase continued from 1990 to the mid 1990s with 4,233 sworn-in auditors by 52.2% and another peak 1998 with 4,238 auditors. Since 1998 the number of sworn-in auditors has stagnated. There is only a small number of sworn-in auditors firms which rose form 50 in 1990 to 166 in 2002 with almost no changes from 2000 onwards. Women in the profession: The actual gender specific situation of accountants and sworn-in auditors, domestic and abroad, is shown in the table. The female quota for domestic swornin auditors with 15.2% is slightly higher than the female quota for the domestic accountants with 11.4%. In absolute numbers there are more than twice the number of female accountants (n = 1,150) compared to female sworn-in auditors (n = 537). Table 8-16 Women in the profession: accountants and sworn-in auditors in Germany, 2002 Accountants Sworn-in Auditors Men Women Female Quota % Region Men Women Female Quota % Domestic 10 101 1 150 11.4 3 530 537 15.2 Among them in own offices 6 053 549 9.1 3 256 489 15 Abroad 48 7 14.6 3 0 0 Among them in own offices 46 7 15.2 3 0 0 Total 10 149 1 157 11.4 3 533 537 15.2 Among them in own offices 6 099 556 9.1 3 259 489 15 Source: Federal Chamber of Accountants (www.wpk.de, 2.1.2003) There are gender specific differences with regard to the numbers having their own office: the accountants’ own office quota for men is 60%, for women 48%. Such a gender specific difference is not seen within the sworn-in auditors. There, more than 90% (men: 92%, women 91%) are active in their own office. Age structure - Accountants: The accountants’ age structure by gender in 2002 is shown in the table. According to a relatively long study time and additional practicing there are only some (3) accountants under 30 years. The modal age class, the age class with the highest frequency of accountants is 35-39 years, altogether (19.5% of all accountants) and both for men (17.6% of all male accountants) and women (36.7% of all female accountants). As this age group demonstrates, there is a distinctly different age profile between male and female accountants. In the table and chart the differences in the relative age frequencies is 256 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S shown: in younger age group (up to 45 years) there are relatively more female accountants than in older age group. In particular, the peak of those differences in younger years is between 35 and 40 years where female accountants show 19,2 percentage points more than their male colleagues. Between 55 and 59 years, in contrast, female accountants show 8.2 percentage points less than their male colleagues. Table 8-17 Accountants: Age structure by gender in Germany 2002 Absolute n Relative % Age All Men Women All Men 1 under 30 3 1 2 0.0 0.0 0.2 2 30-34 693 512 181 6.1 5.0 15.6 3 35-39 2 209 1 783 426 19.5 17.6 36.7 4 40-44 1 772 1 548 224 15.7 15.3 19.3 5 45-49 1 446 1 308 138 12.8 12.9 11.9 6 50-54 1 427 1 339 88 12.6 13.2 7.6 7 55-59 1 155 1 119 36 10.2 11.0 3.1 8 60-64 1 114 1 085 29 9.9 10.7 2.5 9 65-69 627 615 12 5.5 6.1 1 10 70-74 488 480 8 4.3 4.7 0.7 11 75-79 253 245 8 2.2 2.4 0.7 12 80 and more 121 113 8 1.1 1.1 0.7 11 308 10 148 1 160 100 100 100 Women Source: Federal Chamber of Accountants (www.wpk.de, 2.1.2003), own calculations Chart 8-3 Accountants: Age structure by gender in Germany 2002 Women-Men 40,0 35,0 20,0 30,0 15,0 25,0 20,0 10,0 15,0 5,0 10,0 0,0 5,0 -5,0 0,0 -10,0 1 2 3 4 5 Men 6 7 8 9 10 11 12 Women 1 2 3 4 5 6 7 8 9 10 11 12 Women-Men Note: x-axis according age classes of the table Source: Federal Chamber of Accountants (www.wpk.de, 2.1.2003) - Sworn-in Auditors: The age structure by gender in 2002 for sworn-in auditors is shown in the following table. Whereas for accountants the age frequencies are more or less declining I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 257 after 35 to 39 years (right skewed distribution), the age structure of sworn-in auditors is roughly bell shaped with a peak for all, and both for men and women, between 50 and 54. Table 8-18 Sworn-in Auditors: Age structure by gender in Germany 2002 Women All Percentage % Men Women 0 0 0.0 0.0 0.0 1 0 1 0.0 0.0 0.2 35-39 82 71 11 2.0 2.0 2.0 40-44 177 143 34 4.3 4.0 6.3 45-49 765 613 152 18.8 17.4 28.3 50-54 1 192 1 029 163 29.3 29.1 30.4 55-59 898 808 90 22.1 22.9 16.8 60-64 621 558 63 15.3 15.8 11.7 65-69 228 213 15 5.6 6.0 2.8 70-74 75 69 6 1.8 2.0 1.1 75-79 24 22 2 0.6 0.6 0.4 Age All under 30 0 30-34 Absolute n Men 7 7 0 0.2 0.2 0.0 4 070 3 533 537 100.0 100.0 100.0 80 and more Source: Federal Chamber of Accountants (www.wpk.de, 2.1.2003), own calculations According to the gender specific differences in the age profile the male and female age profile is more similar than for accountants. Nevertheless, there are distinct differences between 45 and 49 years (women minus men percentage points: 11%) and between 55 and 59 years (women minus men percentage points: -6.1%). Chart 8-4 Sworn-in auditors: Age structure by gender 2002 in Germany Women-Men 35,0 30,0 15,0 25,0 10,0 20,0 5,0 15,0 10,0 0,0 5,0 -5,0 0,0 -10,0 1 2 3 4 5 Men 6 7 8 9 10 11 12 Women 1 2 3 4 5 6 7 8 9 10 11 12 Women-Men Note: x-axis according age classes of the table Source: Federal Chamber of Accountants (www.wpk.de, 2.1.2003). Legal Form: There are 25,405 firms in the dominant sole ownership category (84.5% of firms), followed by personal associations (Personengesellschaften) with 4,764 associations 258 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S (15.8%) and capital associations with 4,692 (15.6%) associations; associations of other legal forms counting 209 units (0.7%). These numbers of firms tally approximately with the overall total for the NACE 7412 classification for 2000 (35,070). The total number of firms in the statistics certainly includes a large number of tax advising firms (c.f. the section following). According to the IHS questionnaires from the Wirtschaftsprüferkammer and the Institut der Wirtschaftsprüfer in Deutschland the number of auditing firms rose from 1,247 in 1990 to 2,118 in 2001, a total increase of nearly 70% in this period.8 In 2002, just one such firm also had offices outwith Germany. The largest proportion of these firms have up to 4 qualified professionals (86.8%), 9.2% have 5-10 professionals, 2.3% have 11-20 professionals, 1.2% have 21-50 professionals, and 0.2% have 51-100 professionals. Function as employer and instructor: The number of active persons in the accountancy services per September 30, 2000, is 283,087. Among them there are 85.6% wage and salary earners with 242,306 persons. The Federal Chamber of Tax Advisers looks after the directive to the ‘Fachgehilfen in wirtschafts- und steuerberatenden Berufen’. Students: Due to the heterogeneity of the recruitment areas – in accordance with the Federal Chamber of Accountants – no forecasts can be made. Tax Advisers Members of the profession: The development of the number of tax advisers, tax lawyers (“Steuerbevollmächtigte”) and tax advisory associations from 1980 to 2002 in Germany is given in the table and chart. After the re-unification the number of tax advisers increased by 52.5% from 39,997 in 1990 to 60,999 in 2002. Though this rate includes two more growth years, the growth rate in the 1980s was even higher: from 1980 to 1990 the growth rate was 90.2% from 21,030 to 39,997 tax advisers. The number of tax lawyers strongly decreased. The reason: the profession of a tax attorney was abolished by the law of August 18, 1980 (BGBl.,1, 1537, 1543). However, based on the Unification Contract Law (Einigungsvertragsgesetz – BGBl. 1990 II, 885, 970) for the new federal states tax lawyers are licensed again, but only preliminary. Tax advisory associations increased by 65% from 3,901 in 1990 to 6,436 in 2002. As for tax advisers, the growth rate in the 1980s was even higher: the number of tax advisory associations in 1990 was almost three times as much (2.96) as in 1980 (1,319 associations). 8 This number appears to be comprised of ‘capital associations’ only. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 259 Table 8-19 Quantitative development of tax advisers, tax lawyers, others and tax advisory associations 1980 to 2002 in Germany Year* Tax Advisers Tax Attornies1 Others2 Tax Advisory Associations Total: Members of the Chamber 1980 21 030 16 175 197 1 319 38 721 1985 28 882 14 373 214 2 600 46 069 1990 39 997 5 145 252 3 901 49 295 1991 40 927 4 969 353 4 059 50 308 1992 42 631 6 208 185 4 358 53 382 1993 43 939 6 012 216 4 539 54 706 1994 45 644 5 813 225 4 680 56 362 1995 47 067 5 440 242 4 877 57 626 1996 49 525 5 093 419 5 015 60 052 1997 51 217 4 677 386 5 206 61 486 1998 53 193 4 000 397 5 413 63 003 1999 55 702 3 833 403 5 748 65 686 2000 57 806 3 626 413 6 056 67 901 2001 59 702 3 475 411 6 257 69 845 2002 60 999 3 332 431 6 436 71 198 per 1.1. of each year, since 1992 with the new five Federal states 1 (Steuerbevollmächtigte), the profession of a tax attorney was closed by law of August 18, 1980 (BGBl.,1, 1537, 1543). However, by the Unification Contract Law (Einigungsvertragsgesetz – BGBl. 1990 II, 885, 970) for the new Federal states tax lawyers are licensed again but preliminary only. Persons according § 74 Par. 2 StBerG 2 Source: Federal Chamber of Lawyers (Bundesrechtsanwaltskammer, BRAK) 1.1.2002 and Federal Chamber of Tax Advisers (Bundessteuerberaterkammer) 1.1.2002 Chart 8-5 Development of tax advisers, tax lawyers and tax advisory associations 1980 to 2002 in Germany 70000 60000 50000 40000 30000 20000 10000 0 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Tax Advisers Tax Attornies1 Tax Advisery Associations Source: Federal Chamber of Lawyers (Bundesrechtsanwaltskammer, BRAK) 1.1.2002 and Federal Chamber of Tax Advisers (Bundessteuerberaterkammer) 1.1.2002. The table also includes the category „Others“, which means persons allowed to provide limited help in tax affairs (“Befugnis zu beschränkter Hilfeleistung in Steuersachen”) 260 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S according § 74 Par. 2 StBerG. Though the number of these persons also increased in the 1990s by 71%, the total amount is relatively small with 431 in 2002. Practices: There are different types of offices (practices, Praxen). Tax advisers are organized: as a single office (Einzelpraxis), as a company (Sozietät) or as a tax advisory association (Steuerberatungsgesellschaft). The table provides current information about the number of such offices. Dominant are single offices with 32,351 offices in 2002; this is 75% of all office types. Next in line are tax advisory associations with a number of 6,436 units (14.9%) followed by companies with 4,320 units (10%). The relative strongest change to 2001 is seen for companies (+3.6%), whereas single societies slightly decreased by -0.3%. Table 8-20 Offices of tax advisers in Germany 2001 and 2002 Office Type 01.01.2001 01.01.2002 Single Offices 32 446 32 351 -0.3 Companies (Sozietäten) 4 172 4 320 3.6 Tax Advisory Associations 6 257 6 436 2.9 Total 42 875 43 107 0.5 Source: Federal Chamber of Tax Advisers (Bundessteuerberaterkammer) (www.stbk.de, January 2, 2003) Per 1.1.2002 360 so called partnership association (Partnerschaftsgesellschaften) were registered according the appropriate law. Women in the profession: The tax adviser female quota 1991 (per 31.12.1990) was 22.3%. The available actual quotas are 27.8% in 2001 and still increased to 28.2% in 2002. There is a wide range over the 16 German Federal states: Sachsen-Anhalt shows the highest tax adviser female quota with 45,5%, the lowest quota is shown in the Saarland with 20.3% (Federal Chamber of Tax Advisers (Bundessteuerberaterkammer) (www.stbk.de, January 2, 2003). Age structure - tax advisers*: The actual age structure of tax advisers*9 is provided in the table. The most frequented age category is 41 to 50, closely followed by the thirties. The mean over all age of tax advisers* is 49 years. 9 Only here tax advisers* encompasses tax advisers, tax lawyers and others as persons according § 74 Par. 2 StBerG. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 261 Table 8-21 Age structure of tax advisers*1 2002 in Germany Tax advisers* 01.01.2002 Under 30 68 Age Class Quota % 1 30-40 1 893 28 41-50 1 961 29 51-60 1 623 24 61-70 811 12 70 and more 406 6 Total 64 762 100 Age Classes 1 Absolute n Only here tax advisers * encompasses tax advisers, tax lawyers and others as persons according § 74 Par. 2 StBerG Source: Federal Chamber of Tax Advisers (Bundessteuerberaterkammer) (www.stbk.de, January 2, 2003) Function as employer: According to the Federal Chamber of Tax Advisers, the actual percentage of employed persons of all active persons within the tax adviser profession is 24.9% in 2002; the number is21,472 employees out of 86,234: in other words: 75.1% are self-employed in the tax advisers profession. Again there is a wide range and heterogeneity of all active persons in this profession: the lowest employee quota has Rheinland-Pfalz (16.6%), the highest employee quota has Mecklenburg-Vorpommern with 44.4%. Function as instructors: Tax advisers and tax lawyers act as instructors for an assistants in tax and economic consulting professions (Fachgehilfen in steuer- und wirtschaftsberatenden Berufen).10 Thus, the instruction is not only for tax advisers but also for accountants. The regular apprenticeship period is 3 years. According to the Profession Training Law (Berufsbildungsgesetz, § 89 BBiG) the single tax adviser chambers of the Federal states are responsible for the instruction. As the next table shows, at the end of year 2001 there were 23,248 apprentices for an assistant in tax and economic consulting professions. 10 Since 1992 assistants in tax and economic consulting professions with at least three years full professional work for a tax adviser, tax attorney, tax accountant or sworn-in auditor as well as the appropriate associations of these professions are allowed to yield an additional qualification as a specialized tax assistant (Steuerfachassistent). The tax advisory chamber of Rheinland-Pfalz is responsible for this continuing education examination. 262 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-22 Apprentices for an assistant in tax and economic consulting professions (Fachgehilfen in steuer- und wirtschaftsberatenden Berufen)* in Germany 1980 to 2001 (end of year) Apprentices Year 31.12. Total Men Women 1980 20 785 4 080 16 705 Female Quota % 80.4 1982 23 560 4 243 19 317 82.0 1984 24 794 4 792 20 002 80.7 1986 24 212 4 811 19 401 80.1 1988 23 303 4 229 19 074 81.9 1990 23 496 4 796 18 700 79.6 1993 28 283 7 015 21 268 75.2 1994 28 740 7 430 21 310 74.1 1995 27 951 7 194 20 757 74.3 1996 26 908 6 974 19 934 74.1 1997 25 478 6 337 19 141 75.1 1998 23 546 5 974 17 572 74.6 1999 23 146 5 565 17 581 76.0 2000 23 325 5 381 17 944 76.9 2001 23 248 5 276 17 972 77.3 *Since 1996 the new label is tax specialized employee (Steuerfachangestellte). Because there is a new systematic about professions since 1992/1993, the information is not fully comparable with former years. Source: Bundessteuerberaterkammer 1992, Federal Statistical Office. An increase in the number of apprentices by 12.0% was observed in the 1980s: from 20,785 in 1980 to 23,496 in 1990. However, in the 1990s a decrease in apprentices from 28,283 in 1993 to 23,248 in 2001 by a remarkable 17.8% took place. This decrease is different according to gender: male apprentices decreased by 24.8% and female apprentices not as strong by 15.5%. Though the female apprentice quota is quite high in the 1990s, around 75%, in the 1980s the female quota was even higher, about 80%. New members: According to the IHS questionnaires11 2,772 new members were admitted in 2001. There were 2,250 persons who passed the final qualifying examinations, out of 4,693 examinees, i.e. the pass rate was 48%. Because of the heterogeneous conditions in accessing the profession12 no concrete statements on students can be given about their development. 11 Bundessteuerberaterkammer and Bundessteuerberaterkammer. E.g. there were 23 different diploma of the active tax advisers and professional relatives in Rheinland-Pfalz already in the early 1990s. 12 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 263 Accounting, Germany 7412 Table 8-23 Firms per legal form (2000) Firms NACE Branch total individual enterprise 74.12 Accountancy 30 070 25 405 business partnership in units 4 764 joint-stock company other forms 4 692 209 Source: Statistisches Bundesamt Table 8-24 Turnover and persons employed (2000) NACE Branch 74.12 Accountancy Total turnover Total employment in units - point in time (Sept. 30th) in 1 000 EUR total Employees 17 038 727 283 087 242 306 Employees in % of employment 86 Source: Statistisches Bundesamt Table 8-25 Total expenditure (2000) NACE Branch 74.12 Accountancy Total turnover Total employment in units - point in time (Sept. 30th) in 1 000 EUR total Employees 17 038 727 283 087 242 306 Source: Statistisches Bundesamt Employees in % of employment 86 264 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-26 Number of employees and personnel costs (2000) NACE Branch Number of employees (Sept. 30th) 74.12 Accountancy 242 306 personnel costs gross wages and social costs to salaries employer in 1 000 EUR total in units 8 026 617 6 639 607 Source: Statistisches Bundesamt Table 8-27 Turnover, stocks and material costs (2000) stocks in 1 000 EUR NACE Branch Total turnover at the beginning 74.12 Accountancy 17 038 727 675 021 at the end of the year 705 801 Source: Statistisches Bundesamt Table 8-28 Investment, taxes and subsidies (2000) NACE 74.12 material expenditure 681 406 total investment all taxes subsidies 110 858 8 541 74.12 Source: Statistisches Bundesamt 1 387 011 social costs to employer as % of personnel costs in % 17.3 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 265 Table 8-29 Firms in turnover size classes (2000) Firms Turnover NACE 74.12 in units total more than 35 070 in 1 000 EUR 17 038 727 Employment - (Sept. 30th) number of total employees total expenditure personnel costs thereof total material leasing and investment expenditure renting in units 283 087 all taxes subsidies 110 858 8 541 in 1 000 EUR 242 306 less than 12 383 780 8 026 617 4 357 163 thereof in turnover size classes 923 204 681 406 16 620- 50 000 5 206 173 492 7 270 2 383 104 613 17 450 87 163 11 524 14 048 1 965 402 50 000- 100 000 4 902 353 482 9 252 4 557 134 785 55 722 79 063 20 953 14 284 2 853 431 100 000- 250 000 9 173 1 548 276 34 489 25 262 852 819 501 357 351 461 83 364 64 111 8 143 2 161 250 000- 500 000 7 990 2 894 862 59 661 50 331 1 873 306 1 232 732 640 574 145 259 108 593 17 137 2 251 500 000- 1 Mio. 5 246 3 589 093 67 510 60 325 2 520 900 1 717 132 803 767 195 046 121 353 16 399 1 839 1 Mio.- 2 Mio. 1 862 2 448 157 40 008 36 554 1 723 264 1 171 322 551 941 115 232 95 806 14 607 768 2 Mio.- 5 Mio. 574 1 724 631 23 759 22 346 1 241 340 796 464 444 876 84 864 62 161 11 964 301 218 5 Mio.- 10 Mio. 65 466 233 6 233 5 921 385 768 253 394 132 374 20 292 12 979 4 193 10 Mio. - 25 Mio. 35 520 239 6 851 6 678 405 582 281 585 123 997 25 775 22 329 9 755 85 25 Mio. and more 15 3 320 262 28 053 27 948 3 141 403 1 999 458 1 141 946 220 894 165 743 23 840 85 Source: Statistisches Bundesamt 266 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-30 Firms in employment size classes (number of persons employed) (2000) Firms Turnover NACE 74.12 personnel costs thereof material total leasing and expenditure investment renting 35 070 in 1 000 EUR 17 038 727 283 087 242 306 12 383 780 8 026 617 4 357 163 thereof in employment size classes 923 204 in units total Employment - (Sept. 30th) total number of expenditure total employees in units all taxes subsidies 681 406 110 858 8 541 1 469 in 1 000 EUR more than less than bis 4 17 534 1 988 103 37 050 20 620 1 015 258 444 471 570 786 106 268 82 675 17 053 5- 9 9 434 3 311 941 63 800 53 107 2 089 086 1 342 018 747 068 171 507 121 384 16 343 2 574 10- 19 5 869 3 932 705 76 734 68 551 2 698 100 1 882 549 815 551 200 207 135 610 22 993 2 877 20- 49 1 959 3 069 067 53 306 48 628 2 171 686 1 4170 318 701 368 140 510 115 835 15 467 1 174 50- 99 197 757 456 13 030 12 630 705 220 499 037 206 183 46 753 31 241 4 338 181 100- 249 51 508 790 7 172 6 947 399 575 272 836 126 738 25 922 21 737 8 323 98 250- 499 15 264 565 5 100 5 034 244 144 176 197 67 947 13 307 10 523 3 387 82 500- 999 4 195 175 3 084 3 084 191 875 148 666 43 210 12 644 6 920 2 127 85 1000 and more 8 3 010 925 23 810 23 705 2 868 836 1 790 526 1 078 311 206 087 155 479 20 826 . Source: Statistisches Bundesamt I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 267 8.4 The Professions of Accountants and Auditors in France: an overview The French accounting and auditing environment is divided into two separate professions, both of which are government regulated. French law prevents a statutory auditor and a public accountant from working for the same client. The auditing profession is regulated by the Institute of Statutory Auditors (La Compagnie Nationale des Commissaires aux Comptes – CNCC), and the accounting profession by the Order of Chartered Accountants (l'Ordre des Experts-Comptables - OEC). The Ordre des experts-comptables (OEC) is the professional body which regulates practising accountants in France who hold the title ExpertsComptables. The auditors are supervised by the Ministry of Justice (Garde des Sceaux) and accountants come under the supervision of the Ministry of Economy and Finance (see www.acca.co.uk, January 7, 2003). Although the Commissariat aux Comptes has existed as an institution since 1863, rapid economic expansion in the post-war period and the concomitant growth of the financial markets in France, established the obligation to inspect accounts, enforced under the Companies Act of 24 July 1966. A subsequent decree of 12 August 1969 created the Compagnie Nationale des Commissaires aux Comptes under the aegis of the Ministry of Justice. All statutory auditors must be inscribed on the official list of the CNCC, although the majority of them are also members of the OEC. The CNCC is organised on a regional basis and members can be registered in any one of the 34 offices throughout France. The CNCC has seen its role greatly enlarged over the years to cover inspection of accounts in all categories of organisations, both profit- and non-profit-generating concerns. Beyond the statutory mission of attesting that the financial statements are a true and fair presentation, the French auditor is also called upon to intervene when companies seek additional capital or to trigger an early warning procedure for companies likely to encounter financial difficulties. The OEC is divided into eight sectors of professional interest under the aegis of a National Council made up of 66 members, 22 members of which represent the regional councils. The body has been mandated to represent the French accounting profession in its dealings with the other international accounting bodies, in particular the IASC (International Accounting Standards Committee). The two bodies in France co-operate on issues of common professional interest, such as adopting a joint approach to the organisation and monitoring of peer reviews, and coparticipate in a number of working parties. Both bodies are members of the Fédération des Experts-Comptables Européens (FEE). 268 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The CNCC and the OEC formulate and enforce ethical standards, issue technical standards and recommendations in their respective fields, and oversee the peer reviews to ensure compliance with these standards. They also issue accounting and reporting recommendations, which they encourage their members to apply, and which have contributed to the updating and modification of existing regulations. Other bodies associated with the accountancy profession include the Institut des Diplômés d'Expertise Comptables en Entreprise (ECE), which represents qualified accountants working in industry, and the Union des Diplômés d'Expertise Comptable (UDEC), which functions as the trade union of the ECE under the aegis of the IFEC-UNCC. The trainee accountants are represented by the Association Nationale des Experts Comptables Stagiaires (ANECS), who has become a powerful force in France of over 4400 members with 800 members in the Paris region alone. ANECS holds its own annual conference, and has links with other EU trainee accountants' bodies. Market Entry Tasks and exclusive tasks provided by French Accounting Professions The original professional duties of accountants encompass the field of year end auditing of financial statements, tax advising and juristic consulting and representation relating to the profession. In both SMEs and large enterprises, French professional accountants have seen their role broadened beyond accounting and related tasks into areas associated with inheritance/transmission of firms, company restructuring, acquisitions and mergers, and IT projects. French regulation allows accountants to provide tax and legal advice only when they are retained as accounting advisers to a client. They play a major part in tax and labour law compliance and tax consultancy. Legal advice, contrary to statutory audit and tax advice, is not reserved to specific professions in France. The statutory auditor fulfils a legal obligation to audit and give an opinion on the annual accounts of entities subject to audit, as well as on consolidated accounts where required to be drawn up. The standard statutory audit mission applicable to commercial enterprises comprises the following elements: expression of an audit option, specific verifications and review, presentation of an audit report, indicating of inaccuracies. With the exception of local public sector enterprises, the statutory auditor in France may not exercise a statutory audit mission in the public sector. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 269 Education and Entrance to the Profession To be a member of the Ordre (OEC) it is necessary to have passed the diplôme d' expertise comptable, a national diploma delivered by the Ministry of Education. The diplôme d'expertise comptable also gives automatic access to registration as a statutory auditor with the Compagnie Nationale des Commissaires aux comptes (CNCC). Qualification as an Expert-Comptable involves passing a set of multi-stage exams and completing an internship. This requires a period of at least 7 years. The examination syllabus is co-managed by the State and the accountancy profession. The examinations are organised by the Ministry of Education but members of the Ordre and of the CNCC sit on the examination boards. The Ordre organises the traineeship (www.experts-comptables.fr, January 7, 2003). The accounting and auditing professions in France are accessible via a common study programme leading to the Diplôme d'expertise-comptable. It consists of a protracted period of multi-stage exams spread over a minimum of 7 years in both public and private institutions. The first level is the DPECF (Diplôme préparatoire aux études comptables et financières), requiring one to two years of study after secondary school; the DECF (Diplôme d'études comptables et financières), requiring a further two years upon completion of the DPECF; the DESCF (Diplôme d'études supérieures comptables et financières), which can be completed in one year. Having successfully passed the three exams, these qualifications provide access to careers as head of an accounting or finance unit or service within industrial and commercial corporations. The last step, leading to the diplôme d'expertise-comptable, requires the candidate to undertake a three year traineeship in a professional accountancy firm monitored by a qualified principal, and the preparation of a thesis, a written exam and an oral test. Holders of the final diplôme d'expertise-comptable, who are in public practice are automatically eligible, once they have taken the professional oath, to enrol with the Ordre. France is one of the EU states (along with Belgium, Germany and Greece) that restricts membership of professional associations to those working in public practice. Membership is thus associated with a given function and not with a certain educational background in accountancy or auditing; upon leaving public practice in France to work in industry or retire, the individual is obliged to rescind his/her membership of the OEC and CNCC. The most popular route to the CNCC is by obtaining the diplôme d'expertise-comptable, thus explaining why the majority of practitioners belong to both bodies. Nevertheless, a specific and very restrictive route exists for French nationals to the CNCC, comprising of a qualifying examination open to persons holding a university degree or an equivalent degree from a higher commercial college (Ecole Supérieur de Commerce) and practical professional 270 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S training of at least three years, very similar to the traineeship required to obtain the diplôme d'expertise-comptable. Both streams can be undertaken at the same time. Quality control Quality control of the auditing profession falls under the responsibility of the CNCC's Regional Councils, who have developed a peer review system for members registered with their designated regional institute. The Regional Council selects the auditors to carry out the quality control, under the denomination of ”contrôleurs article 66”, named after the section of company law which regulates the statutory audit profession. Each Regional Council appoints a member from its Board to supervise the control function at regional level. Reviews are carried out on individually registered auditors as well as the organisation of the audit firms in which they practice. As a result of pressure from the COB, the French stock exchange watchdog, a separate external quality control function is directed at auditors of listed companies on a national level. This is also conducted as a peer review. Separate professional unions exist in France representing the two professions who take an active role in defending the interests of its members: first, there is the Institut Français des Experts Comptables (IFEC) and the Union Nationale des Commissaires aux Comptes (UNCC), which is a single trade union, with two branches of members. The second union is Experts Comptables de France, which is a member of EFAA (the European Federation of accountants & auditors of small to medium sized enterprises). Based on voluntary membership and considered as an optional extra to the obligatory OEC and/or CNCC membership, the unions hold annual conferences, provide technical information to members via their journals and seminars. Dual membership to both unions by practicing accountants is rare. Conduct Regulation Prices and Fees Generally, according to information provided by the OEC, in France there do not exist any general regulations on prices and fees of accountants and/or auditors. At the same time statutory auditors are required by law to be independent vis-à-vis their clients. This applies equally to an individual or a firm. Statutory auditors are forbidden to receive remuneration from any of the following sources: the audited company for services other than auditing; any company that holds 10% or more of the capital of the audited company; a company in which the audited company holds 10% or more of the capital. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 271 Advertising According to information provided by the OEC several forms of advertising are forbidden for accountants in France. These are: direct mailing, price advertising in any form (incl. comparative price advertising), as well as commercial advertising via print- or other media. All in all the regulations concerning advertising for French accountants appear to be rather restrictive. A re-regulation in the direction of liberalisation is currently under consideration. Forms of Business For cultural and historical reasons, individual statutory auditors have usually been designated rather than firms. Increasingly, however, firms are being appointed as statutory auditors, including French accounting companies and professional auditing partnerships. The notion of a management accountant does not exist in France and has been the subject of much debate within the accountancy unions, anxious to introduce enhanced skills in management accounting in the mainstream accountancy curriculum. Unlike the UK, there is only one category of membership of accountant in France: the individual who, having obtained the diplôme d'expertise comptable and works in public practice, is eligible for membership to the OEC. Those accountants working in industry and commerce may, however, refer to themselves as diplômés experts comptables. However, according to information provided by the OEC accountants in France can incorporate in different legal forms, whereby even public limited companies are allowed (but not limited liability companies). Location and Diversification According to information provided by the OEC there are no special regulations on location and diversification. This means that there are no restrictions regarding the geographical area of offering services, nor is it forbidden to open branch offices. However, for branch offices there is a prohibition of handling cash, prohibition of own commercial activities, and a prohibition of offering in subsidiaries services prohibited for the parent company. Inter-professional Co-operation According to information provided by the OEC, inter-professional co-operation for accountants in France is not generally forbidden. However, they are allowed to incorporate with other professions only under specific preconditions. To the best of our knowledge (OEC did not provide detailed information) firms must be owned at 75% by locally licensed professionals as regards companies in the form of SARL (see case study on technical 272 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S professions in France), at 66% as regards companies in the form of SA. In the case of a Societé d’ Exercise Libéral (professional corporation), 40% of capital must be with professionals active with the company, 25% with professionals, and 25% are entirely open. As for statutory audit, firms must be owned 75% by locally licensed comissaires aux comptes in the case of SARL or SA and 75% at least of the shareholders must be licensed comissaires aux comptes. Continuing Education Membership to the Ordre des Experts-Comptables involves a commitment to continuing professional education. The relevant standard requires a minimum of 120 hours CPE per three year period. The Ordre provides continuing education seminars through its regional councils. Other courses are also available from various private organizations. Specialisation in the Profession There are no specific regulations on specialisation in the profession. Compulsory Indemnity Insurance In France professional indemnity insurance for accountants is mandatory. The minimum amount of coverage is 500.000 € per case and firm. Recent Trends in regulation and conclusion Regulation for French auditors appears to be rather rigid in respect to entry regulation. The education takes a comparatively long time and the reserved areas of service are rather broad. At the same time conduct regulation appears to be rather liberal. This is especially true in respect of price regulation and partially as regards the form of firm and interprofessional co-operation. At the same time the profession has made large efforts in relation to professional quality management (peer reviews etc.) and continuing education. According to ACCA in the field of public practice, the profession is dominated by the Big Five (Four) firms in France, whilst the smaller practices serving the SME sector have merged to strengthen their position vis-à-vis the former groups. In the past 30 years, the image of the local accountant and auditor serving the SME type of business has given way to the emergence of large practices. The Big Four have absorbed the smaller French firms and now certify the accounts of the French corporations listed on the French stock exchange. They have expanded into management consultancy and other advisory services, and have moved into the provincial regions of France in pursuit of the SME business. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 273 Economic Characteristics France – Structure and dynamics (NACE 7412) Enterprises, Turnover, Employment:13: In discussing the firms’ turnover it is to be noted that only enterprises above 76.000 EUR turnover per year are included in the French statistics, for which data on average turnover are available. Furthermore, statistics on employment include only units with 1 or more employees, so that single-person self-employed enterprises are omitted. For that reason the tables below contain 1994 data from Eurostat, and a 2000 figure based on extrapolation on the basis of growth rates from the INSEE statistics Table 8-31 Firms, Turnover and Employment; France 7412 Number of Firms Turnover in No. of Employment Mio. EUR Professionals 1994 14 524 7 229 117 690 2000* 15 800 9 023 135 476 14 800 * extrapolated value based on INSEE definitions (except No. of Professionals) Source: EUROSTAT, INSEE; IHS Table 8-32 Key Statistics, Accountancy Services: France 7412 Turnover per Firm Employment Turnover Employment Firms per per 1000 per person per Mio. of Mio. of firms employed Pop Population 1000 EURO 1000 EURO 1994 498 8 103 61 2 037 251 2000* 571 8 574 67 2 287 267 * extrapolated value based on INSEE definitions (except No. of Professionals) Source: EUROSTAT, INSEE, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1996 values indexed at 100. 13 EUROSTAT, SIRENE (Système informatique pour le répertoire des entreprises et des établissements - Computer system for the companies and establishments directory) (INSEE) 2002 274 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 8-6 Relative Growth, France 7412 120 115 110 105 100 95 90 1996 1997 1998 1999 No. of Firms Turnover 2000 2001 Employment Source: INSEE *based on INSEE defintions The following analysis is based on the data obtained from INSEE Accountancy services in France encompasses accounting, book-keeping, auditing services and tax advising. Table 8-33 Number of companies 1 Year 1 Accounting active at 31/12 Enterprise demography 1996 17 854 Individual entrepreneur 9 097 8 467 290 1997 17 995 8 941 8 775 279 1998 18 237 8 900 9 080 257 1999 18 654 9 058 9 336 260 2000 18 885 8 988 9 645 252 2001 19 254 8 991 10 018 245 Company Other Number of companies economically active in the inventory at the end of year. Source: SIRENE (INSEE) (2002) As the table shows the number of accounting firms active increased by 7.8% from 17,854 in 1996 to 19,254 in 2001. Dominant groups are individual entrepreneurs and companies. Whereas in 1996 there were more individual entrepreneurs (9,097) than companies (8,467) I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 275 in 2001 this relation was reversed: in 2001 there are more accounting companies (10,018) than individual entrepreneurs (8,991). Other forms are relatively small and diminishing. Number of enterprises: The development of accountancy enterprises in employee classes in France from 1996 to 2001 is shown in the table. Table 8-34 The number of accountancy enterprises in employee classes in France 1996 to 2001 Year Enterprise demography: Number of enterprises active at 31/12 0-5 Jun.19 20-49 50-249 250-499 500-1999 >=2000 Other 1996 12 997 4 014 710 116 9 6 2 0 1997 13 085 4 058 717 118 8 7 2 0 1998 13 301 4 112 697 110 9 6 2 0 1999 13 726 4 084 712 112 10 8 2 0 2000 13 784 4 244 719 117 9 10 2 0 2001 13 931 4 372 782 147 11 9 2 0 Source: SIRENE (INSEE) (2002) In accountancy services small enterprises are obviously dominant, in particular enterprises with up to 5 employees. Their growth rate from 1996 to 2001 is 7.2% with 13,931 small enterprises in total. Next in line are enterprises with 6 - 19 employees. Their growth rate is 8.9% with 4,372 enterprises in this second class; a growth rate, which is higher than that of the group of small enterprises. An even higher growth rate of 10.1% is given for enterprises with 20 - 49 employees. To summarize: in France from 1996 to 2001 larger accountancy enterprises grew faster than smaller ones. Average Turnover: The accountancy services produced an average turnover of 734,300 EUR in 2000 (see table). The accountancy services showed a growth rate of 9.6% from 670,000 in 1996. The larger the accountancy enterprises the larger is their average turnover: the highest turnover can be found in enterprises with more than 250 employees with a maximum of 85,559,650 EUR in 2000. In contrast: the smallest enterprises (0 - 9 employees) produced 310,880 EUR in 2000 as its highest average turnover from 1996 to 2000. 276 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 8-35 The average turnover in accountancy enterprises in employee classes in France 1996 to 2000 Average turnover Year Accounting EUR EUR 10-19 employees EUR 1996 670 000 303 000 891 000 1 998 000 5 444 000 68 475 000 1997 666 000 300 000 896 000 1 912 000 6 343 000 70 887 000 1998 677 000 297 000 890 000 1 912 000 5 935 000 71 278 000 1999 700 000 305 000 906 000 2 098 000 6 416 000 77 109 000 2000 734 300 310 880 912 130 2 178 350 6 272 010 85 559 650 0-9 employees 20-49 employees EUR 50-249 employees EUR >=250 employees EUR Threshold: Turnover > 76.000 EUR Source: Système unifié de statistiques d'entreprises (SUSE-INSEE) Employment structure by gender: The accountancy services employment structure measured as salaried staff by gender in France from 1996 to 2000 is shown in the table. In 2000 there are 112,687 salaried staff altogether with a relatively high female quota of 64.3%, a quota lower than that of legal services. Employment grew by 9.8% with 102,595 salary receivers in 1996. The female quota in the mid 1990s of 64.1% is similar to the quota five years later. Thus – as in the legal services - the gender structure remained constant over the last years in French accountancy services employment. Table 8-36 Employment structure in accountancy enterprises by gender in France from 1996 to 2000 Year All Total employee at 31/12 Men Women 1996 102 595 36 857 65 738 1997 105 316 38 009 67 307 1998 101 415 37 087 64 328 1999 109 471 39 231 70 240 2000 112 687 40 173 72 514 Threshold: Enterprises with 1 or more employees Source: Déclaration annuelle de données sociales (données d'entreprises) (DADS-INSEE) Enterprise Structure: In the field of public practice, the profession is dominated by the Big Five firms in France, whilst the smaller practices serving the SME sector have merged to strengthen their position vis-à-vis the former groups. In the past 30 years, the image of the local accountant and auditor serving the SME type of business has given way to the emergence of large practices. The Big Five have absorbed the smaller French firms and now certify the accounts of the French corporations listed on the French stock exchange. They have expanded into management consultancy and other advisory services, and have moved into the provincial regions of France in pursuit of the SME business. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 277 Table 8-37 Size of Firms Size of Firm % Firms small medium large 34.2% 46.0% 18.3% Source: Le Figaro economie The market shares of the Big Five audit and accountancy companies are: KPMG (34.5%), PWC (25.5%), AA (15.7%), E&Y (13.3%), DTT (11.0%)14 Despite the dominance of the Big Five, the bulk of the French accounting profession, numerically, remains as small to medium-sized firms serving the many owner-managed SME businesses in France. Over 10,000 accountancy firms employing 130,000 people now compete in France generating 20% of their fees from audit work and 80% from accountancy services. Overall, the fee split profiles have remained more or less consistent over the past few years, with a slight increase in consultancy arising from the conversion to the Euro, the impact of new technologies and the implementation of the 35-hour working week in France. The focus has become one of achieving improved price/quality service in a highly competitive market. In response, small to medium-sized practices are offering a broader range of services, already enjoyed by the bigger firms, in areas like general business consultancy and investment advice. They have also forged regional partnerships, trimmed their overheads and looked beyond France to export their expertise. But restrictions still exist in France, preventing accountants from offering certain services; for example, insolvency services - except in very limited circumstances - cannot be provided by accountants, as these activities are restricted to other professions. Table 8-38 Number of employees Number of employees % Firms < 10 11-100 > 100 78% 18% 3.5% Source: Le Figaro economie, May 1996 Most of the Big Five in France have downsized over the early part of the 1990's. In the past three years, French accountancy firms have shed 6,000 staff - over 5,000 alone between 1993 and 1994. The first signs of a revival in the recruitment of accountants and auditors appeared in 1996; a total of 1,195 new recruits were hired by the big firms, many of which were employed directly from the grandes écoles at entry level. 278 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conseil supérieur de l'Ordre des Experts Comptables: Complete structure data on accounting services to enterprises and other organisations (including statutory audit) was made available in the IHS questionnaire by the Conseil supérieur de l'Ordre des Experts Comptables:. In addition to its 12,215 corporate members in 2001, the Conseil supérieur had a membership of 16,906 individual accountants. This figure is an increase of 64% over the number of members in 1990 (10,297). Approximately 90% of the experts comptables are self-employed. Only 10 members were practising abroad in 2001, 6 of these in non EU or EU-candidate countries. From 1990 to 2001 the number of professional trainees increased by 75% from 3,212 to 5,621. There have been around 1000 persons (+/- 25% ) annually passing the final qualification examinations – in 1990 this represented a pass rate of 74.4%. There were over 1,500 new trainee entrants in 2001, indicating that the period as trainee lasts for upwards of 4 years. In 2001 there were 14,600 accountancy firms giving employment to a total of 120,000 professionals and non-professionals, this latter figure being up by just 9% on the corresponding figure for 1990. (Registration with the Conseil supérieur is high - 12,215 accountancy companies are registered, i.e. 84% of all firms.) Full-time employees account for 90% of the total. More than half, 58%, of firms have incorporated status. Large firms having more than 5 offices are rare, making up only 0.3% of the total - only 4 firms hold more than 50 offices throughout France - as are firms with more than 30 qualified professionals (2% of the total). There is, however, a broad distribution of small and medium sized firms – 35% single accountant firms, 30% with 2 professionals, 28% with 3-5 professionals, and 15% with between 5 and 30 professionals. Likewise, one quarter of firms consist only of the accountant, 22% have 1-2 non-professional employees, 36% have 3-10 other employees, 15% have 10-50 employees, whereas only 2% of firms have more than 50 employees. Total turnover reported by the Conseil supérieur was 8.4 bill. Euro in 2001, up 58.5% in nominal terms since 1990. The five largest firms had a market share of 18% and the first 50 firms in size (0,3% of the number of practices) realize 31% of the total turnover of the profession in the regulated activities (accounting and auditing). 14 Source. Financial Times 1998. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 279 9. Case Studies: Technical Professions 9.1 Technical Professions in Austria: an overview The professional group of the “Civil Technicians” (Ziviltechniker) was first regulated in the Staatsministerialverordnung 11. 12. 1860, Z. 36.413. The main relevant law for a long time was the “Civil Technician Law”, BGBl. 1957/146 (“ZTG”). The last important amendment is of 1993 (“Ziviltechnikergesetz 1993, ZTG 1993” – “Civil Technician Law 1993”, BGBl. Nr. 156/1994). Since this amendment “Civil Technicians” are divided into “Architects” and “Chartered Engineering Consultants” (§ 1 Abs. 2 ZTG). At the same time as this amendment, the profession of the “Civil Engineer” (Zivilingenieur) has been abolished: no new licenses are issued for this profession. In contrast to the Architects and Engineering Consultants this profession (the Civil Engineers) according to the “Civil Technician Law” 1957 (superseded through the ZTG 1993) was not only entitled to “planning and co-ordinating activities”, but also to “executive activities” (“ausführende Tätigkeiten”). In comparison, the activities of “Architects” and “Engineering Consultants” are primarily of a planning, consulting and controlling character and they are not entitled to perform tasks of executive character. The aim of the more strict separation of planning and implementation activities is, according to the intention of the law, that the professional service provider should be active with the highest possible objectivity and independence. It should be mentioned that a multiplicity of Civil Technicians titles exists (not less than 35!). This is caused by the fact that there is a multitude of different types of Engineering Consultants. In respect of authorisation to offer services on the market, many of these titles have overlapping entitlements. As demonstrated above, the regulatory situation for Engineers and Architects in the European Union appears to be bi-polar. On the one hand, there are several countries with very low, or, as in some cases, nearly no specific regulation on market entry and conduct. On the other hand there exist several countries, where the regulation for these professions is rather rigid. Austria is one of them. The total market entry index we computed for technical professions in Austria is as high as 3.84 and the highest of all countries compared. The conduct index, with a value of 1.175, lies in the medium field. However, only Luxembourg, Italy and Germany show higher conduct indexes (although figures for Spain and Portugal, two rather high-regulation countries, are not available). 280 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The entry index is very high because there is a rather broad range of tasks that is reserved for Architects and Engineering Consultants (and sometimes some other professions) by law.1 In respect of conduct in recent years several measures of liberalisation have been implemented. Civil Technicians are members of the Chamber of Architects and Chartered Engineering Consultants. According to § 5 Abs. 1 of the “Chamber of Civil Technicians Law” (Ziviltechnikerkammergesetz 1993 (BGBl. Nr. 157/1994)) this membership is obligatory. The organisation of the profession shows some federal elements. Civil Technicians are members of the regional chamber (Länderkammer), according to the geographic area in which the relevant firm is located. Altogether four regional chambers (Länderkammer) exist. The provinces Lower Austria, Vienna and Burgenland are pooled in one chamber. The same applies to Styria and Carinthia, Upper Austria and Salzburg as well as Vorarlberg and Tyrol. These chambers, as well as the Federal Chamber of Architects and Chartered Engineering Consultants (below: “Federal Chamber”), which is incorporated in Vienna, are public corporations (Körperschaften öffentlichen Rechts) (§ 1 Abs. 3 “Chamber of Civil Technicians Law”). The Austrian regulation system for the profession of the “Civil Technicians” therefore follows the principle of obligatory membership in a professional association with licensing and not the principle of non-obligatory certification. Market Entry Tasks and exclusive tasks provided by Austrian technical professions With certification as a Civil Technician (Architect or Engineering Consultant) it is possible to offer a more or less wide range of specific tasks to third parties. Thereby the status as Civil Technician is normally a mandatory requirement for the independent practice of the respective service. But in several cases there are also other professions authorised to offer the same services. These professions include for example the technical bureaus and chartered builders, which are not liberal professions. These professions are “chartered craftsmen” (Gewerbetreibende) and the market entry for them is regulated as well through public law (via the Gewerbeordnung). Different exclusive tasks exist for the professions of Civil Technicians. Before 1993 these tasks were directly listed in the law. Henceforth only general enumeration can be found in the law as well as some more detailed descriptions for a few professional services (Architects, Engineering Consultants for surveying, Engineering Consultants for subterranean geometry). For all the other types of Engineers the detailed regulations of entitlements to fulfil different 1 Notwithstanding with this some other professions may perform some of the respective tasks as well. Such professional groups are for example so-called Technical bureaus or chartered builders, which are no liberal professions. For details see below. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 281 tasks can now be found in different relevant laws, concerning directly to the various activities. Generally § 4 Abs. 1 ZTG provides that Civil Technicians, if there is no other entitlement defined by law, are authorised to carry out planning, consulting, co-ordinating, examining supervisory and fiduciary activities. Civil Technicians are particularly authorised to do measurements, prepare surveys, to take on functional representations and general planning mandates. Beside this Civil Technicians are acknowledged as public commissioner of deeds. This is an completely reserved activity, which chartered craftsmen (Gewerbetreibende) are not allowed to fulfil. Furthermore it is stated by law, that Architects, regardless of the appurtenant rights of chartered craftsmen for planning, are especially authorised for the planning of cultural and other public buildings (e.g. churches, schools, theatres). Education and Entry to the Profession Civil Technicians in Austria require a university education. The field of study has to correspond to the subject area for which the title is intended (§ 7 ZTG). This means that especially technical, scientific and mining studies qualify for the professions of the Civil Technician. The minimum study duration is 4 years. For Austrian Civil Technicians a relevant university degree is necessary. There are no other possibilities of entering the profession, for example after comparatively long periods of professional practice. Would-be Civil Technicians require practical experience after finishing the university. Three years of such professional experience are obligatory. Of this three years, a minimum of one year has to be undertaken as a wage earner. The others – maximum two years – can be undertaken as an independent contractor. This practical experience has to be achieved in a full time position, which is appropriate to convey the necessary skills, but it does not make a difference in which economic sector and in which country this is done. For architects, for “engineering consultants for building and construction”, “engineering consultants in the field of economics of building and construction” as well as for “engineering consultants in the field of economics of water supply and distribution and cultural techniques” a minimum of one year practice on a construction site is mandatory (§ 8 Abs. 2 ZTG). Comparable specific rules apply to the “Engineering consultants for surveying”. The fulfilment of the practical experiences have to be authenticated by a detailed testimonial. If the requirements listed above are fulfilled (university degree and professional practise), the candidate can submit an application for admission to the professional exam to the relevant regional Kammer für Architekten and Ingenieurkonsulenten. The relevant regional Chamber is the one competent for the area where the candidate lives. The relevant dossier is – in several steps – transmitted to the Ministry of economics, which in the last instance decides if 282 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S the relevant preconditions are fulfilled. The examination is open to the public, held in German language and can be repeated only twice. The examination commission is made up of two high grade civil servants, of whom one is the chairperson, and two Civil Technicians, active in the field of examination or in a nearby subject area (§ 10 Abs. 2 ZTG). The contents of the examination are codified by § 9 Abs. 3 ZTG. These are: - Austrian administrative law - Business economics - Legal and professional rules of the subject field - Rules, Regulations and professional by-law applicable to the Civil Technician - Particular objects, according to the practical and university experiences, can be taken into account. After successful completion of the examination, the professional authorisation is given to work as a self-employed Ziviltechniker (Architect or Engineering Consultant) and/or establish a firm (§ 12 Abs. 1 ZTG). For this a registration with the relevant regional Chamber of Architects and Consulting Engineers is necessary. However, the license is valid all over Austria. Additionally the Civil Technician candidate has to give a professional oath (§ 13 Abs. 1 ZTG). Conduct Regulation Prices and Fees For “Architects” and “Engineers” different fee scales exist. These are prescribed, according to § 33 Abs. 1 ZTG by the Federal Chamber. However, today they have no binding effect any more. Before the law of 1993 came into force this professional fee directive was a de facto minimum price. The current directives have to be seen as guidelines. Price competition is therefore possible, the honorarium being a matter for negotiation. The code of ethics only provides that the calculated price has to be “on the basis of the various fee scales” and must not be disproportionate to the real output. Advertising Advertising in Austria for Civil Technicians is allowed. The relevant regulations state that Civil Technicians have to use their correct professional title. So it is forbidden to advertise without I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 283 giving notice of one’s exact powers. Furthermore, disparaging advertising and misleading advertising are not allowed. Forms of Business, Inter-professional Co-operation, Location and Diversification Since 1994 Civil Technicians may establish Civil Technician Corporations. Two different types of business organisation exist: incorporated enterprises (limited liability company or public limited company) and limited private partnerships/companies (Eingetragene Erwerbsgesellschaft: Kommandit-Erwerbsgesellschaft or Offene Gesellschaft). The founding of a private company in co-operation with chartered craftsmen is allowed only in cases where the latter are not authorised to carry out activities in the subject-field of the relevant Civil Technician. This rule applies due to the above mentioned principle of separation of planning and executive tasks, which was implemented as from 1993/94. In the case of an incorporated firm, Civil Technicians have to hold more than 50% of the shares and it must be Civil Technicians with a valid license who fulfil the management and representation functions. If the corporation is a limited partnership (Eingetragene Erwerbsgesellschaft), shareholders that are not members of the profession may only be partners (Kommanditisten) (§ 28 Abs. 4 ZTG). Special regulations also exist for public companies (Aktiengesellschaften) (cf. § 28 Abs. 5 ZTG). As a consequence of the regulations described above, the possibilities for inter-professional co-operation for Civil Technicians are – at least from an international comparative point of view – highly restricted. This applies in the first place to the prohibition of co-operation with chartered craftsmen if there are overlapping powers (i.e. if the respective chartered craftsmen are allowed to perform executive tasks in the respective field). Secondly, restrictions occur due to the regulation of shareholding and firm management. Nevertheless the possibilities for inter-professional co-operation for Civil Technicians in Austria have for a long time been broader than those for other liberal professions. According to information provided by the Federal Chamber of Architects and Chartered Engineering Consultants, a further liberalisation of respective rules is currently under consideration. The opening of local branch offices is allowed since the implementation of ZTG 1993. The former restrictions have been abolished. Furthermore, the ZTG dos not contain any specific rules concerning the management/guidance of such branch offices. It does not say that every branch office has to be managed by a licensed Civil Technician. 284 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Continuing Education Hitherto there has not been an obligation for continuing education for Architects and Chartered Engineering Consultants. A change of the relevant rules is currently under consideration. Specialisation in the Profession No measures exist which would allow a further job specialization beyond the rules set up by the ZTG. This would of course, in connection with the actual splitting-up of the professions and the high number of different kinds of Chartered Engineering Consultants, not make much sense. On the contrary, a consolidation of powers/different types of authorisation/licensing would maybe be beneficial. Compulsory Indemnity Insurance Up to now a professional indemnity insurance for Architects and the different types of Chartered Engineering Consultants is not mandatory. According to information provided by the Federal Chamber of Architects and Chartered Engineering Consultants, a reform of this subject is currently under consideration. Economic Characteristics Austria – Structure and dynamics (NACE 7420) Enterprises, Turnover, Employment:2 The nominal turnover of architectural and engineering enterprises in Austria was around 4,500 million euro in 2000, equivalent to 2.2% of GDP, above the median value of the ten EU countries surveyed (c.f. Overview-tables in Chapter 5). Output of the sector rose at a very high yearly average of 15.1% from 1997 to 2000, a rate well above that of GDP in the same period (an average of 4.1% p.a.), as well as that of the rate of GDP growth in the 1990s (4.6%). This represents a real growth in architectural and engineering services of 13.6%, which is considerably higher than the growth in employment – 10.4% - over the same period, 1997 to 2000, so definitely productivity increased. In fact, the turnover per employed person rose 8.9% in total in real terms over this period. Unfortunately the rate of productivity growth in the early part of the 90s can not be calculated from the data – only the yearly average growth in employment is 2 Sources: EUROSTAT, Statistik Austria. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 285 available, a considerably lower annual figure of 3.0% from 1991 to 1997. Altogether the average yearly increase in employment from 1991 to 2000 was 5.4%. Table 9-1 Firms, Turnover and Employment, Austria 7420 Number of Firms Turnover in Mio. EUR Employment 1991 5 739 1997 6 009 2 959 27 805 1998 7 131 3 185 31 648 1999 7 610 3 294 33 598 2000 7 932 4 517 37 385 No. of Professionals 23 306 7 673 Source: EUROSTAT, Statistik Austria, IHS The number of firms increased correspondingly from over 5,700 in 1991 to over 7,900 in 2000, an average rate of 3.7% p.a. (see Table). The higher rate of increase in the number of enterprises relative to employment is indicative of a trend towards concentration i.e. relatively fewer firms with more employees: indeed the average firm gave employment to 4.7 persons in 2000, up a little from an average of 4.1 persons in 1993. However the total number of enterprises in this branch, now certainly exceeding 8,000, is not high in international comparison, being less than median value. The average turnover per firm (in 2000) of almost 569,000 euro was considerably higher than the correspondingly value for accounting services (390,000 euro) in Austria, but closer to the turnover for legal services firms - 442,000 euro3. This is a relatively high level of business, only firms in Denmark and the UK of the countries in our survey having higher valued outputs. In fact when adjusted for level of prices and output of the whole economy, only the UK has a higher volume per firm in the sample; unlike the UK, however, Austria does not have an exceptionally high level of architectural and engineering business measured in per capita volume. The level of employment is somewhat low for the branch, at nearly 4,600 persons per million of the population in 2000 below the median value, whereas the level of productivity, as measured by the turnover per employed person is, at 121,000 euro in 2000 in absolute terms among the highest of countries included in our survey. Even when adjusted for price levels as well as for economic output level (in terms of GDP in PPS per capita), the volume per employee of the architectural and engineering consultancy branch in Austria is second only to that of Sweden; unlike Sweden, however, as mentioned above, Austria does not have an exceptionally high level of architectural and engineering business measured in per capita volume. 3 Note: Value Added is typically 70-75% of turnover for legal and accounting services, 50-55% of turnover for technical services. 286 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 9-2 Key Statistics, Legal Services; Austria 7420 Turnover per Firm Employment Turnover per Employment Firms per Mio. of per Mio. of person per 1000 Population Pop employed firms 1000 EURO 1000 EURO 4 061 3 000 739 1997 492 4 627 106 3 446 745 1998 447 4 438 101 3 919 883 1999 433 4 415 98 4 157 942 2000 569 4 713 121 4 614 979 1991 Source: EUROSTAT, Statistik Austria, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1997 values indexed at 100. Chart 9-1 Relative Growth Rates, Austria 7420 160 140 120 100 80 60 40 1991 1992 1993 1994 1995 No. of Firms 1996 Turnover 1997 1998 1999 2000 Employment Source: EUROSTAT, Statistik Austria, IHS Relative to other professions: the next table shows the size and structure of the technical services branch in Austria relative to other related professional services (NACE 2-digit 74). Architects and engineering consultants account for the highest share of the professional services.4 Altogether technical services account for 26% of firms, 27% of turnover, and 18% of employment in the 74-branch. 4 The only larger 4-digit category is cleaning services. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 287 Along with the legal services professions and accountancy services, other non liberal professions such as market and opinion research and advertising are included. The productive output of the branch is also relatively high: 120 Euro per employee, in comparison to 109 Euro per employee in the consulting branch (7414) – a non-regulated branch employing a high proportion of highly qualified persons. Professionals: The Bundeskammer der Architekten und Ingenieurkonsulenten provided statistics on membership of its two sections, i.e. architects and chartered engineering consultants (IHS questionnaire). These two sections have almost identical strength of membership and show parallel changes in membership structure (since 1990 at least). Whereas there were 3,158 architects in 2000 (up by 39.5% from 2,263 in 1990, there were 3,056 consulting engineers in 2000 (up by 30.5% from 2,341 in 1990. Of this number, However, only 67% of architects (2,112), and 64% of chartered consulting engineers (1,961) were practising in 2000. (It should be noted that there are also 4,480 members of the Fachverband Technische Büros (as of 2000/01), not classed as a liberal profession, and this number has increased by 262% since 1990.) There were 220 newly admitted architects in 2000, 26% more than in 1990, out of a total of 950 trainees, indicating that persons have the trainee status upwards of 5 years. Correspondingly, There were 210 newly admitted consulting engineers qualifying through entrance examinations in 2000, 24% more than in 1990, out of a total of 900 trainees, indicating a similar period of trainee status. The pass rates in final qualifying examinations are high for both architects and consulting engineers – these were, for example, 96% and 93% respectively in 2000. 288 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 9-3 Structure data for professional services. Austria 2000 NACE Branch firms Employment (31.12.2000) personnel costs therof employees 202 903 173 504 Earnings Revenues Other business activities 8 298 126 3 421 786 7 566 824 k7411 Legal activities 2 791 16 456 12 694 331 817 1 236 027 1 234 123 1 204 625 348 450 30 265 884 885 46 503 k7412 Account., book-keep. & audit. activities; tax consult. 3 529 22 663 19 260 630 430 1 386 672 1 377 419 1 243 830 456 291 136 659 921 469 68 246 186 1 182 1 016 44 847 163 461 161 805 119 471 94 861 43 305 67 133 6 915 3 126 10 394 7 239 335 197 1 154 865 1 134 178 893 396 623 862 245 692 513 608 79 262 k7413 Market research and public opinion polling k7414 Business and management consultancy activities k7415 Management activities of holding companies 29 977 Buying of goods and gross value gross services added investment thereof for total resail in 1.000 EURO total k74 Production value 5 299 770 18 390 508 16 574 163 12 461 094 893 245 381 3 956 3 861 272 786 2 395 385 861 307 742 057 493 535 123 002 369 532 182 358 k7420 Architectural and engineering activities 7 932 37 385 28 807 1 176 154 4 677 756 4 516 539 2 763 938 2 556 186 1 058 610 1 259 284 169 437 k743 Technical testing and analysis 1 588 5 818 4 361 164 623 440 671 431 842 384 748 179 950 45 702 252 432 54 040 k744 Advertising 3 553 13 935 10 934 389 863 2 724 974 2 691 709 1 342 432 1 911 667 1 357 541 783 252 82 834 Source: Statistik Austria I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 289 Size of Firms, Legal Form, Self-employment 5: The following table shows that both architects’ and engineers’ enterprises overwhelmingly consist of small business with less than four employees. A slight trend towards slightly bigger companies is just discernable, mainly to the size category, 5-9 employees. Table 9-4 Firms by Number of Employees – Technical Services. Austria Number of Employees Year 1-4 1997 4 660 5-9 873 10-19 321 20-49 128 50-99 19 100-249 250-499 500-999 > 1000 6 0 0 2 Sum 6 009 1998 5 464 1 004 479 154 22 6 0 0 2 7 131 1999 5 749 1 228 449 140 29 14 0 0 1 7 610 2000 5 946 1 327 409 214 24 10 0 0 2 7 932 % in 1997 78% 15% 5% 2.1% 0.3% 0.1% 0% 0% 0.03% 100% % in 1998 77% 14% 7% 2.2% 0.3% 0.1% 0% 0% 0.03% 100% % in 1999 76% 16% 6% 1.8% 0.4% 0.2% 0% 0% 0.01% 100% % in 2000 75% 17% 5% 2.7% 0.3% 0.1% 0% 0% 0.03% 100% Source: Statistik Austria, IHS The proportion of self-employed professionals has remained more or less constant in recent years, at around 22-23% of total employment in the branch. Table 9-5 Self- employed professionals, Technical services, Austria Total Employees Self-employed as % 1997 27 805 21 275 6 531 23.5% 1998 31 648 24 311 7 337 23.2% 1999 33 598 25 686 7 913 23.6% 2000 37 385 28 807 8 579 22.9% Source: Statistik Austria, IHS Data on legal form only exists for one year, and the statistical basis used was different6, but it offers an insight into the types of firms present in the market for technical services (see table following). It is interesting that there are proportionately more sole proprietors (83% of all technical services firms) than in the accountancy, legal or pharmacy professions. This indeed characterises the enterprise structure among the liberal professions in Austria. 5 6 Source: Statistik Austria; IHS Data from 1995, ÖNACE norm. 290 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 9-6 Types of Firm Ownership 1995 Pharmacy % Sole Proprietors 450 50% Private company 444 49% Limited Liability Partnerships 13 1% Accountancy Services % 2 491 69% 264 Legal Services % 2 348 81% 7% 554 19% 856 24% 4 0.1% Technical Services % 5 182 83% 311 5% 740 12% Public limited companies 0 8 0 1 others 1 1 0 3 Totals 908 3 620 2 906 6 237 Source: Statistik Austria, IHS Summary Austria is one of the Countries in the European Union where Technical professions are highly regulated. This is especially true concerning market entry. Architects and Consulting Engineers in Austria are equipped with broad exclusive tasks (whereby some of them may be provided by selective licensed chartered craftsmen as well) and the regulations concerning educational preconditions to enter the relevant professions are very rigid. At the same time for Engineering Consultants there exists a multitude of different titles and rules concerning the (exclusive) tasks that the relevant type of Engineering Consultant may provide. This leads to a high level of non-transparency which may retard an even more dynamic development of the sector (not only in quantitative but also in qualitative measures). Conduct regulation for technical professions has been liberalised to a certain degree in recent years. This is especially true for prices and fees, and, to lesser degree, forms of business. A first step in reforming the market could be to advance transparency by reducing the large number of different kinds of Engineering Consultants. Specialisation is not per se a bad thing, but it should be understandable for the public. At the same time the exclusive tasks reserved to technical professions should be displayed in a clear form. Furthermore, from an international-comparative point of view it is not clear why licensed technical professions should be equipped with such a multitude of exclusive tasks, as is the case in Austria. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 291 9.2 Technical Professions in Finland: an overview As already stated above the field of technical professions in the European Union shows up as a kind of bi-polar phenomenon. On the one hand, there are countries with rather “comprehensive” systems of regulation; on the other hand, there are several countries where such regulations do not exist at all. Finland is part of the latter group with a rather liberal professional regime. It occurs for both Architects and Engineers that not even their professional title is protected and according to the questionnaires provided to us no exclusive or shared exclusive tasks exist for these professions. So specific market entry regulation is not, or, as will be shown below, nearly non-existent. The same is true for conduct regulation. Both professionals are not obliged to become members of or be registered with a professional association. The associations of architects (SAFA), construction engineers and architects (RIA) as well as civil engineers (RIL) have been set up on a voluntary basis. The Finnish Association of Architects, SAFA, is a non-profit, professional organisation which is open to all architects with a university degree from a Finnish university or equivalent qualifications. Membership of SAFA accounts for approx. 85% of all Finnish architects with a university degree. The Association of Finnish Construction Engineers and Architects RIA is a professional organisation for the construction engineers (B.Sc.), architects (B.Sc.) and environmental engineers (B.Sc.) graduated from technical colleges and polytechnics. There are 17 local associations and 1 labour market organisation that belongs to RIA. In those associations there are about 8,500 members. RIL, the Association of Finnish Civil Engineers, is an organisation for civil engineers with Master of Science degree and university students of civil engineering. RIL has more than 5,000 members. Over 60% of all who have a MSc degree in civil engineering in Finland belong to the Association. Nearly 100% of the civil engineering students are enrolled as junior members of RIL. Market Entry Tasks and exclusive tasks provided by Finnish Engineers and Architects Engineers and Architects in Finland generally provide the same services as they do in other countries. Main fields of activity are for example design and planning, project management including execution management, preparation and monitoring of constructions, urban and landscape planning, requests for construction permits etc. Generally these tasks are not reserved to Architects or Engineers. This is stated unanimously by different sources (the questionnaires returned to us, publications by the OECD, different web-pages etc.). 292 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Notwithstanding this, we found the following rules in the Use and Building Decree Issued in Helsinki, September 10, 1999: “Section 48 Qualifications of planners Persons drawing up a building design or special design shall have a construction-related university degree appropriate for the planning functions in question, or an earlier construction-related higher-level vocational or other degree, and sufficient experience of working on the type of planning in question. Buildings that are small or have ordinary technical properties may also be designed by persons with a college-level qualification in construction or in the relevant line of special study, or a corresponding earlier qualification if they are sufficiently experienced. In addition, a person who does not possess one of the aforementioned qualifications but is deemed to have the skill required in view of the type and extent of the construction work or design task may also carry out minor design works.” Although the formulation of this rule is rather “open”, it appears to be clear, that there exists a kind of exclusive or shared exclusive task for engineers and architects at least in the field of planning. Similar rules can be found in Section 70. The relevant paragraphs say that “the site manager of a construction works shall have a construction-related university degree or a degree required of a responsible foreman in sections (...), hereinafter earlier decree, that is appropriate for the task. In addition, the site manager shall have the construction experience required in view of the type and extent of the construction project. When the building in question is smallish and structurally straightforward, the site manager may also be a person who does not possess one of the aforementioned qualifications but is otherwise deemed to meet the preconditions for the task”. All in all this points in the direction that there are areas in the field of technical professions in Finland that require more or less specific qualifications on the grounds of public law. At the same time these regulations seem to be handled rather flexibly. For that, we gave Finland a rather low market entry regulation index in chapter 2. Education and Entrance to the Profession In Finland there are three levels of engineering qualifications: I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 293 - the highest level is the one of diplomi-Insinööri - MSc equivalent - which may be taken at one of five universities. In principle the course lasts for five years with 3 - 6 months of practical training: in practice it lasts seven years on average; - in the non-university sector there are institutes of technology and polytechnics which offer the equivalent of a BSc after a nominal four years of study including 20 weeks of ‘practical training’. Education toward an engineering diploma is given at 23 polytechnics in Finland, out of a total of 29. The number of starting places is over 9,000, of which close to 8,000 are at the undergraduate level and the rest are for adult education; - at the lowest level, Technician courses are also available at the polytechnics: they take four years with 20 - 40 weeks of practical training. As already mentioned, there is no register of engineers, nor is there any protection of title. Professional engineers may start to practice as soon as they graduate. The same is true for the profession of Architects. Courses in Architecture are offered at Helsinki University of Technology, the University of Oulu, and Tampere University of Technology. Places are limited and placement is highly competitive. There is a pre-test for admission. The program takes 4.5 – 5.5 years, depending on the university. An unification to a 5-year course is envisaged (2+3 years). A short-term training is envisaged during the course, but it is not compulsory for the membership in the SAFA (which is not obligatory after all, see above). Conduct Regulation Prices and Fees According to our present knowledge there are no specific price regulations for technical professions in Finland. There are no minimum, maximum or in any other way fixed prices. Additionally, no systems of reference prices exist. Fees and prices of technical professions are freely negotiable. Advertising No special regulations for marketing and advertising apply to technical professions in Finland. 294 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Forms of Business, Inter-professional Co-operation, Location and Diversification There are no special regulations in respect of these points. Technical professions are allowed to establish all forms of business. Inter-professional Co-operation is allowed in all kinds and there are no special rules on Location and Diversification. Continuing Education Continuing education is not compulsory for Architects and Engineers in Finland. Specialisation in the Profession There are no special rules for specialisation in technical professions in Finland (as there are for example for lawyers in Germany). But since 2002 several postgraduate degree programmes are available for polytechnic graduates. The admission criteria for postgraduate studies is a polytechnic degree and three years’ related practical experience after graduation. Compulsory Indemnity Insurance In Finland an obligation for a compulsory indemnity insurance does not exist. Economic Characteristics Finland – Structure and dynamics (NACE 7420) Enterprises, Turnover, Employment:7 The nominal turnover of architectural and engineering enterprises in Finland reached a level approaching 2,800 million euro in 2000, equivalent to over 2.1% of GDP, which represents the fifth highest share of GDP, after Sweden, the UK, Austria and Denmark, among the 13 EU member states surveyed (c.f. Overview-tables in Chapter 5). Output of the sector thus rose at a yearly compounded average of 10.1% during most of the 1990’s, faster than the growth in GDP (an average of 8.7% p.a.). This represents a real growth in architectural and engineering services in Finland of 7.8%, which is higher than the growth in employment - 5.5% - over the same period, 1993 to 2000, so productivity gains have also been made. In fact, the turnover per employed person rose in total 17% in real terms over this period. 7 Sources: EUROSTAT, Tilastokeskus – Statistics Finland. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 295 Table 9-7 Firms, Turnover and Employment; Finland 7420 Number of Firms Turnover in Mio. EUR Employment 1993 4 818 1 423 18 115 1994 4 928 1 671 18 174 1995 5 150 1 853 19 341 1996 5 642 2 032 20 525 1997 5 997 1 980 22 767 1998 6 275 2 199 24 277 1999 6 222 2 396 25 120 2000 6 337 2 784 26 355 No. of Professionals 6 500 2001 Source: Statistics Finland The number of firms increased correspondingly from about 4,800 in 1993 to over 6,300 in 2000, an average compound rate of 4.0% p.a. (see above Table). The lower rate of increase in the number of enterprises relative to employment is indicative of a slight trend towards concentration i.e. relatively fewer firms with more employees: indeed the average firm gave employment to 4.2 persons in 2000, up from an average of 3.8 in 1993. The total number of enterprises in this branch, over 6,000 since 1998, is relatively high, however, at 1,225 per million of population compared to the median value in our survey of 1,073 – although Italy, Sweden, Spain, Luxembourg and Belgium have a greater density of architecture and engineering firms in our survey relative to the size of population. Table 9-8 Key Statistics, Technical Services; Finland 7420 Employment Turnover per Employment Firms per per 1000 person per Mio. of Mio. of firms employed Pop Population 1000 EURO 1000 EURO Turnover per Firm 1993 295 3 760 79 3 584 1994 339 3 688 92 3 579 953 970 1995 360 3 756 96 3 793 1 010 1996 360 3 638 99 4 011 1 103 1997 330 3 796 87 4 436 1 168 1998 350 3 869 91 4 716 1 219 1999 385 4 037 95 4 869 1 206 2000 439 4 159 106 5 097 1 225 Source: Statistics Finland; IHS The average turnover per firm (in 2000) over 439,000 euro is considerably higher than the correspondingly value for firms offering accounting services (140,000 euro) or legal services 296 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S (247,000 euro) in Finland, but this level of business is typical, being the median value in our survey and well below the turnover per architecture/engineering firm in Austria, Denmark, Ireland and UK8. Although the level of employment, approximately 5,100 persons per million of the population in 2000 is somewhat high in international comparison (after Sweden, the Netherlands, the UK and Denmark) the turnover per employed person is, at 106,000 euro in 2000, well above the median but equally well below the equivalent values for Sweden, Denmark, Austria and the UK, the leaders in terms of this indicator in our survey. The differential rates of growth in enterprises, turnover and employment are illustrated in the chart with the 1993 values indexed at 100. Chart 9-2 Relative Growth Rates, Finland 7420 220 200 180 160 140 120 100 80 60 40 1993 1994 1995 No. of Firms 1996 Turnover 1997 1998 1999 2000 Employment Source: Statistics Finland Engineering9: 85 per cent of engineers in Finland are employed in the private sector, 12% in the public sector (state, local authorities) whereas 3% are self-employed. A more detailed breakdown of employment by task is shown in the graphic. 8 Note: Value Added is typically 70-75% of turnover for legal and accounting services, 50-55% of turnover for technical services. 9 Source: Insinööriliitto - the Union of Professional Engineers in Finland I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 297 The average age at which an engineer in Finland had completed his/her education is 26. The median monthly gross salary of qualified engineers, 10% of whom are women, is ca. 3,000 euro. A breakdown of positions held by engineers is shown in the chart. The Finnish Association of Consulting Firms SKOL:10 SKOL is a professional and employers' organization for independent and private consulting companies. SKOL has a membership of 257 consulting engineering, architect and management consulting firms. Member firms are independent from commercial, manufacturing and contracting interests and must have practised in independent engineering, architecture or other consulting for at least one year. The executives and leading consultants of a member firm must be full-time consultants and have an adequate education and experience in their special fields. 10 Sources: IHS-Questionnaire; SKOLry website 298 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Currently, the yearly invoicing of members of SKOL amounts to about 700 M €. About one third of this amount (220 M €). comes from foreign operations, of which 80 M € originates in other EU or EU candidate countries, and 140 M € in other countries. Building construction accounts for 35% of Finnish consulting, municipal engineering 25% , and industrial projects 40%. SKOL capacity represents two thirds of the total consulting engineering capacity in Finland. SKOL members offer services in the 33 fields defined by SKOL. About 70 per cent of the personnel in the member companies have a university or technical college degree. The five largest firms have a market share of 28%; altogether the top 10% of large firms account for 60%, and 30% of firms for 80% of the market. Ten companies have offices outside Finland, half of these in EU or EU candidate countries. Swedish (head-office) firms have the largest number of offices in Finland, followed by UK enterprises. The SKOL member companies employ about 9,500 people in Finland and their sixty foreign subsidiaries employ some 5,000 people abroad. Compared to the 6,400 or so firms in the architectural and engineering branch in Finland, which altogether give employment to ca. 30,000 people altogether (cf. Enterprises, Turnover, Employment), it is evident that large companies are proportionately higher represented in this organisation. Over a third of firms has only one or two employees, half employ less than 10 people, but 10% of firms have 10 50 employees, and 5% employ more than 50 persons. Correspondingly 80% of firms operate from a single office, 15% have between 2 and 5 offices, and 5% of firms have 5 - 20 offices. The typical number of professionals employed by the enterprises is shown in the chart below. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 299 Architects:11 The Finnish Association of Architects, SAFA: had 2500 members at the beginning of 2001, split 63% male and 37% female., encompassing 85% of all Finnish architects with a university degree. Membership is voluntary, and is not a condition for practising in the profession. Students and Graduates:12 There were 1,400 students of architecture in Finland in 2001, i.e. 1% out of a university student population of 140,000. The population of graduates (degree holders) in Civil Engineering was estimated at 13,000. The Architecture and Consulting Engineering Sector:13 The large Finnish consulting firms have generally had a good market for their services in 2000 and expanded rapidly. The giant Jaakko Pöyry Group has, however, mainly expanded on the international market – almost 70% of its turnover is attributable to markets outside the Nordic region. The areas expanding most were the energy and forestry sectors. Jaakko Pöyry is also setting up business on the world’s third largest market for forest products, Japan. The Jaakko Pöyry Group, with a turnover of 475 mill. €, twelve times the size of the next largest consulting firm in Finland, is not only the largest Scandinavian consulting firm but is also the seventh largest in Europe and seventeenth in the world in terms of its workforce (over 4,700 employees). In general, however the employment in Finland of consulting groups, compared to other Scandinavian countries, is more or less proportionate to the size of it’s population (see graphic) Nevertheless, altogether 11 consulting firms are listed in the top 200 European architectural and consulting engineering companies (by number of employees). 11 Source: The Finnish Association of Architects, SAFA Source: ArchiWorld Network Website. 13 Source: Swedish Federation of Consulting Engineers and Architects (STD Svensk Teknik och Design), Sector Report 2001. 12 300 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In the Scandinavian context alone, the relative strength of the Finnish architectural and consulting engineering sector is evidence in the following graphics: It is notable that the relatively high profitability of the sector by no means is due only to the performance of the dominating consulting engineering group, as the table below bears witness to. Table 9-9 Turnover Top 30 groups Key figures 2000/2001 for the top 30 groups all Turnover/employee in 1000 EUR Result after financial items/employee in 1000 EUR for the top 30 groups excl. JP* 84.9 70.5 505 419 6.7 6.6 40 39 * Excluding Jaakko Pöyry Group Source: Swedish Federation of Consulting Engineers and Architects (STD) The total turnover for the top 30 groups increased with some 15% during 2000/01 (previous year 6%). If Jaakko Pöyry Group is excluded the turnover increased with some 4,5% (previous year 7%). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 301 Summary Finland is one of the Countries in the European Union with very liberal regulations in the field of Technical Services. It is a good example for the fact that the quality of services may be guided by market mechanisms instead of extensive professional regulations without obvious sub-optimal outcomes or, as some argue, even a “breakdown” of the market due to adverse selection. The Finnish regulatory system is also a good example for the fact that the phenomenon of path-dependency (meaning that a system is hard to change once it is in place, and any changes that do occur are made up of gradual moves from the initial start position) not only occurs in respect of rigid regulations but also regarding relatively liberal ones. Up to now there have not been any serious far-going attempts to reform the technical professions in Finland in the sense of setting up more rigid rules. However, from our point of view, no good reasons occur to do so. 302 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 9.3 Technical Professions in France Architects France has today more than 28,000 architects registered in the “tableau de l'Ordre”; that corresponds to approximately 4.7 architects per 1,000 inhabitant. The profession of the architect is exercised in France under the job title “architect”. Only the persons, who are registered in the occupation register of the architects (tableau régional des architectes), are allowed to call themselves “architect”; and only “architects” may assume architectural tasks (exclusion principle). The occupational register is kept by the established conseils régionaux on a local level, which should not be confused with the chambers (“ordres” see below). This profession is strictly regulated in France. The laws, rules and regulations tend to protect the monopoly of architects on one hand, and the title of Architect on the other (Law 77-2 of January 3, 1977 amended by the Law of July 12, 1985; Ordinance 78-67 of January 19, 1978; Ordinance 80-217 of March 20, 1980, establishing a Code of Professional Responsibility of Architects). Architects are required to obtain insurance covering their professional responsibility (see chapter Compulsory Indemnity Insurance). Market Entry A condition for the entry is that the applicant possesses either the French nationality or belongs to a member country of the European Union. Furthermore the applicant must show either a diploma or another French degree of architecture; if he comes from the European Union, he must be in the possession of an equivalent and recognized diploma. Exceptionally also an acknowledgement is sufficient by the Minister of Education, as far as the candidate has on suggestion of a commission sufficient vocational experiences. An applicant coming from another country has only access to the profession of the architect, if a mutual agreement exists with the country of origin and if he can submit an appropriate diploma. Tasks and exclusive tasks provided by French Architects The architect, according to French Law, is defined as the prime contractor to whom the owner must address himself for any construction or renovation job which requires a building permit. In all cases where a building permit is necessary (i.e., for all new constructions, for all changes in the purpose of an existing construction or all modifications carried out on its I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 303 volume or its outer appearance), the architect has to establish an architectural plan before such permit can be issued. Such a plan consists of drawings and documents defining “the positions of the building, their content, organization and volume, as well as the choice of materials and colours”. The execution of the work may be entrusted to a contractor, but the architect must always ensure that the project is being followed as it has been approved by the authorities who have issued the building permit. Furthermore, the architect may participate in the following exclusive tasks: Town planning and development including preparation of drawings, allotment of land, preparation of programs, consulting of firms, preparation of public calls for bids, coordination and direction of works, providing assistance to owners, consultancy and expert appraisal, teaching. Education and Entry to the profession There are three types of diplomas which give access to the profession of architect: - D.P.L.G. (diplômé par le Gouvernement; graduate by the Government) delivered by one of the 24 schools of architecture which depend on the Ministère de la Culture, - E.N.S.A.I.S. (l'Ecole Nationale Supérieure des Arts et Industries de Strasbourg which depends on the Ministère de l'Education Nationale), - D.E.S.A. (Diplôme de l'Ecole Spéciale d'Architecture, which is a private school). The teaching in the schools of architecture has been reformed. From now on the studies are organized in three cycles: - A first cycle of two years of general studies leading to the diploma of first cycle of the studies of architecture: It is a national diploma of the higher education (DEUG en architecture). It has the aim of initiating the student in architecture and its methods, to give him the bases of its architectural culture, and to enable him to work out a simplified project. At the end of the first cycle, the student will be able, either to continue his formation in the second cycle, or to direct himself towards other higher education or towards short professional trainings leading to the working life. - A second cycle of two years fundamental studies leading to the diploma of 2nd cycle of the studies of architecture. It is a national diploma of the higher education (maîtrise en architecture). It has the aim of giving to the student the mastery of essential concepts, tools and methods of the architectural work. It allows the student, either to continue his formation 304 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S in the third cycle leading to diploma D.P.L.G., or to orientate towards other formations of 3rd cycle of the higher education in the respect of the particular conditions of access to these dies. - A third cycle of deepening of knowledge leading either to the D.P.L.G., or to a national diploma of the higher education in the fields of architecture (D.E.S.S., D.E.A., Doctorat). The 3rd cycle leading to the D.P.L.G. takes two years. It includes a practical training course of six months which can be carried out in France or abroad, in an agency, in a local authority, in an administration, in a company, or with other partners with whom the schools of architecture undertake an agreement. This reform whose decrees of application were published at the end of November 1997, came into force, for all the courses, in 1999/2000. The formation continue of the architects is one of the axes of study and priority reflexion of the Conseil National de l'Ordre des Architectes (National Council of the Order of the Architects). In accordance with the legislation in force (Art 26 de la Loi de 77 et Décret du 20/03/80, Art. 4 du Code des Devoirs Professionnels) the architect maintains and improves his competence and takes part for this purpose with activities of information, training and improvement. The Conseils régionaux de l'Ordre des architectes (regional Councils of the Order of the architects) are, either by internal delegation, or by creation under their aegis of independent structures, on the initiative of actions or organizations of formation professionnelle continue (vocational continuous training) which answer by their expected programs and the requests of their professional colleagues. These organisations of formation also endeavour to answer the invitations to tender launched by FAF PL (pour la formation des collaborateurs d'architectes; for the training of the collaborators of architects) by FIF PL (pour la formation des architectes eux-mêmes; for the training of the architects themselves) or by the Direction de l'Architecture et du patrimoine du Ministère de la Culture (Management of the Architecture and the inheritance of the Ministry for the Culture), in particular for the training of the applicant for work architects. Protection of the title The illegal use of the title of architect is subject to criminal sanction. To ensure the protection of the title, there is a professional body which guarantees the application of professional rules and regulations. It has the authority to take disciplinary action and controls the access to the profession through inscription on the Roll. Furthermore, a code of ethics enumerates the architect's obligations. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 305 Thus, in principle, to join this profession, three conditions must be fulfilled: (1) To possess one's civil rights and provide evidence of good moral character. (2) To have obtained a degree, certificate, or other title recognized by the French government. (3) To be French, or the national of another Member State of the European Community, or the national of a third country which has signed a convention of reciprocity with France. There is no such convention between France and Canada, or the United States. A North American cannot therefore practice as an architect in France, unless he has dual nationality, one of which is of an EU country. In the latter case, the degree he or she holds must appear on the list of foreign degrees recognized as being equivalent to French diplomas by an order of the Ministre de l'Urbanisme, du Logement et des Transports (Ministry of Urbanism, Housing and Transport). Nevertheless, the Law of January 3, 1977 and the Ordinance of January 16, 1978, mention four exceptions to the condition regarding French nationality: (1) A foreign architect can be authorized to practice by a decision of the Ministre de l'Urbanisme, whose decision is taken after hearing the opinion of the Ministre des Relations Extérieures (Secretary of State). But in practice, the Ministre des Relations Extérieures bases his decision mainly on the existence of a convention of reciprocity with the country of origin of the candidate. (2) The Ministre de l'Urbanisme may allow a foreign architect to register in France, upon presentation of professional references, and after taking into account the opinion of a national commission. But this rule only concerns exceptional cases, where the candidate has already completed works of great importance. (3) The Ministre de l'Urbanisme can authorize an architect to carry out a specific project in France, either after hearing the opinion of the Conseil National de l'Ordre des Architectes, or as a result of a contest of which he or she was the prize-winner. Within this context, then, the authorization of the Minister is practically automatic. It is to be noted that competitions are advertised in the bulletin of the Union Internationale des Architectes (U.I.A. - International Union of Architects). (4) Finally, the law provides for persons having effectively practiced as architects in France before 1977 to be recognized and approved by the Ministre de l'Urbanisme, after receiving the opinion of a regional commission, and on these grounds to be authorized to work as an architect. However, this procedure seems quite impractical at the moment as 2,000 applications have already been submitted, and l'Ordre des Architectes is not at all favourable to this procedure. The application to register should be made to the Conseil Régional de l'Ordre des Architectes of the area in which the candidate wishes to practice. 306 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In cases (1), (2), and (3), however, if the candidate is the prize-winner of a competition, the application should be made directly to the Direction de l' Architecture du Ministère de l'Urbanisme. In all cases, the application must be accompanied by the documents which prove that the candidate fulfils the statutory conditions. In practice, foreign architects in France practice in partnership with French architects. Indeed, the real problem is not the access to the profession, but the lack of knowledge of French rules and regulations and of French practice, especially regarding the employment of salaried workers, the making of contracts, the technical regulations (control of materials, etc.) and the possibility of entering into a partnership with an engineering firm. Conduct Regulation Prices and Fees There is no regulation of charges for architects. Rather the remuneration of the architect between the parties is in principle freely agreed upon. The “Union Nationale des Syndicats Francais d'Architectes” however developed principles, which should be considered with the calculation and fixing of the architect fee. Since there are no restrictions of co-operation for architects, they have a competition advantage opposite other self-employed persons, which can lie in particular in the capital applying by financially strong partners. Advertising (publicité) Art. 26-4 du décret n° 80-217 of March 20, 1980 which regulated in a restrictive way the possibility for an architect of making advertising was repealed by Art. 2-II du décret of September 17, 1992 carrying various regulations concerning the profession of architects. This decree, on the other hand, introduced with the Code des devoirs professionnels, a new article “10 bis” (10 a) authorizing the architects to turn towards advertising. Thus the recourse to advertising is to practise under the conditions of the common right which, according to Art. 44 de la loi n° 73-1193 of December 27, 1973, prohibits any misleading or comparative advertising. The architect is, in addition, supposed to continue to comply with the rules enacted by the Code des devoirs professionnels. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 307 In addition to opinions and advice, the architect must provide to his customer the explanations necessary to comprehension and judgement of the services. He must thus announce all the risks and disadvantages which the project of construction may imply. Forms of Business and Inter-professional Co-operation Architects can group themselves and form a partnership with others of different means or professions, or form a corporation for which they will work. In the latter case the partners must comply with the following rules: (1) the shares of the company must be nominative shares, (2) more than 50% of the nominative capital must be held by architects, (3) the membership of a new partner is subject to the prior agreement of the General Meeting of shareholders; the decision must be taken by a two-third majority, (4) none of the partners can hold more than 50% of the nominative capital, (5) the chairman of the board of directors, the general manager (if he is alone), at least half of the managers and members of the board of directors, as well as the majority of the board of directors and administrators must be architects. According to the Loi de l'Architecture architects can operate according to one or several of the following legal forms: (1) Individually, in liberal form (on a liberal basis) (2) As associé (joint-proprietor) of a private company of architecture (3) As salarié (employee) of a private company of architecture (4) As civil/public servant or employee by the government (5) As salarié d’organismes d’études carrying on their activities for the account of the state or the local communities in the field of arrangement and urban development· (6) As associé (joint-proprietor) or salarié (employee) of a person that is making constructions for its characteristic and exclusive use and whose area of responsibility does not correspond with the blueprint of projects, the financing, the construction, the restoration, the sale or the hiring of buildings, or the buying and the sale of grounds or materials and structural components (7) As salarié (employee) of a société d’intérêt collectif agricole d’habitat rural (kind of cooperative) 308 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The large majority of the architects exerts on a purely liberal basis, but the practise in a company, in particular in the form of limited liability company (SARL= société à responsabilité limitée) which offers many advantages, becomes more and more successful. These companies obey a certain number of common rules: - They are registered in the tableau de l’Ordre. - They may exercise the professional service of architects; even when their form is commercial, their object remains civil and for this reason, they cannot concern e.g. the exercise of financial or commercial real activities. - The companies of architecture must be mainly made up by architects (physical people). One architect cannot hold more than 50% of the capital. - On decision of the assemblée générale, an associated architect can continue to follow his occupation on a purely liberal basis or as associé of another architecture company. Location and Diversification Architects in France are not subject of any restrictions concerning this point. Continuing Education The architect is not obliged to continue his professional education as there does not exist any legal arrangement as far as this is concerned. Compulsory Indemnity Insurance Each occupation carrier is obligated to acquire an occupation liability insurance. Any architect, person or entity, who has responsibility for his/her own professional actions or of the actions of his/her employees, must be covered by an insurance. A certificate of insurance is joined, in all the cases, with the contract signed between the architect and building owner or, if necessary, his employer. Whatever the adopted form, any company of architecture is jointly responsible for the accomplished professional acts for its account by architects. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 309 Actual challenges and recent changes in regulations The text of the proposed reform of the French Loi de l'architecture of January 1977 covers new areas of practice for architects, the conditions governing practice, and reform of the organisation of the profession. A few of the proposals are highlighted: (1) Legal requirement to commission an architect The legal requirement to commission an architect for planning and listed building consent applications will apply to buildings with a gross surface area in excess of 20 m² instead of the previous threshold of 170 m² of net surface area, providing in effect a complete monopoly on all such work for architects. This will now also apply to all categories of buildings, including private dwellings and agricultural buildings. The legal requirement will not be met (and the application will then be refused) unless the architect has been entrusted with a complete mission, except where agreed otherwise under contract (in which instance, this would exempt the architect, in the event of litigation, from the risk of joint condemnation). (2) Outline and full planning consents The role of the architect will also be reinforced with respect to applications for outline planning consent to build and to demolish. These would be subject to the presentation of a study of the architecture and heritage of the buildings. Again, full planning consents (this is a proposal annexed to the proposed law) would evolve towards a consent in two stages, the “planning consent” and the ”building consent”, the latter corresponding to the stage when contract documentation has been prepared in order to obtain competitive tenders. Finally, a ”transformation consent” (rehabilitation etc.) would also be created. This would have to be accompanied by a study on interior and exterior architecture and on insertion. This new concern for the interior of buildings reflects the desire not only to increase potential areas of work for architects generally but also to recognise and regulate interior designers known in France as architecte d'intérieur. The text also proposes in exchange that interior designers should be able to intervene on works subject to the proposed new ”building consent”. Their activity would be carried out (without a monopoly) under the same conditions affecting architects with registration under a separate panel managed by the Ordre des Architectes. (3) Contract administrators registered by the Ordre des Architectes These developments are accompanied by new measures in the organisation of the professional role known as the Maitre d'Oeuvre or contract administrator and, more specifically, in the registration and regulation of the different professions fulfilling this role with registration under further separate panels managed by the Ordre des Architectes. 310 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Amongst these professions, the agréés en architecture and the détenteurs de récépissé constitute two groups of professionals which are allowed to practice as if they were registered architects. The agréés en architecture and the détenteurs de récépissé may continue to practise as before and benefit from the same rights under certain conditions (valid decennial PI insurance and the payment of the tax levied on this professional role). These 600 to 700 professionals concerned would be registered under the title of équivalents agréés en architecture. As for the other 10,000 maitres d'oeuvre offering full “building works” services and contract administration on projects involving buildings up to 170 m² (and 800 m² on agricultural buildings), they would also be registered under another separate panel within the Ordre des Architectes but which would allow them to pursue practice until retirement subject to the same limits on the size of the buildings. The registration of this last category of professionals would also be subject to conditions and, more specifically, be limited to those maitres d'oeuvres who have exercised a design activity in France for at least two years prior to the application of the new law. (4) French architects in building contracting and in estate agency The areas of practice open to this profession are also increased. Architects will be able to organise themselves as architectural practices with commercial subsidiaries in order that they could work, amongst other activities, as general building contractors, as estate agents or as management agents, the last thanks to a bank offering financial guarantee deposit bonding. Engineers The comprehensive term for all engineers is the ingénieur diplômé. The profession advisory engineer in France is practised under the term ingénieur conseil. The title ingénieur diplômé is legally protected since 1934. The diploma is awarded either as national diploma, or of nationally recognized training centres. There is not any list obligation for ingénieurs diplômés and no market admission limiting obligation membership in a chamber mechanism. But there is a distinction between prohibition and certification models. One who is not certified, but who is independently active as a consulting engineer, in whatever speciality, may practise. Even without certificate he is accepted as member of a profession liberal in different regard. In France the title ingénieur is used in a much more holistic sense than in German speaking countries. It is therefore not surprising that members of this profession have attained leading I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 311 positions in both business and politics with a great operational range. The total market for engineering services in France can be split up into the areas building/construction trade (ingénierie bâtiment), infrastructure (ingénierie infrastructure) and industry (ingenierie industrie). Most of the employed as well as two-thirds of the total turnover are concentrated in the industry sector. Characteristic for the French educational system we find here a highly differentiated university landscape in spite of a very centralistic organised educational system. Market Entry Tasks and exclusive tasks provided by French Engineers The profession of engineer comprises one or more of the following tasks: The engineer ensures the design, the realization, the exploitation, maintenance, the distribution, the technical sale or the after-sales service of equipments, of products, processes, logical systems or services with dominant technique. The engineer takes part in research relating to sciences and technology or uses the new knowledge obtained in these fields for the search and the development for new equipment, products or services. Moreover the engineer transmits his knowledge to other people and the assistance to use their capacities for better exerting their professional or civic functions, and allowing them to reach the functions corresponding best to their potential and the needs for the company. Education and Entrance to the Profession After the highest school leaving examination (baccalauréat) those willing to study have a number of alternatives regarding engineering education: Universities, Instituts Universitaires de Technologie (IUT), Instituts Universitaires Professionnalisés (IUP), 120 smaller engineering schools (Ecoles d’Ingénieurs) as well as a few Grandes Ecoles which are under government supervision by the ministry of Education and around 60 further Ecoles d’Ingénieurs that are administrated by other ministries or private owners. Parallel to and often in competition with state education the other Grandes Ecoles and Sections des Techniciens Supérieurs have developed their educational programmes. The central instances in France exercise a strong influence on university education. However, the provisions of this centrally organised French education system don’t apply equally to all sectors of university education. Due to the fact that the universities managed by separate ministries often boast a high financial backing and autonomy in terms of political decision making the French university landscape is characterised by a broad variety of institutions. It is therefore more difficult to assess the quality of the different French degrees and diplomas. For this reason an 312 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S independent and very successful evaluating commission, the Comité National d’Evaluation was instituted in 1985 to conduct a quality review of all French Universities. Intellectually gifted school leavers have the opportunity to prepare themselves for the difficult entrance exam (Concours d’entrée) of the distinguished Grandes Ecoles by means of a two years course (“CPGE”). The Grandes Ecoles deliberately position themselves as elitist educational institutions to prepare candidates for leading positions in industry, business, military and the public service. Mass education in France is a task assigned to the universities. Entrance to the universities long-time courses (five years) is not regulated in principle and therefore an entrance exam is not mandatory. The first three year-end exams are however highly selective and low pass rates are not an uncommonness. A high increase in the number of students has however led to the introduction of a numerus clausus in many courses. Furthermore there is the possibility to be trained as a higher-qualified technician, the Technicien Supérieur after completing the baccalauréat. This two-year job related educational course is offered by technical schools (STS) and has been positively accepted by both students and industry alike. The work scope of the Technicien Supérieur is centred around technical problem solving. The equally practically oriented Diplôme Universitaire de Technologie (DUT) can be attained after two years at Instituts Universitaires de Technologie (IUT). Due to the strict separation of research, elitist and mass education in the French system, higher positions on the corporate ladder remain unattainable to the Technicien Supérieur. Despite extensive practical experience these positions are the exclusive domain of the Diploma Engineer. Especially when changing companies the rank-value of an Engineering Diploma becomes evident. Notwithstanding this fact students that have completed the Technicien Supérieur outnumber those with an university diploma. Above that, the importance of the Technicien Supérieur for the industrial sector has increased due to the fact that academically schooled graduates from the Grandes Ecoles more often than not don’t see their role as that of practical problem solvers. The studies at the Ecoles d’Ingénieurs in France follow a very generalist conception, mainly focussing on Theoretical Mathematics and Physics, institutions in other EU countries emphasize the importance of technical disciplines and early specialisation in the complete spectrum of Engineering Sciences from manufacturing system to chemical engineering. Coupled with that, the idea that research and teaching should be conducted in parallel is underdeveloped in France. For a long time now, a stronger orientation towards the problems encountered in business has been called for. Due to the fact that students are too closely accustomed to academic thinking the have lost the pragmatism required in order to solve practical problems. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 313 In recent time there have been efforts to intensify the cooperation between industry and university. Under the impression of an engineer-deficit in the late eighties a few governmental bodies have initiated the foundation of Instiuts Universitaires Professionnalisés (IUP) against the opposition of engineering associations. After completion of their baccalauréat students can attain the title of Ingénieur Maître in a job related course at these Institutions. This Diploma, which is not academically approved by the Commission des Titres is awarded to students who have specialised in either Engineering or Management for example after completing one year of general education. After completing this four year course students have the opportunity to go on to engineering school where they can attain the title of Ingénieur Diplôme. In doing this, it was hoped to counteract the lack of practically oriented junior executives below the level of the Grandes Ecoles graduates. In closing one can say, that the French educational system is characterised by a large variety of admission standards and study regulations of the different institutions which in turn leads to a very dynamic vitality in the educational landscape. Only those courses instituted in the last couples of years are more oriented towards the needs of the job market and the everyday vocational requirements. Conduct Regulation Prices and Fees For professional services offered in the public service sector there has been a legally fixed scale of charges and fees Maîtrise d´Ouvrage Publique (“MOP”) in existence since 1988. Its concrete application however is not precisely defined. In general the remuneration is still calculated in accordance with a decree from 1974, which was used for a basis for calculating detailed remuneration scales and tables. There is always a lump-sum payment accorded to the whole team responsible for a project with the individual split-up amongst the team members calculated according to a separate set of rules and regulations – known as the “Guide GELI-REC”. In the private sector however no state-regulated tariff scales are known. The remuneration is always individually negotiated for every project. Only in the case of para-statals or statesubsidised parties entering the contract negotiations, administrative regulations such as the Code des Marchés Publics for example come into application. Contracts with consultant engineers are mostly calculated on a blanket payment basis. 314 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Advertising As the relevant professional bodies did not sent back a completed questionnaire we do not have any reliable information on this point at he time of writing. Forms of Business and inter-professional Co-operation In France two forms of legal accreditation dominate amongst engineering consultancies, the Bureaux d´Etudes Techniques (BET) and the free-lance engineering consultancies. The term “BET” includes all professional operations from simple drawing offices to highly qualified engineering practices excluding the building and construction industry where specialists from very different skill fields work in combined teams. In comparison to the independently operating free-lance consultancies the “BET” are mostly offshoots of big construction, finance or industrial corporations. Therefore the total of 11,000 total employees in engineering is dominated by ten large corporations, covering mostly the vast field of industry needs. Ninety percent of all engineering consultancies have 50 employees or less and are mostly engaged in the areas of construction and infrastructure planning. The more regionalised need for engineering consulting in the construction industry outside of the large cities is mainly covered by many smaller firms. But also in this sector some concentration tendencies could be observed over the last couple of years. The Chambre des Ingénieurs-Conseils de France, according to their own figures, represents approximately 1,000 independent Engineers and Consulting Engineers with about 6,000 employees and a revenue of 3 Billion francs in total. Problems arise mainly in areas related to tariff and liability issues because in public works infrastructure projects the project responsibility has to be shared equally between architects and engineers. Possible cases of conflict are therefore discussed prior to project commencement by way of informal arrangements. Continuing Education The future prospects for engineers are not all that bad. The job-market in France at present offers both engineers and Technicien Supérieurs ample opportunities. University graduates, especially those from Grandes Ecoles, currently find sufficient job opportunities in the private sector. Engineers with work experiences ranging from 3 to 5 years are specifically much sought after. Especially the Radio and Telecommunication industries are diagnosed as I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 315 having the highest potential for growth, providing engineers with the appropriate specialisation in this field with countless job opportunities. As can be witnessed in other European countries also, the occupational image of the engineer in France has changed a lot. Only a few engineers are able to distinguish themselves solely on the grounds of technical competence. Geographical flexibility and company-internal mobility as well as sound management knowledge have become part of the day-to-day working routine of most French engineers and becoming even more important prerequisites for success in the future. Many companies are urging their employees to participate in continuing education programmes aimed at furthering management skills. Due to the fact that most French companies have less pronounced hierarchies, engineers are continuously forced to deal with a number of problems not related to their field of expertise or specialisation. As their careers progress, more and more French engineers realise that their academic training has not sufficiently prepared them for the specific requirements their job-reality entails, i.e. with regard to solving problems relating to management and financing issues. Many engineers in France therefore opt for enrolling in a commercial college to address their knowledge deficits in the areas already mentioned above. That a number of engineers have already decided to pursue this option is evident from the fact that nearly fifty percent of participants in evening classes at said colleges are engineers. Specialisation in the Profession Candidates who are planning a career as consultant engineer must, according to the provisions of the chamber of consultant engineers of France (Chambre des IngénieursConseils de France), be in possession of an engineering diploma in addition to providing proof about numerous years practical experience. A membership in this representative body is mandatory for all free-lance consultant engineers. The title Ingeniéur Conseil (Consultant Engineer) is not legally protected in France and in comparison to Architects for instance there exists no formal professional code of conduct. Compulsory Indemnity Insurance If there is a problem involving dissatisfactory project delivery in the construction industry, the Provisions of the Code Civil (last amended in 1978) apply: a twelve months liability is set for the completeness of building construction, two years for the ascertainment of satisfactory functionality as well as a ten year liability in conjunction with the general planning and project responsibility. 316 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S A legal clarification of contractual liabilities usually takes years to complete. Above the mandatory insurance for the Executor (Maitre d´Oeuvre) therefore exists an additional obligation for the awarding authority (Maitre d´ouvrage) to cover possible events of damage or loss by means of insurance. As far as projects outside of the construction industry are concerned no proof of special insurance is required, usually however there is a voluntary insurance against possible damage claims arising from the project liabilities entered into. In order to objectively clarify liability matters a number of independent and state-approved consulting engineers offer their services such as Bureaux Veritas, SOCETEC or CEP for example. Actual challenges and Conclusion Due to the fierce competition within the French market itself, foreign companies have not been able to make substantial inroads. This can be further attributed to the fact, that foreign participants in infrastructure planning procedures are often required to submit additional documentation for approval. A positive signal for foreign contractors can be seen in the fact that public works development projects are no longer solely handled by state owned or para-statal technical divisions but that the market has increasingly been opened up to private tenders. Economic Characteristics France – Structure and dynamics (NACE 7420) Enterprises, Turnover, Employment:14: In discussing the firms’ turnover it is to be noted that only enterprises above 76,000 EUR turnover per year are included in the French statistics, for which data on average turnover are available. Furthermore, statistics on employment include only units with 1 or more employees, so that single-person self-employed enterprises are left out. For that reason the tables below contain 1993 and1994 data from Eurostat, and a 2000 figure based on extrapolation on the basis of growth rates from the INSEE statistics 14 EUROSTAT, SIRENE (Système informatique pour le répertoire des entreprises et des établissements - Computer system for the companies and establishments directory) (INSEE) 2002 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 317 Table 9-10 Firms, Turnover and Employment; France 7420 Number of Firms No. of Turnover in Employment Professionals Mio. EUR 1993 44 559 18 503 194 625 1994 43 704 18 796 202 151 2000* 50 376 29 662 287 698 80 300 * extrapolated value based on INSEE definitions (except No. of Professionals) Source: EUROSTAT, INSEE, IHS Table 9-11 Key Statistics, Accountancy Services: France 7420 Turnover per Firm Employment per 1000 firms 1000 EURO Turnover Employment Firms per per person per Mio. of Mio. of employed Pop Population 1000 EURO 1993 415 4 368 95 3 383 775 1994 430 4 625 93 3 499 756 589 5 711 103 4 858 851 2000* * extrapolated value based on INSEE definitions (except No. of Professionals) Source: EUROSTAT, INSEE, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1996 values indexed at 100. Chart 9-3 Relative Growth Rates, France 7420 140 130 120 110 100 90 80 1996 1997 No. of Firms Source: INSEE 1998 Turnover 1999 Employment 2000 318 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The following analysis is based on the data obtained from INSEE. In France there were 28.212 architects active working in 2001 (see table)15. About 21,449 (76%) architects work as individual entrepreneur, about 5,611 (19.9%) work in a company, and about 1,152 (4.1%) in other categories (end of year 2001). Table 9-12 Number of Architects active in France 1996 to 2001 End of Year Architects active at 31/12 Enterprise demography 1 1996 25 228 Individual entrepreneur 19 886 4 074 1 268 1997 25 421 19 876 4 321 1 224 1998 26 151 20 318 4 630 1 203 1999 27 085 21 018 4 866 1 201 2000 27 517 21 190 5 150 1 177 2001 28 212 21 449 5 611 1 152 Company Other 1 Number of companies economically active in the inventory at the end of year. Source: SIRENE (INSEE) 2002. This structure has not changed substantially as compared with six years ago: From all architects at the end of year 1996 about 78.8% worked in the single firm category, 16.1% in a company and about 5% in other organisations. In fact there was almost exactly the same number members newly admitted to the architects profession in 2000/1 i.e. 985, as in 1990 – 984 (IHS questionnaire from Ministère Culture Direction de l'architecture et du patrimoine - Bureau des professions) The number of architecture graduates was, however, 2,861, an increase of approx 250% over the numbers for each of the years 1990 and 1995. Regarding engineers, the sector engineering and technical studies does not contain land surveyors, building consultants and building supervisors. In the following table the quantitative development of engineers active in France from 1996 to 2001 is shown. Altogether the 31,813 engineering enterprises in 2001 show a growth rate of 15.9% from 1996 onwards. Dominant are companies with 20,862 enterprises in 2001, which is almost the double compared to individual entrepreneurs. The companies’ growth rate is 21.2%, the growth rate of individual entrepreneurs is much lower with 6.9%. 15 The number of architects in this statistic agrees broadly with the figures supplied by the Conseil national de l'ordre des architectes (IHS Questionnaire). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 319 Table 9-13 Number of engineers active in France 1996 to 2001 (on 31/12) Engineers active at 31/12 1 Year All Enterprise demography Individual Company entrepreneur 9 839 17 199 Other 1996 27 453 1997 27 619 9 491 17 716 415 412 1998 28 437 9 719 18 312 406 1999 29 365 10 033 18 896 436 2000 30 398 10 174 19 785 439 2001 31 813 10 516 20 862 435 1 Number of companies economically active in the inventory at the end of year. Source: SIRENE (INSEE) 2002. Thus, the main quantitative development occurred for engineering companies in France from 1996 to 2001. Ordre des Geometres-Experts: In 2001 there were 1.937 chartered land surveyors, a decrease in number –10% since 1990 (data from IHS questionnaire). It appears that typically less than 100 new members have been admitted each year: in 2001 there were 69 new members and 83 new stagiaires. The number of surveyors’ firms has also decreased to 1,528 over this period by 17% from 1,848 in 1990. At the same time the proportion of firms with incorporated status has risen from 16% to 40%. However, the distribution of firms size by non-professional employees has shown just a slight trend towards larger enterprises. In 2001 there were 45% of firms with 1-2 employees (47% in 1990), 41% with 3-10 employees (40% in 1990), and 14% with 10-50 employees (115 in 1990). Branch turnover was 427 million Euro (3.8 Bill. FRF) in 2001, up in nominal terms by 22.5% from the corresponding figure of 1990. The Ordre estimates the breakdown of turnover in 2001 as follows: remuneration of professionals - 24%, other salaries and wages - 42%, cover for professional insurance and risk – 6%, investment in office premises – 5%, investment in technology (computers) - 3%. on-going professional education (courses) - 3% , and other costs - 17%. Number of enterprises: the development of engineering enterprises in employee classes in France from 1996 to 2001 is shown in the following table. Table 9-14 The number of engineers enterprises in employee classes in France 1996 to 2001 Year 0-5 Enterprise demography: Number of enterprises active at 31/12 Jun.19 20-49 50-249 250-499 500-1999 >2000 Other 1996 23 779 2 697 650 268 38 20 1 0 1997 23 781 2 834 660 278 42 23 1 0 1998 24 523 2 873 704 273 40 23 1 0 1999 25 308 2 966 750 282 32 25 2 0 2000 25 989 3 248 782 308 41 28 2 0 2001 27 166 3 367 864 342 42 29 3 0 SIRENE (INSEE) (2002) 320 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S There were 27,166 engineer enterprises in 2001. Small enterprises in the engineering services are obviously dominant, in particular enterprises with up to 5 employees. Their growth rate from 1996 to 2001 was 14.2% with 23,779 small enterprises in 1996. Next in line are enterprises with 6-19 employees. Their growth rate is 24.8% with 3,367 enterprises in this second class in 2001, a growth rate which is higher than that of the smallest group. An even higher growth rate of 32.9% was achieved by enterprises with 20-49 employees. Note however, the relatively small number of enterprises in this third class. Beyond 250 employees only a small number of firms are apparent. To summarize: larger engineering enterprises grew faster than smaller engineering enterprises in France from 1996 to 2001. Compared to the other services enterprises’ results. Further, there is also general tendency that larger firms grow faster than smaller firms in the legal services and in the accountancy services. Average Turnover: The engineering services produced an average turnover of 1,935,890 EUR in 2000 (see table). They showed a growth rate of 26.4% in 1996 with an average turnover of 1,532,000 EUR. Table 9-15 The average turnover of engineering enterprises in employee classes in France 1996 to 2000 Average turnover Year 0-9 employees 10-19 employees 20-49 employees 50-249 employees EUR EUR EUR EUR EUR >250 employees EUR 1996 1 532 000 513 000 1 524 000 3 520 000 11 985 000 106 579 000 1997 1 788 000 536 000 2 721 000 3 567 000 12 321 000 125 155 000 1998 1 684 000 504 000 1 621 000 4 947 000 12 358 000 109 329 000 1999 1 705 000 601 000 1 989 000 4 164 000 11 680 000 108 188 000 2000 1 935 890 685 490 2 096 120 4 387 150 16 529 580 97 605 760 Threshold: Turnover > 76.000 EUR Source: Système unifié de statistiques d'entreprises (SUSE-INSEE) The highest turnover can be found in enterprises with more than 250 employees with a maximum of 109,329,000 EUR in 1998. In contrast: the smallest enterprises (0-9 employees) produced 685,490 EUR in 2000 as its highest average turnover between 1996 and 2000. Employment structure by gender: The engineering services employment structure by gender in France from 1996 to 2000 is shown in the following table. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 321 Table 9-16 Employment structure in engineering enterprises by gender in France All Total employee at 31/12 Men Women 1996 123 002 90 532 32 470 1997 133 104 97 889 35 215 1998 126 599 93 804 32 795 1999 143 452 106 891 36 561 2000 156 274 116 462 39 813 Year Threshold: Enterprises with 1 or more employees Source: Déclaration annuelle de données sociales (données d'entreprises) (DADS-INSEE) In 2000 there were 156,274 employees altogether with a relatively high male quota of 74.5%. The employment grew by 27.1% with 123,002 employees in 1996. The male quota in the mid 1990s of 73.6% is similar to the quota five years later. Thus, the gender structure remained constant over the last years in the French accountancy services employment. Compared to the legal and accountancy services where it is the female quota, here the male quota is pronounced. 322 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Architectural and engineering services, France 7420 Table 9-17 Number of companies economically active at the end of year Enterprise demography NACE Branch Year active at 31.12 Individual entrepreneur Company Other in units Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Source: INSEE 1996 52 681 29 725 21 273 1 683 1997 53 040 29 367 22 037 1 636 1998 54 588 30 037 22 942 1 609 1999 56 450 31 051 23 762 1 637 2000 57 915 31 364 24 935 1 616 2001 60 025 31 965 26 473 1 587 Table 9-18 Number of employees NACE Branch Year number of employees (31.12) Men Women in units 74.2 Architectural and engineering activities 1996 143 767 101 409 42 358 74.2 Architectural and engineering activities 1997 155 187 109 488 45 699 74.2 Architectural and engineering activities 1998 148 531 105 427 43 104 74.2 Architectural and engineering activities 1999 167 912 119 688 48 224 74.2 Architectural and engineering activities 2000 181 900 129 753 52 148 Threshold: Enterprises with 1 or more employees Source: INSEE I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 323 Table 9-19 Average turnover by size class of employment NACE Branch 0-9 employees EUR 1996 EUR 10-19 employees EUR 20-49 employees EUR 50-249 employees EUR 1 822 000 750 000 2 655 000 6 284 000 16 645 000 1997 2 078 000 773 000 3 860 000 7 190 000 16 663 000 1998 1 974 000 741 000 2 669 000 7 670 000 16 602 000 1999 2 003 000 845 000 3 135 000 7 007 000 16 884 000 2000 2 246 510 934 910 3 255 440 7 226 050 21 511 880 Year Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Architectural and 74.2 engineering activities Threshold: Turnover >76 000 EUR Average turnover Average turnover Source: INSEE Table 9-20 Enterprise demography NACE Branch Year Enterprise demography: Nber of enterprises active at 31/12 0-5 6-19 20-49 50-249 250-499 500-1999 >=2000 Other 74.2 Architectural and engineering activities 1996 48 051 3 607 691 273 38 20 1 0 74.2 Architectural and engineering activities 1997 48 230 3 760 700 284 42 23 1 0 74.2 Architectural and engineering activities 1998 49 682 3 812 752 278 40 23 1 0 74.2 Architectural and engineering activities 1999 51 365 3 940 797 289 32 25 2 0 74.2 Architectural and engineering activities 2000 52 382 4 314 831 317 41 28 2 0 74.2 Architectural and engineering activities 2001 54 045 4 612 943 351 42 29 3 0 Source: INSEE 324 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 9.4 Technical Professions in Spain Technical professions in Spain: an overview As in other European countries technical professions in Spain are divided into architects and engineers. But - and this makes the overall picture rather complicated in respect of engineers - several sub-categories exist. . For engineers one at first has to differentiate between “superior engineers” and “technical engineers”. The following types of superior engineers are known: Ingeniero - Caminos, Canales y Puertos de Telecommunicaciones Aeronautico Industrial Informatico Agrícola de Montes Naval. Apart from this there exist several types of “technical engineers” (Ingeniero Tecnico). The profession of Architects is divided into two professions only: architects and technical architects. For all these professions a membership in the relevant professional association is compulsory. There exists a rather large number of respective bodies for engineers – organised by type of title and by regional differentiation. For architects and technical architects the situation is less complicated, as there are only two types of respective professions. Market Entry Tasks and exclusive tasks provided by Spanish Engineers and Architects The regulations concerning tasks and exclusive tasks of engineers and architects in Spain are, as to our knowledge at the time of writing, very restrictive. Tasks like design and planning, project management including monitoring of execution, feasibility studies, environmental assessments, tender and contract administration, representation for obtaining permits, requests for construction permits, construction cost management, planning and managing maintenance, urban and landscape planning and even interior design are exclusive tasks of the relevant professions. In fact, in respect of exclusive tasks from an I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 325 international comparative point of view Spain (possibly together with Greece) appears to be the most regulated case in all the European Union. As a general rule, engineers and architects are allowed to practise in the fields related to their previous studies. However, Superior Engineers have competence related to all academic courses and specialities taught in their Universities, even if they have not taken these courses as specialization (when optional). In contrast, technical engineers have their competence limited to their respective academic training and specialities. The architect generally speaking may fulfil all tasks related to building and planning. The technical architect is normally the manager of the building construction, under the instructions of the architect, in charge of the supervision of the construction in order to achieve the quality and costs specified in a project. However, the technical architect may also have the competencies that in principle are reserved for architects, if works do not require an architectural plan (i.e. minor works, consolidations etc.). Education and Entrance to the Profession Superior Engineers have to obtain a relevant University degree, for which the studies normally take five years. Once the university degree is obtained, professionals may practice in the fields related to their studies. No further professional practice or examinations are required. The same is true for technical engineers, for whom studies at the university take a minimum of three years. The education system for architects and engineers follows the same structure: 5 years University education for architects, three years for technical architects. No further professional training or professional entry examinations are required. In all cases the studies at University are normally finalised with a "proyecto” (something like a practical thesis). As already mentioned above, there is a general requisite of membership to the pertinent professional body. This membership is territorial, but the Real Decreto-Ley 6/2000, de 23 de junio, de Medidas Urgentes de Intensificación de la Competencia en los Mercados de Bienes y Servicios codifies, for all professional bodies organised on a territorial basis, that membership to one territorial body is enough to practice in the entire State. 326 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conduct Regulation Prices and Fees The Ley 7/1997, de 14 de abril, de medidas liberalizadoras en materia de Suelo y Colegios Profesionales for engineers and architects abolished all precedent fix prices scales of a State nature. However some professional bodies issue recommended prices for some particular works (although this may well not be longer the case). According to information provided by Tecniberia currently no special regulations on fees and prices exist for engineers and architects in Spain. Advertising According to information provided by Tecniberia currently no special regulations on advertising exist for engineers and architects in Spain. All forms of advertising are allowed. Forms of Business, inter-professional Co-operation, location and diversification Engineers and Architects can, (and do) enter into associations of all forms with other professionals, but a Société anonyme (public limited company) cannot provide for engineers' or architects’ services (accurately speaking: it can provide for the services, but it is always the engineer or architect who undertakes all the responsibility, not the society). The respective firm has to inform the customer of the fact that they have entered into such associations. There are no special regulations concerning branch offices and regulations restricting the offering of services in geographical terms have been abolished recently. Real Decreto-Ley 6/2000, de 23 de junio, de Medidas Urgentes de Intensificación de la Competencia en los Mercados de Bienes y Servicios codifies, for all professional bodies organised on a territorial basis, that membership to one territorial body is enough to practice in the entire state. Continuing Education As to information provided by Tecniberia continuing education for architects and engineers in Spain is not mandatory. Specialisation in the Profession No measures exist, which would allow a further job specialization beyond the different types of engineers and architects described above. This would of course, in connection with the actual splitting-up of the professions and the high number of different kinds of engineers I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 327 make not much sense. On the contrary, a consolidation of powers/different types of authorisation/licensing would maybe be beneficial. Compulsory Indemnity Insurance For engineers as well as for architects a professional indemnity insurance is mandatory. Actual challenges and Conclusion The most important regulatory changes for engineers and architects in Spain were the 1997 and 2000 Acts (mentioned above) that abolished fixed prices and regulations restricting the offering of services in geographical terms.. They were enacted following a report of the Spanish National Competition Authority. These reforms intended to promote more competition in the field of technical professions (as well as other liberal professions). However, as regards to market entry regulation technical professions in Spain are still heavily regulated. This is especially true in respect of the extremely broad exclusive rights possessed by engineers and architects. In fact, the sector is completely reserved to the respective professions, whereas in other countries, like Finland or Sweden, no equivalent market entry regulations are in place. At the same time the regulatory system for the engineering sector (not so much for architects) in Spain appears to be very fragmented and non-transparent. On the other hand conduct regulation for architects and engineers now is rather liberal, as regulations on prices and location have been abolished by the end of the 90s and only few specific regulations exist in respect of business forms etc. Economic Characteristics Spain – Structure and dynamics (NACE 7420) Enterprises, Turnover, Employment:16 The nominal turnover of architectural and engineering enterprises in Spain was more than 11,900 million euro in 2000, equivalent to nearly 2% of GDP, the median value of the ten EU countries surveyed. (c.f. Overview-tables in Chapter 5). Output of the sector rose at a yearly average of 7.6% during most of the 1990’s, at a rate more than twice that of GDP (an average of 3.5% p.a.). This represents a real growth in architectural and engineering services of 5.6%, which is a little higher than the growth in employment - 5.1%. - over the same period, 1992 to 2000; therefore modest productivity 16 Sources: EUROSTAT, INE -Instituto Nacional de Estadística, Spain 328 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S gains have also been made, but less than the gains in Finland or Austria. In fact, the turnover per employed person rose 4.5% in total in real terms over this period. Table 9-21 Firms, Turnover and Employment; Spain 7420 Number of Firms Turnover in Mio EUR Employment 1992 57 634 6 644 124 491 1994 61 020 1997 70 841 7 824 151 195 1999 77 378 10 457 170 232 2000 79 679 11 911 184 682 2001 No. of Professionals 48 723 Source: EUROSTAT, Instituto Nacional de Estadística, IHS The number of firms increased correspondingly from about 57,600 in 1992 to almost 79,700 in 2000, an average rate of 4.1% p.a. (see Table). The lower rate of increase in enterprises relative to employment is indicative of a slight trend towards concentration i.e. relatively fewer firms with more employees: indeed the average firm gave employment to 2.3 persons in 2000, up a little from an average of 2.2 persons in 1993. However the total number of enterprises in this branch, now certainly upwards of 80,000, is very high – only Italy has a higher density of architecture and engineering firms in our survey – so that the market structure is dominated by small firms of consultants. The average turnover per firm (in 2000) of almost 150,000 euro was not much higher than the correspondingly value for accounting services (136,000 euro) in Spain - turnover for legal services’ firms was 63,000 thousand euro. Only Italy has a lower level of business in the member states in our survey17. The level of employment is typical for the branch, at nearly 4700 persons per million of the population in 2000 whereas the level of productivity, as measured by the turnover per employed person is, at 65,000 euro in 2000 in absolute terms well below the median value of countries included in our survey. However, when adjusted for the lower price levels in Spain, as well as for the lower output of the whole economy (in terms of GDP in PPS per capita), the relative volume per employee of the architectural and engineering consultancy branch in Spain is the highest among the member states surveyed. 17 Note: Value Added is typically 70-75% of turnover for legal and accounting services, 50-55% of turnover for technical services. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 329 Table 9-22 Key Statistics, Technical Services; Spain 7420 Turnover per Firm Employment Turnover Employment Firms per per 1000 per person per Mio. of Mio. of firms employed Pop Population 1000 EURO 1000 EURO 115 2 160 53 3 195 1 479 1997 110 2 134 52 3 847 1 803 1999 135 2 200 61 4 321 1 964 2000 149 2 318 64 4 682 2 020 1992 1 560 1994 Source: EUROSTAT, Instituto Nacional de Estadística, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1992 values indexed at 100: Chart 9-4 Relative Growth Rates, Spain 7420 200 180 160 140 120 100 80 60 1992 1993 1994 1995 1996 Number of Firms 1997 Turnover 1998 1999 2000 Employment Source: EUROSTAT, Instituto Nacional de Estadística, IHS Architects and Engineers18: The following table for 1997 shows clearly that both architects’ and engineers’ enterprises consist overwhelmingly of single office units. The large percentage of unremunerated employment includes not only self-employed professionals, but is conjectured that it includes a relatively higher proportion of family members than in other countries in these case-studies. 18 Source: INE - Instituto Nacional de Estadística, Spain 330 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 9-23 Architects and engineers, 1997 1997 Architects % Engineers % Number of Firms 70 841 47 085 66.5 23 757 33.5 Number of Offices 72 646 47 507 65.4 25 140 34.6 151 195 66 143 43.7 85 052 56.3 81 753 18 261 22.3 63 492 77.7 Employment Paid Employment Turnover in Mio. Euros 7 824 2 731 34.9 5 093 65.1 Value Added in Mio. Euros 6 155 2 273 36.9 3 882 63.1 Source: INE Although consulting engineers account for only a third of the branch, their economic output in terms employment and value added is much higher than for architects: this observation is of course not only specific to Spain. Unfortunately the breakdown between architects and engineers is not generally available for the member states in our survey. Likewise the economies of scale measured by turnover per employee are illustrated in the following breakdown of enterprises in the 7420 sector by firm size (number of employees): Table 9-24 Breakdown of 7420 branch by Size of employment of firms Breakdown of 7420 by Size of Employment of Firms Total 1 or less 79 679 F % 11 910 515 T % 184 682 E % T/E 64 2-4 5 - 19 20 - 99 more than 99 64 224 11 266 3 430 646 112 80.6 14.1 4.3 0.8 0.1 2 719 201 1 851 762 1 965 295 2 249 562 3 124 695 22.8 15.5 16.5 18.9 26.2 62 960 30 422 28 923 26 207 36 171 34.1 16.5 15.7 14.2 19.6 43 61 68 86 86 Source: INE The breakdown of firms by employment statistics shows that legal status as a physical person holds the balance with companies, limited or otherwise. Evidently the percentage of women working as self-employed professionals is considerably less than overall proportion of employees. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 331 Table 9-25 Legal Form of enterprises and employment Sole Practitioners Total Total Employment 151 195 in percent Private Companies Limited Liability Partnerships Others 67 558 44 635 30 015 45 30 20 8 987 6 Paid Employment 81 753 10 390 43 238 22 895 5 230 Full-time 54 678 6 830 28 558 15 231 4 059 Men 38 368 3 410 22 094 10 388 2 476 Women 16 309 3 421 6 463 4 843 1 583 Part-time 27 075 3 560 14 680 7 664 1 171 Men 19 314 2 138 11 242 5 210 724 7 761 1 422 3 438 2 454 447 69 442 57 168 1 397 7 120 3 757 61 346 51 253 1 226 5 689 3 179 8 096 5 915 172 1 431 578 Women Non-Paid Employment Men Women Source: INE Civil Engineering Consultants19: The membership of Tecniberia Civil has grown from 6000 in 1990, to 10,000 in 1995 and 15,000 in 2000/2001 a large yearly average increase of 9.6%. This growth has been driven by an upsurge in the intake of new trainees entrants and new members of over 20% per annum. Table 9-26 Professionals Professionals : 1990 1995 Total, with Professional Affiliation 6 000 10 000 15 000 Percentage of self-employed 25 35 40 Percentage of non-self-employed 75 65 60 2000/01 No. of professionals with professional affiliation in Spain... 100 200 250 ... practicing in rest of EU or EU candidate countries 50 125 180 ... practicing in other (non EU/Candidate) countries 50 75 70 ... practicing abroad Source: TECNIBERIA CIVIL, IHS Questionnaire These developments have also been accompanied by a strong increase in the proportion of self employed civil engineers. Corresponding increases in the number of firms and employment are shown below. 19 Source: TECNIBERIA CIVIL - Asociación Espanola de Empresas Consultatoras de Ingenieria Civil, IHS Questionnaire 332 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 9-27 Employees and Firms Enterprises : 1990 1995 12 000 15 000 20 000 99 99 99 1 1 1 1 Qualified Professional 80 81 82 2 Qualified Professionals 15 15 14 3-5 Qualified Professionals 3 2 1 5-30 Qualified Professionals 2 2 2 more than 30 Qualified Professionals 1 1 1 0 Employees 50 50 50 1-2 Employee 40 40 40 3-10 Employees 7 7 7 10-50 Employees 2 2 2 more than 50 Employees 1 1 1 1 Office 84 84 84 2-5 Offices 15 15 15 5-20 Offices 1 1 1 20-50 Offices 0 0 0 more than 50 Offices 0 0 0 Number of Firms 2000/01 Percentage with non-incorporated status incorporated status Percentage of Firms with… Source: TECNIBERIA CIVIL, IHS Questionnaire According to these data, however the relative structure of firms in terms of legal status, and number of professionals or size has remained unchanged throughout the last decade. The effects of internationalisation of architectural and engineering consulting business are also evident, particularly with other EU member countries. Table 9-28 Firms, International International : Firms with offices outwith your country in… 1990 1995 10 15 40 rest of EU or EU Candidate countries 4 10 30 other countries 6 5 10 All countries 2000/01 Firms with head office in other countries: Country with largest no. of offices United States of America Country with second largest no. of offices Netherlands Country with third largest no. of offices France Source: TECNIBERIA CIVIL, IHS Questionnaire Civil Engineering thus accounts for almost a quarter of the revenue of the architectural and civil engineering branch. And has apparently outstripped the growth in the branch as a whole (cf. data on turnover for the 7420 branch above). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 333 A certain concentration process has also been observed, with the top five firms now accounting for 40% of the market. Whereas the lion’s share of expenditure still cover professionals’ remuneration, a doubling in the share of technological investments from 4% to 8% of costs has also occurred in the previous ten years. Table 9-29 Output / Input 1990 Turnover before tax of branch in… Mio. EUR 1995 Mio. EUR 2000/01 Mio. EUR Spain 450 1 000 2 500 Rest of EU and EU Candidate countries 100 200 350 other countries 100 100 150 Concentration : in percent Market Share of the 5 (five) largest firms 30 35 40 Market Share of top 10% largest firms 60 70 75 Market Share of top 30% largest firms 98 99 99 Cost Structure of Firms : in percent The 'median firm' has costs broken down into… 70 68 65 other Salaries and Wages 5 5 5 Cover for Professional Insurance and Risk 0 1 2 10 12 15 Investment in technology (Computers) 4 6 8 on-going professional education (courses) 5 6 5 other costs 6 2 0 Remuneration of Professionals Investment in office premises Source: TECNIBERIA CIVIL, IHS Questionnaire Legal, Accounting and Technical Services:20 This group of professional services, corresponding to the 4-digit codes, 7411, 7412 and 7420 accounted for 67% of firms, 43% of turnover, and 33% of employment of all business services in 2000. Only the advertising branch has a higher production value than these three groups of services. The overall standing of all business services is shown in the graphics. 20 INE -Instituto Nacional de Estadística, Spain 334 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Source: INE The relatively high rate of employment generated by firms in the business services sector is clearly in evidence: only the (smaller number of) information technology enterprises employ higher numbers of persons. Taken together, legal, accounting and technical services account for 12,3% of all service enterprises in the economy, 3.4% of the turnover, and 7.2% of total employment in the service sector, whereas architectural and engineering services alone account for 4.7% of enterprises, 1.6% of the turnover, and 2.8% of total employment in the service sector of Spain. European Dimension21: Eight enterprises in Spain are listed among the top 200 European architecture and engineering consulting firms (ranked by employment), the highest being Tecnicas Reunidas, S.A, in 30th place. This firm is also among the top 100 architectural and engineering consulting firms in the world in 2000, along with another Spanish firm, Sener Group. Architects The Consejo Superior de los Colegios de Arquitectos de España, CSCAE, reported the number of architects at 34,000, of which 1,600 were newly admitted, in 2002 (IHS questionnaire). About 95% of firms (actual total not specified) have between 1 and 5 professionals. 21 Source: Swedish Federation of Consulting Engineers and Architects (STD Svensk Teknik och Design), Sector Report 2001. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 335 10. Price Structure in EU Pharmaceutical Retail Markets Background Unlike the other professional services in this study, pharmacy professionals are engaged in retail trade: Statistics on branch turnover thus reflect various stages in the production and distribution of pharmaceutical products, some parts of which are outwith the direct influence of pharmacists. In order to compare the market volume in pharmacy services in EU member states in the following section and chapter, we would rather focus on the value added at the pharmacy level. In this section prices in the pharmaceutical area are surveyed in order to obtain an international comparison of relative pharmacy margins, from which related volume statistics on shares of turnover attributable to pharmacy activity can be derived. The country-specific analysis of price structure shows up differences in the level of ex-factory prices, wholesale margins, pharmacy margins and value added taxes. The survey of the pharmaceutical market begins with a description in terms of market actors from production to point of sale. The structure of prices within and between member states is reviewed. The last stage covers pharmacists' share of retail price and turnover. In general measures including quantities and those that are based on price alone have to be distinguished. Real comparisons in prices generally have to be viewed against the backdrop of different levels of consumption of medicines. Health Expenditures in Percent GDP: Expenditures on health in member states show the specific background of pharmacy services in each country. The following chart (Share of Total/Public Healthcare Expenditures 2000 in % of GDP) shows the various proportions of the total and the public healthcare expenditures in 2000 in the EU member states. The highest share in terms of percent of the GDP for total as well public expenditures occurs in Germany. The data for Germany is from 1998, and although there has been a general trend since 1996 to reduce the public share in percent on health spending, Germany’s share has been the highest of all EU members over the previous ten years. 336 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S In the following tables the development of expenditures on pharmaceuticals1 in member states is shown for the period starting 1991 in terms of share of GDP and in euro PPP (i.e. relative to general price levels in each country). 1 Expenditure on pharmaceuticals and other medical non-durables (Total, Public, Private) = Total expenditure on prescription medicines + Total expenditure on over-the-counter medicines (OTCs) + Other medical non-durables. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 337 Table 10-1 Total Pharmaceutical Expenditure in % of GDP 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 1.3 Austria Belgium 1.2 1.3 1.4 1.4 1.4 1.4 1.4 Denmark 0.7 0.7 0.7 0.8 0.7 0.7 0.7 0.8 0.8 0.8 Finland 0.9 1.0 1.0 1.0 1.1 1.1 1.1 1.0 1.0 1.0 France 1.5 1.5 1.7 1.6 1.7 1.7 1.7 1.7 1.8 1.9 Germany 1.3 1.4 1.2 1.2 1.3 1.3 1.3 1.3 Greece 1.1 1.3 1.4 1.5 1.5 1.6 1.5 1.2 1.4 1.5 Ireland 0.8 0.8 0.7 0.7 0.7 0.7 0.6 0.7 0.7 0.6 Italy 1.7 1.7 1.6 1.6 1.5 1.6 1.6 1.7 1.7 1.8 Luxembourg 0.9 0.7 0.8 0.7 0.7 0.7 0.7 Netherlands 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.9 1.0 Portugal 1.6 1.7 1.9 1.8 1.9 2.0 2.0 2.0 Spain 1.2 1.3 1.4 1.3 1.4 1.4 1.4 Sweden 0.7 0.8 0.9 1.0 1.0 1.1 1.0 UK 0.9 1.0 1.0 1.1 1.1 1.1 1.1 1.0 Source: OECD HEALTH DATA 2002; ÖBIG Table 10-2 Total Pharmaceutical Expenditures per capita, Euro PPP 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Austria Belgium 265 320 325 343 405 394 371 Denmark 151 164 172 190 224 226 214 232 227 205 Finland 174 195 192 206 261 272 259 250 259 238 France 350 390 371 382 453 443 414 438 459 435 Germany 283 338 266 290 352 361 334 349 Greece 140 177 188 209 255 268 237 205 233 237 Ireland 118 142 128 142 165 161 160 171 185 172 Italy 365 408 338 350 407 419 406 435 447 422 Luxembourg 290 281 334 321 315 326 328 Netherlands 167 208 202 212 257 254 243 260 271 Portugal 219 257 263 281 348 363 362 354 Spain 206 235 221 224 275 287 278 Sweden 156 190 188 213 265 282 257 UK 175 217 207 226 263 282 267 Source: OECD HEALTH DATA 2002 243 1.9 338 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 10-1 Share of Total/Public Healthcare Expenditures 2000 in % of GDP2 12 Total in % GDP 10.3 Public in % GDP 9.5 10 8.7 8.3 8.3 8.2 8.1 8.1 8 7.9 8 7.7 7.3 7.8 6.7 6.6 7.2 6 6.8 6 6.6 6.2 5.8 5.9 5.5 5.9 5.6 5.4 5.4 5.1 5 IRL FIN 4.6 4 2 0 DEU' FRA BEL DNK GRC PRT ITA NLD AUT SWE' ESP GBR LUX' Source: OECD HEALTH DATA 2002 Health Expenditures per Capita: In terms of purchasing power parity (PPP) Greece spent the lowest amount per capita in total and public expenditures on health in 2000, closely followed by Portugal, and Spain is well below the EU average of 1.912 euros per capita3. For the last years only Germany expended more money in terms of Euro PPP per capita on health. Chart 10-2 Total/Public Expenditures on Health 2000 - per capita, Euro PPP4 3000 2 796 2 528 Tot al per capit a Euor PPP 2500 2 226 Public per capit a Eur o PPP 2 161 2 087 2 066 1989 1958 2000 1869 1797 1622 1531 1432 1500 1326 1287 1000 500 2 598 1898 1827 1642 1487 1396 1386 1641 1377 LUX' DEU NLD 1362 1315 1149 1001 943 715 FIN ESP PRT GRC 0 DNK FRA BEL AUT SWE' ITA IRL GBR Source: OECD HEALTH DATA 2002 Pharmaceutical Expenditures in percent Total Expenditures on Health: Comparing the pharmaceutical expenditures in percent of total expenditures on health results in a similar 2 1998: Germany and Sweden, 1999: Luxembourg For Luxembourg the value is for 1999 4 1998: Sweden, 1999: Luxembourg 3 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 339 state with total pharmaceutical expenditures in terms of percent of GDP: again Portugal, Italy and France are the leaders. The average percent value differs around 15%. Observing the development over time results in the conclusion that the public share does not decrease. Chart 10-3 Total/Public Pharmaceutical Expenditures 2000 in percent of Total Expenditures on Health5 Tot al Phar maceut ical Expendit ur es in %T.E.H. Public Pharmaceut ical Expendit ures in %T.E.H. 30 23.5 25 22.6 20.1 19 20 18.4 16.3 15.9 15.7 15.5 15 12.8 12.7 11.8 11.7 9.6 9.2 10 5 15.5 10 13.1 14.8 11.3 7.3 10.2 PRT' ITA FRA ESP' GRC BEL' GBR' 7.8 9.2 8.8 7.5 9.5 8 4.2 FIN SWE' DEU' NLD LUX' IRL DNK 0 AUT' Source: OECD HEALTH DATA 2002 Pharmaceutical expenditure per capita: Observing the total expenditures on pharmaceuticals per capita in purchasing power parities France is leading joined by Italy. Also Belgium (1997), Portugal (1997) and Germany (1998) are clearly above the average. The five countries the Netherlands, Finland, Greece, Denmark and Ireland in the rear range only shift their positions slightly when ignoring PPP. Chart 10-4 Total/Public Pharmaceutical Expenditures 2000 per capita, Euro PPP5 Tot al Pharmaceut ical Expendit ures per capit a, Eur o PPP Public Pharmaceut ical Expendit ures per capit a, Eur o PPP 500 435 422 371 400 362 349 328 312 278 300 267 257 243 238 237 205 172 200 100 283 187 166 238 242 265 FRA ITA BEL' PRT' DEU' LUX' 217 172 183 ESP' GBR' SWE' 155 120 146 95 144 NLD FIN GRC DNK IRL 0 AUT' Source: OECD HEALTH DATA 2002 5 1997: Belgium, Portugal, Spain, Sweden, UK; 1998: Germany; 1999: Luxembourg, Austria (ÖBIG) 340 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The Pharmaceutical Market Pharmaceutical Industry / Wholesaler / Pharmacies The pharmacy health care markets are first described by the following table, which lists the absolute number of manufacturers, wholesalers and pharmacies. Table 10-3 Numbers of Manufacturers, Wholesalers and Pharmacies Manufacturers Wholesaler Pharmacy Pharmacies per firm Austria 103 39 1 086 1 Belgium 150 41 5 273 1 Denmark 194 10 1 556 5 Finland 21 13 795 1 305 203 22 689 1 1 100 118 21 590 1 Greece 189 424 8 348 Ireland 100 18 1 186 1 Italy 287 489 16 382 1 France Germany Luxembourg 1 6 79 1 Netherlands 120 37 1 600 1 Portugal 45 400 2 778 1 Spain 368 285 19 439 1 Sweden 195 9 1 889 1 889 United Kingdom 375 70 12 311 2 Source: ÖBIG Excepting the special case of state monopoly in Sweden, the concentration of ownership of pharmacy outlets is highest in Denmark followed by the UK. Otherwise the market is overwhelmingly divided into single outlet pharmacies. On a per capita basis the pharmaceutical industry is strong in terms of number of manufacturers per capita in Denmark, Ireland and Sweden. 8 out of 15 countries are below a value of 10 manufacturers per million capita. Greece and Portugal attain the high value of 40 wholesalers per capita. For all other member states except Luxembourg the value is beneath 10. The extremes in number of pharmacies are represented on the lower end by the Netherlands and on the upper end by Greece. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 341 Table 10-4 Manufacturers, Wholesalers and Pharmacies per million capita Manufacturers / Mio. capita Wholesalers / Mio capita Pharmacies / Mio capita Denmark 36.6 Greece 40.0 Greece 787.5 Ireland 27.0 Portugal 40.0 Belgium 517.0 Sweden 21.9 Luxembourg 15.0 Spain 493.4 Greece 17.8 Italy 8.6 France 383.9 Belgium 14.7 Spain 7.2 Ireland 320.5 Germany 13.4 Ireland 4.9 Denmark 293.6 Austria 12.7 Austria 4.8 Italy 287.4 Spain 9.3 Belgium 4.0 Portugal 277.8 Netherlands 7.6 France 3.4 Germany 263.0 UK 6.3 Finland 2.5 Sweden 212.2 France 5.2 Netherlands 2.3 UK 207.6 Italy 5.0 Denmark 1.9 Luxembourg 197.5 Portugal 4.5 Germany 1.4 Finland 152.9 Finland 4.0 UK 1.2 Austria 134.1 Luxembourg 2.5 Sweden 1.0 Netherlands 101.3 Source: ÖBIG, own calculation The high number of manufacturers and pharmacies per wholesalers in Sweden, Germany and Denmark indicates strong market power for the wholesalers, and correspondingly, competition is strong in this level in Portugal, Luxembourg and Greece. Table 10-5 Numbers of Manufacturers and Pharmacies per Wholesaler Manufacturers / Wholesaler Pharmacies / Wholesaler Sweden 21.7 Sweden 209.9 Denmark 19.4 Germany 183.0 Germany 9.3 United Kingdom 175.9 Ireland 5.6 Denmark 155.6 United Kingdom 5.4 Belgium 128.6 Belgium 3.7 France 111.8 Netherlands 3.2 Spain 68.2 Austria 2.6 Ireland 65.9 Finland 1.6 Finland 61.2 France 1.5 Netherlands 43.2 Spain 1.3 Italy 33.5 Italy 0.6 Austria 27.8 Greece 0.4 Greece 19.7 Luxembourg 0.2 Luxembourg 13.2 Portugal 0.1 Portugal 6.9 Source: ÖBIG, own calculation 342 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Drug Consumption and Sales Differences in several countries can be partly ascribed to unequal consumer behaviour. The figures on average drug pack consumption on their own can be misleading. Studies concentrating on consumer behaviour point out that the average drug pack contains different quantities in different countries. In France the pack tends to be small, and on the other hand the average pack in the UK contains the highest value of so called “Standard Units”6. The spread of deviation in this indicator is not as large: only the Netherlands consumes considerably less than other member states. Consumption of standard units is highest in France, followed by Germany and the UK.7 Table 10-6 Average drug consumption per capita Drug pack / capita 1999* Standard Units / capita** Standard Units / pack** France 48.8 France 1 634.0 United Kingdom 65.5 Italy 26.6 Germany 1 088.0 Germany 56.2 Spain 26.1 United Kingdom 1 022.0 Finland 54.6 Portugal 23.3 Spain 991.0 Ireland 50.6 Greece 22.9 Belgium 984.0 Netherlands 48.0 Belgium 22.7 Portugal 904.0 Belgium 43.2 Austria 20.5 Finland 884.0 Austria 43.1 Germany 19.4 Austria 881.0 Portugal 38.9 Ireland 16.8 Ireland 848.0 Spain 38.0 Finland 16.2 Italy 759.0 France 33.5 Netherlands 672.0 Italy 28.5 United Kingdom 15.6 Netherlands 14.0 Sweden 12.5 Denmark 12.1 ** Sweden, Denmark, Greece - no data * Luxembourg - no data Source: IWI Structure of Drug Prices All member states of the European Union regard medicaments as extraordinary products, whose production and distribution is not left exclusively to market processes. Regulation of the market occurs in all countries. Justifications are an appropriate supply for inhabitants in all regions of the country, avoidance of cases of social hardship, as well as control of the quality of medicaments. In most member states manufacturers are formally free to set prices. In practice this is limited by the fact that in all member states one authority (the national health system or social health insurances) is the principal customer in terms of expenditures on drugs. Regulations settling the reimbursement of individual medicaments or their purchase by a 6 7 Standard units are the smallest units distributed in the medicament market, i.e. tablets, drops, capsules etc. Any differences in dosage are not taken into account here. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 343 national authority to fulfil price obligations, clearly limit the actual price setting by pharmaceutical producers. There are several factors to be considered for direct price or isolated price margin comparison at the retail level: Drug packages contain different amounts of standard units. The drug range differs. The drug consumption differs. The pharmacy retail price consists of four parts o Different ex-factory prices. o Different wholesale margins. o Different pharmacy margins. o Different value added tax rates. Factory Level: The reference price system is important for reimbursement as well as for price-setting. Germany introduced a reference price system in 1989, followed by Denmark, the Netherlands and Sweden in the early 1990s. Table 10-7 Regulations for Price Setting at the Ex-Factory Level 2000 / 2001 Country Reference Price System Price fixing free governmental price fixing Negotiations AUT - - reimbursement drugs all drugs BEL planned OTC - prescription-only drugs DNK 1983 non-reimbursement drugs FIN - non-reimbursement drugs - reimbursement drugs FRA - non-reimbursement drugs reimbursement drugs - DEU 1989 non-reference price market - - GRC - - - all drugs IRL - OTC prescription-only drugs ITA planned non-reimbursement drugs reimbursement drugs national authorization of reimbursement drugs LUX - non-reimbursement drugs - reimbursement drugs NLD 1991 non-reimbursement drugs - reimbursement drugs PRT - OTC - ESP 2001 non-reimbursement OTC - prescription-only drugs prescription-only drugs and reimbursement OTC SWE 1993 non-reimbursement drugs - reimbursement drugs GBR - non-reimbursement drugs reimbursement drugs non proprietary products reimbursement drugs Source: ÖBIG, OTC = Over-the-Counter = prescription-free drugs Ex-Factory Prices: The price for one Standard Unit in PPP € varies between 0.248 € in Portugal and 0.123 € in the UK. In the case of Italy and Portugal the relative high price can be partly explained by the strong market power of the manufacturers, which are small in number per capita and in relation to the number of wholesalers. 344 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 10-5 Ex-Factory Price per Standard Unit in PPP-€ 1998 Ex-Factory Price in PPP-€ 1998 / Standard Unit 0.300 0.248 0.250 0.222 0.189 0.184 0.200 0.159 0.149 0.150 0.147 0.143 0.139 0.126 0.123 0.100 0.050 0.000 PRT ITA NLD BEL ESP AUT FIN DEU IRL FRA GBR Source: IWI Wholesale Level: In most countries price control is implemented by legally regulated trade margins. On the wholesale level only Denmark has no regulated wholesale margin within the EU. In Finland, the Netherlands, Sweden and the UK regulation of margins are settled indirectly. Wholesale Margins: Wholesale margins are usually quoted as a percentage of pharmacy cost price. Thus both the ex-factory price and the wholesale margin vary across countries so that the pharmacy cost price varies considerably too. On this basis, therefore, only a conditional comparison of wholesale margins is possible. Later on we transform the wholesale margin to a wholesale share, which shows how much of the retail price level inclusive VAT is earned in wholesale. Chart 10-6 Wholesale Share per Standard Unit in euro and PPP-€ 1998 Wholesale M argin /Standard Unit in €1998 0.030 0.027 Wholesale M argin /Standard Unit in PPP €1998 0.027 0.025 0.025 0.023 0.023 0.022 0.022 0.019 0.020 0.015 0.015 0.013 0.010 0.010 0.005 0.025 0.019 0.022 0.024 0.018 0.022 0.020 0.015 0.015 0.013 0.012 0.000 NLD Source: IWI PRT IRL DEU ITA AUT BEL ESP GBR FRA FIN I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 345 Table 10-8 Regulations for Wholesale Margins 2000/2001 Governmental Regulations for AUT All Drugs degressive margins with maximum markup values BEL linear margin (in percent of the pharmacy cost price), maximum value at pharmacy retail price of €25,43 DNK free price fixing Reimbursement Drugs Prescription-Only Drugs FIN (implicitly ruled by wholesale reimbursement prices) FRA DEU GRC IRL 2 degressive margins degressive margins with maximum markup values linear margin (in percent of the pharmacy cost price) linear margin (in percent of the pharmacy cost price) linear rate in percent of exfactory price ITA LUX linear margin (in percent of the pharmacy cost price), maximum value for Belgian drugs at pharmacy retail price of €25,70 (implicitly rule by maximum wholesale price) NLD linear rate in percent of pharmacy retail price PRT ESP 2 degressive rate in percent of pharmacy cost price or absolut value dependent to the exfactory price SWE (implicitly ruled by wholesale reimbursement prices) GBR (implicitly ruled by pharma price regulation scheme - linear margin in percent of the pharmacy cost price) Source: ÖBIG 2001 A more meaningful ranking is given by wholesale share per standard unit in power purchasing parities, whereby different ex-factory prices are implicitly considered. As with exfactory price per standard unit in PPP-€, Portugal and the Netherlands are two of the top three countries in terms of price. The UK and France are once more among the bottom three countries. Pharmacy Level: The pharmacy margins are regulated by law in all EU member states. Most countries have a unique set of regulations that applies to all drugs. In France, the UK, Italy 346 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S and the Netherlands the rules only cover the reimbursable market, in Portugal the prescription-only market. After 1995 the regulation of the pharmacy margins has been changed in many countries. To control the medicaments market not only have the margins been decreased, but also the regulations for margins have been newly implemented. Table 10-9 Regulations for Pharmacy Margins 2000/2001 Governmental Regulations for AUT BEL DNK FIN All Drugs degressive margins with maximum markup values Prescription-Only Drugs linear margin (in percent of the pharmacy cost price), maximum value at pharmacy retail price of €25.43 degressive margins with maximum markup values degressive margins with maximum markup values 2 degressive margins (same margin for generic drugs) FRA DEU Reimbursement Drugs degressive margins with maximum markup values GRC linear margin (in percent of the pharmacy cost price excl. VAT) IRL flat charge / €2.40 for reimbursable drugs or maximum rates between 33 to 50 % ITA degressive rate for central authorized drugs, else linear margins (for non-reimbursable drugs minimum margin) LUX linear margin (in percent of the pharmacy cost price), maximum value for Belgian drugs at pharmacy retail price of €25.70 NLD flat charge / €5.69 a third of the savings using generic products linear rate in percent of pharmacy retail price PRT ESP SWE 2 degressive rate in percent of pharmacy cost price or absolut value dependent to the exfactory price degressive margins with maximum markup values GBR Source: ÖBIG 2001 reimbursement of flat charge and product costs I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 347 Pharmacy Margin The pharmacy margin as a percentage of retail price exclusive VAT is used in Chapter 5 and in the pharmacy case studies to calculate the pharmacists’ share of turnover, (prescription medicines or OTCs) obtained from statistics on branch turnover of dispensing chemists exclusive of VAT.8 In the following graphic average pharmacy margins are listed that have been calculated in previous studies. The pharmacy margin (excl. VAT) in 1999 in EU member states was between 33% in Ireland and 17.3% in the UK. An average margin over 30% exists in Luxembourg, Germany and Belgium. In Portugal, Sweden and the UK the average margin was below or equal to 20%. Chart 10-7 Average Pharmacy Margins in terms of Pharmacy Net Retail Price Pharmacy M argin 35 33 31.8 31.7 31 29.25 28.9 28.75 30 27.9 27.6 25.93 25 22.4 20 21.4 20 20 17.3 15 10 5 0 IRL LUX DEU BEL DNK AUT FIN ESP FRA GRC ITA NLD PRT SWE GBR Source: ÖBIG, own calculation In Italy the margin is below the median EU margin, but the value of pharmacy margin per standard unit in PPP-€ is not exceeded by any other country. Ireland is in both rankings in the top two. The broad middle range consists of Belgium, Portugal, Austria, Spain, the Netherlands and Germany. Finland and France are clearly below the average. 8 Note: Pharmacists’ share of turnover is calculated for comparative analysis on the basis of dispensed pharmaceuticals. Items belonging to the categories ‘Retail sale of medical and orthopaedic goods’ (NACE 5232) and ‘Retail sale of cosmetic and toilet articles’ (NACE 5233) that may be sold in pharmacy outlets are not included. 348 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 10-8 Pharmacy Share per Standard Unit in € and PPP-€ 1998 Pharmacy M argin /Standard Unit in €1998 Pharmacy M argin / St andard Unit in PPP-€1998 0.100 0.089 0.090 0.082 0.074 0.080 0.074 0.070 0.069 0.070 0.066 0.066 0.058 0.060 0.047 0.050 0.035 0.040 0.030 0.020 0.010 0.076 0.073 ITA IRL 0.069 0.046 0.070 0.053 0.065 0.069 0.061 0.047 0.035 FIN FRA GBR 0.000 BEL PRT AUT ESP NLD DEU Source: IWI Value Added Tax: Governments not only set reference price systems, refunding regulations and other procedures; there is also direct intervention regarding the surcharge on net pharmacy retail price i.e. value added tax. Here there are substantial differences in the European Union, both in the systematic classification of medicaments and in the amount of the value added tax raised on these classes of drugs. Table 10-10 Value Added Tax for Pharmaceuticals in Contrast to VAT in general Value Added Tax in percent normal pharmaceutical Austria 20 20 Belgium 21 6 Denmark 25 25 Finland 22 France 20.6 8 2.1/5.51) Germany 16 16 Greece 18 Ireland 21 8 0/212) Italy 20 10 Luxembourg 15 3 Netherlands 17.5 6 Portugal 17 5 Spain 16 Sweden 25 4 0/25.0 3) 17.5 0/17.5 4) United Kingdom 1) 2.1 % on reimbursable drugs 0 % on drugs for oral application 3) no VAT on prescription-only medicines 4) 0 % within the framework of the National Health Service /17.5% on drugs for self-medication 2) Source: ÖBIG I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 349 Overview of Total Prices Shares of gross turnover are presented here as percentages of retail price incl. VAT (sums up to 100% in each member state separately), in decreasing order of pharmacy share. Manufacturer level: In Sweden manufacturers earn the largest part of overall sales of drugs. Manufacturers earn the least share in Germany, Austria and Denmark. Wholesale level: The Netherlands, the UK and Ireland have high wholesale shares. Only Sweden and Finland are considerably below the median share. Pharmacy level: The pharmacies of Ireland, Luxembourg and Belgium earn the most on each euro of medicaments sold. At the lower end of the scale are Portugal and the UK. VAT level: There are three countries where VAT is absent on almost all drugs: UK, Sweden and Ireland. The state obtains highest tax revenue from pharmaceuticals sold in Germany, Austria and Denmark. Table 10-11 Country Product Shares of Drug Prices VAT Pharmacy Wholesale Manufacture Ireland 0.0 33.0 10.1 57.0 Luxembourg 2.9 30.9 8.7 57.5 Belgium 5.7 29.2 8.5 56.6 Germany 13.8 27.3 7.7 51.2 Spain 3.8 26.8 6.7 62.7 Finland 7.4 26.6 2.6 63.3 France 5.2 26.2 3.8 64.8 Austria 16.7 24.1 7.5 51.8 Greece 7.4 24.0 5.5 63.1 Denmark 20.0 23.4 4.1 52.5 Italy 9.1 20.4 6.7 63.8 Netherlands 5.7 20.2 10.8 63.4 Sweden 0.0 20.0 2.4 77.6 Portugal 4.8 19.0 8.4 67.8 United Kingdom 0.0 17.3 10.3 72.4 Source: ÖBIG, IHS The chart below illustrates the information of the table above – in both the member states are shown in order of decreasing pharmacy share of retail price. 350 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Chart 10-9 Product Shares in the Pharmaceutical Market VAT Pharmacy Wholesale M anuf acturers GBR SWE ESP PRT NLD LUX ITA IRL GRC DEU FRA FIN DNK BEL AUT 0% 20% 40% 60% 80% 100% Source: ÖBIG, IHS The actual price of medicaments sold in pharmacies varies across EU Member states. This can be taken into account on a comparable basis by looking at the breakdown of retail price per standard unit of drug sold. In the following graphic countries are shown left to right in order of decreasing pharmacy share of price per standard unit. In terms of total price, Spain, France and the UK lie at the lower end, while Italy, Austria (high tax rate), the Netherlands and Germany are in the group of most expensive countries for pharmacy products. This comparison is based on absolute euro values – the effect on consumers in each country is, of course dependent on consumers’ purchasing power. Chart 10-10 Pharmacy retail price incl. VAT / Standard Unit in € 1998 Pharm acy retail price incl. VAT / Standard Unit in € 1998, in decreasing order of pharm acy price share 0.350 0.300 0.250 VAT 0.200 Phar macy 0.150 Wholesaler Fact or y 0.100 0.050 0.000 ITA IRL Source: IWI AUT DEU BEL NLD FIN ESP FRA PRT GBR I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 351 Turnover Share In the benchmarking analysis (Chapter 5 of Part 1) and in the following pharmacy case studies, we wish to use a measure of turnover attributable to the pharmacy level. The available statistical data (Eurostat, member states’ statistical offices) records the overall turnover of dispensing chemists, net of VAT. The missing link between the pharmacy price level and actual revenues of pharmacists (from dispensing) is the factor of demand level, which, as we have seen earlier, varies considerably. By applying the average pharmacy margins (net retail price) described above to the overall net turnover we calculate the variable we call pharmacists’ turnover share for use in comparative analysis of the pharmacy profession in EU member states. This measure is broadly equivalent to the turnover used in the studies of the legal, accountancy and technical services, under the assumption that these latter professions have a very low level of purchases from suppliers. The absolute figures from turnover share (TS) for each country surveyed may be found in the corresponding pharmacy Overview table in chapter 5. The relative turnover share is shown in the chart below by the share of actual net turnover per capita accruing to pharmacists in each member state (except for Greece), in decreasing order, based on data available for the nearest year to 2000. France shows the second largest turnover share, although the pharmacist’s price is one of the lowest in the EU, due to the high volume of medicines sold. An opposite effect is seen in the case of Italy, the Netherlands and Austria, where the actual turnover share is relatively lower than the price share. In both rankings the UK, Portugal and Spain are at the low end of the scale. These values of turnover share here are expressed in absolute euros. For a comparative view of turnover share that takes general price levels and economic output into account, these may be compared with the pharmacists’ ‘volume per capita’ in the Overviewtable for pharmacy professional services (Chapter 5 of Part 1). Chart 10-11 Actual Pharmacists (Net) Turnover Share per capita 140 120 100 80 60 40 20 Lux Fr Bel Ger Ir l Fin Swe Aut Dk Sp It Por Net h UK 2000 2000 1999 1999 1999 2000 2000 2000 2000 2000 2000 2000 1998 2000 Source: Eurostat; IWI; IHS I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 353 11. Case Studies Pharmacy 11.1 The Profession of Pharmacists in Ireland: an overview The Pharmaceutical Society was established under the 1875 Pharmacy Act. This act oversees the qualification of pharmaceutical chemists. Under the provisions of this legislation, a person cannot operate an outlet for the 'dispensing or compounding of medical prescriptions' unless that person is a pharmacist. In addition the outlet, the dispensing, and the compounding of medical prescriptions must be personally supervised by a pharmacist. This basic characterisation could lead one to the solution, that the sector of pharmacies is highly regulated. As already mentioned earlier in this report in fact today this is not the case, at least from an international point of view. On the one hand pharmacists provide some exclusive tasks especially concerning the dispensation of medicines (also not all of them; see below). On the other hand, after an interplay of more rigid regulations between 1996 and 2001, the number and locality of pharmacies today is not restricted (as it was before 1996). Also the circumstances to become a pharmacist in the Irish educational system are rather rigid, still the market entry system is all in all – at least from an international comparative point of view – of a rather liberal nature. This has led, as will be shown below, to a rather high density of pharmacies in Ireland. But it is not only the market entry regulation for pharmacists in Ireland that is comparatively (!) liberal; the same applies to some fields of conduct regulation. Market Entry Tasks and exclusive tasks provided by Irish Pharmacists “Scheduled” prescription medicines for human use in Ireland can only be supplied under prescription, some of these may only be dispensed in a hospital, and most medicines may only be dispensed in a pharmacy by or under supervision of a pharmacist. Some substances are specifically exempted from the pharmacist-supervised sale requirement, and thus these may be sold in non-pharmacies. They are, notably, aspirin, paracetamol, nicotinic acid, certain vitamins and toothpaste components. Medicines of this type are commonly described as "general sales list" medicines. The supply of medicines by mail order is prohibited. The dispensing and compounding of medical prescriptions and the sale/supply of medicines may also be carried our by Medical/Dental Practitioners for patients under their care as well as Veterinary Surgeons for animals under their care. 354 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Education and Entrance to the Profession Education The conditions for becoming a pharmacist in the Irish educational system are rather rigid. Whereas anyone that has graduated in pharmaceutical sciences in Ireland may open a pharmacy, there exist rather high entry barriers to the relevant educational system. A student who wishes to become a pharmacist (pharmaceutical chemist) must: (a) obtain preliminary registration with the Pharmaceutical Society of Ireland (forms available from the Registrar); (b) enrol at Trinity College Dublin for the four-year course leading to the Degree of Bachelor of Science (Pharmacy) (see below for further details); (c) complete twelve months' practical training in an approved establishment under the supervision of a tutor pharmacist; (d) and pass the Society's Licence Examination. As a general rule, all pharmacy degree courses must be accredited by the Pharmaceutical Society of Ireland if graduates of these courses are to proceed to registration with the Society. As of April 2002, the pharmacy degree course at Trinity College Dublin was the only course accredited by the Society! A new pharmacy degree course now is offered at the Royal College of Surgeons in Ireland (from October 2002 onwards). University College Cork is also considering offering a new pharmacy degree course. To enter one of the respective courses specific entry requirements have to be fulfilled. The entry requirements for the School of Pharmacy, Trinity College, Dublin, are the following (based on Leaving Certificate Examination): Please note these are minimum requirements. 1. A pass in English. 2. A Grade C on the lower or Grade D on the higher Leaving Certificate paper in Mathematics. 3. A pass in a language other than English. 4. A pass in three further subjects. 5. Six subjects must be presented in all and three of these subjects must be of a standard of at least Grade C on higher Leaving Certificate papers. 6. A Grade C on higher Leaving Certificate Chemistry paper. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 355 7. A Grade C on the higher Leaving Certificate paper in one of Physics, Biology, Mathematics, Geology, Geography, Applied Mathematics and Agricultural Science. There are only seventy places available annually (at Trinity College) and, because of demand, applicants generally require qualifications which are substantially higher than the minimum. Applicants are ranked on the basis of their Leaving Certificate subjects. All graduates who wish to become pharmacists are required to undergo twelve months preregistration training after they have completed the four year pharmacy degree course. All practical training must be carried out under the supervision of a pharmacist who has undergone special training in order to act as a tutor. At least six months of the year must be spent in a hospital or community pharmacy while the other six months may be spent in a community, hospital or academic pharmacy, or the pharmaceutical industry. The Pharmaceutical Society supervises the pre-registration year and requires each graduate to complete two multiple-choice assessments and a practice of pharmacy research project during the year. The two assessments and the project account for 10 per cent each of the Society's Licence Examination - the professional examination which each graduate must pass in order to register as a pharmacist. The Society also runs an optional course in Forensic Pharmacy for pre-registration graduates each year which covers topics such as medicine and pharmacy law, professional matters and negligence. The Pharmaceutical Society's final examination examines candidates' knowledge of medicines and pharmacy law, ethical and professional matters and is taken at the end of the pre-registration year. It accounts for 70 per cent of the Licence Examination. Having successfully completed all elements of the Licence Examination, the graduate may apply for registration as a pharmacist. All graduates who wish to practise Pharmacy must be registered (as Licentiates) with the Pharmaceutical Society of Ireland. In addition, most pharmacists become members of the Society (MPSI). It has been shown above that it is rather difficult to obtain a place for studying pharmacy in Ireland. An other option is to study abroad and then come back to Ireland to work at a pharmacy or even open one oneself. But both is bound to specific pre-conditions. If a Student has been offered a place in one of the Universities abroad in order to practice pharmacy in the Republic of Ireland he generally must: - successfully complete the degree course in that School of Pharmacy - if applicable successfully complete the relevant pre-registration training year in that country (note: she/he cannot do the pre-registration training year in the Republic of Ireland) 356 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S - if applicable successfully complete the Registration Examination in the respective country - apply for registration with the Pharmaceutical Society of Ireland under the EU/EEA route having successfully registered in the country he has been studying. Under the terms of the EU free-movement directives one cannot take personal control of a pharmacy that is less than three years old. In practice, this means that: - one cannot set up one's own pharmacy (unless it is set up as a limited company and another pharmacist gets employed to work there for the first three years of its existence. This pharmacist must be registered with the Pharmaceutical Society of Ireland and have registered through the Irish, Reciprocal or Adjudicating Committee routes.) - one cannot work in a pharmacy that is less than three years old (unless the pharmacist that has been studying abroad is working at all times with or under the supervision of another pharmacist who is registered with the Pharmaceutical Society of Ireland and has registered through the Irish, Reciprocal or Adjudicating Committee routes.) In order to take advantage of this route of registration the relevant person must be a national of an EU/EEA country. A person may not register in Ireland under this route if he or she is a non-national of the EU/EEA even though this person may have studied pharmacy and registered as a pharmacist in an EU/EEA country. To open an own Pharmacy Until 1996 any Pharmacist after fulfilling the requirements described above was allowed to open his own pharmacy. Then, from 1996 to February 2002, special regulations have been in force. Regulations in force as from May 1996 limited the number of General Medical Scheme (GMS) dispensing pharmacies i.e. pharmacies which will be reimbursed by the GMS for dispensing prescriptions to medical cardholders and other qualifying individuals. The main provisions of the regulations under which contractor agreements have been granted from this time on have been as follows. The health board has to be satisfied of the following criteria: - There is a definite public need for a community pharmacy in the catchment area to which an application relates i.e. serve a catchment area of not less than 4,000 in urban areas and large towns and in the case of other locations the population must be at least 2,500. In addition, pharmacies must be spaced at least 250 meters apart or 5 km in rural areas. - The premises have free and direct access to the public road at all times. - The proposed premises, equipment, staff and facilities etc must meet the requirements of the contractor agreement and standards set out by the pharmaceutical society. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 357 - The proposed supervising pharmacist has at least three years recent post registration experience in the practice of community pharmacy. - The proposed supervising pharmacist has a high degree of professional competence including the ability to manage the community pharmacy. - The proposed pharmacy has a reasonable prospect of being viable and there is a longterm commitment to the catchment area the pharmacy is intended to serve. The reasons put forward by the Department of Health for these restrictions according to OECD (2001: 301) were (1) to erect similar controls to those already in place in other EUMember Countries, (2) to promote the development of quality driven service and (3) to prevent further clustering of pharmacies in areas already well-served while promoting the provision of rural areas. These regulations lead to heavy criticism by the 2001 OECD-Report on “Regulatory Reform in Ireland”. In the words of OECD: “The logic provided for restricting the location and number of pharmacies is flawed. Incumbents in other sectors in other economies make similar arguments, that if they are protected from competition then they will perform a variety of good works. In fact competition – keeping up with the competitors – is what indices quality-improving investments.(...) Where there is a genuine public service obligation, such as loss-making provision to rural areas, the solution is not creation of a protected monopoly to cross-subsidise the unprofitable activity. Rather, the solution is to split the task into two parts, of providing the service and paying for the part that must be subsidised. (...) Therefore, eliminate the location restrictions on pharmacies. Assess the exit and entry in the sector and provide transparent subsidies to pharmacies that are desirable on the basis of public policy objectives, but are not forthcoming under free entry” (OECD 2001: 302). The Minister for Health and Children announced on 31st January 2002 his revocation of the above Regulations on the opening of new pharmacies, which has been in place since 1996. Since 1996, the Regulations have been subject to ongoing legal challenge, during the course of those challenges, the legal basis of the Regulations were raised. The Minister for Health and Children sought legal advice from the Office of the Attorney General. The advice received concluded that the Regulations were ultra vires. The effect of the revocation, for the awarding of new Community Pharmacy contracts, is a return to the pre 1996 situation whereby the applicant applies to the health board for a Community Pharmacy Contract, which is granted if the educational preconditions mentioned above are met. 358 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Conduct Regulation Prices and Fees Pharmacies sell both under the GMS and to private patients. Both types of transactions are heavily regulated, at least for medicines dispensed under prescription. In particular, for the sale of a prescription medicine under the GMS, the pharmacist cannot charge a mark-up: he is reimbursed for the cost of the medicine plus a flat dispensing fee. The flat fee can vary if a powder or ointment must be prepared or the medicine is dispensed at night. For the sale to a private patient, i.e. one not under the GMS, the pharmacist charges a 50% mark-up, under established custom and trade. The wholesale cost of prescription medicine is set by agreement between the Department of Health and the Irish Pharmaceutical Healthcare Organisation, representing the drug-making Industry. Other products pharmacists sell, including as mentioned above, over the counter medicines (OTCs), as well as cosmetics, toiletry, camera film etc. For these products the prices and margins are not fixed. Advertising Advertising by pharmacies is constrained by the ethical rules of the profession. Listings in the telephone directory and notices in the newspaper cannot advertise more than its existence and hours or change of hours. Special events, such as patient testing , can be advertised only by a notice in the window of a pharmacy (c.f. OECD 2001: 01). According to OECD (2001: 302) the cumulative effect of these restrictions is that a pharmacy cannot increase its customer base by advertising. Also these regulations appear to be rather rigid, one has to bear in mind, that they are issued by the Pharmaceutical Society of Ireland as a professional rule only. For this, the respective regulations are not legally binding. Forms of Business, Inter-professional Co-operation, Location and Diversification The owner of a pharmacy in Ireland may be one of the following: (a) a pharmacist; (b) a partnership of pharmacists; (c) a legal person (e.g. a company); (d) the legal personal representative of a pharmacist acting as such at the time of his death (this is limited to a period of five years from the date of death). I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 359 All in all the establishment of a business in the profession is not restricted to specific forms of business. This means that also non-pharmacists, i.e. as corporate bodies can own pharmacies. At the same time specific regulations on inter-professional co-operation do not exist, nor on location (again since 2002, see above) or on diversification: more than one pharmacy may be owned in Ireland and it is possible to run several branch-offices. Continuing Education There is no obligation for continuing education for pharmacists in Ireland. Specialisation in the Profession There are specific regulations on specialisation in the profession of pharmacists in Ireland Compulsory Indemnity Insurance There are no regulations on compulsory professional indemnity insurance in Ireland. Economic Characteristics Ireland – Structure and dynamics (NACE 5231) Enterprises, Turnover, Employment:1: The nominal turnover share of pharmacies in Ireland reached a level of over 310 million Euro in 2000, equivalent to less than 0.35% of GDP, which represents a typical value, but a little more than the median of our survey of 14 member states. (c.f. corresponding Overview-table in Chapter 5). Output of the sector rose however at a very high yearly compound average of 16.2%, ahead of the booming Irish GDP (nominal 15% p.a.) during the second half of the 1990’s. This represents a real growth in pharmacy services of 15.1% per annum, which outstrips employment, which increased at a rate of 5.9% p.a. over the period 1995-1999, so productivity has risen dramatically. In fact, the real turnover share per employed person was up by 39.6% over this period. 1 EUROSTAT 360 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 11-1 Key Statistics, Pharmacy Services, Ireland 5231 1995 970 Total Turnover in Mio EUR 519 1996 1 022 607 200 6 409 1997 1 053 708 234 6 602 1998 1 152 933 308 8 096 1999 1 173 946 312 7 136 Number of Firms Turnover Share in Mio EUR 171 Employment 2001 No. of Professionals 5 672 2 966 Source: EUROSTAT, IHS The number of firms has also increased, being over 970 in 1995 and over 1170 in 1999, an average compound rate of increase of just 4.9% p.a. (see Table). The lower rate of increase in enterprises relative to employment is indicative of a slight trend towards larger pharmacies i.e. indeed the average enterprise gave employment to 6.1 persons in 2000, compared to a 5.8 person average in 1995. However the total number of enterprises in this branch, at 314 per million of population, is the third highest in the survey, after Portugal and Italy. The average turnover share per firm (in 1999) of about 270,000 euro is much lower, however, than the correspondingly value - for turnover – for technical services (520,000 euro), accounting services (490,000 euro) in Ireland, and especially the turnover of legal services’ firms (1530,000 euro). This level of business is the fifth lowest among the member states in our survey2. The level of employment is, however, high for the branch, at over 1900 persons per million of the population in 1999, whereas the level of productivity, as measured by the turnover share per employed person is, at 44,000 euro in 1999 in absolute terms, below the median value of countries included in our survey. Even when adjusted for the price levels in Ireland, as well as for the output of the whole economy (in terms of GDP in PPS per capita), the relative volume (share) per employee of the pharmacy branch in Germany occupies roughly the same place among the member states surveyed. 2 Note: Value Added is typically 70-75% of turnover for legal and accounting services, 50-55% of turnover for technical services. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 361 Table 11-2 Key Statistics, Pharmacy Services, Ireland 5231 Turnover Share per Firm Employment per 1000 firms 1000 EURO Turnover Share per person employed Employment Firms per per Mio. of Mio. of Pop Population 1000 EURO 1995 177 5 847 30 1 577 270 1996 196 6 271 31 1 770 282 1997 222 6 270 35 1 808 288 1998 267 7 028 38 2 192 312 1999 266 6 084 44 1 911 314 Source: EUROSTAT, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1995 values indexed at 100. Chart 11-1 Relative Growth Rates, Ireland 5231 200 180 160 140 120 100 80 1995 1996 Number of Firms 1997 Turnover Share 1998 1999 Employment Source: EUROSTAT, IHS The Pharmaceutical Society of Ireland: reports a professional membership of 2966 pharmaceutical chemists in 2000, up 24% from 1995 (IHS questionnaire). There are, in addition, 3 members classed as ‘registered druggists’ and one member classed as ‘dispensing chemist and druggist’ – both these categories have decreased from 6 in each in 1995. The number of professional trainees (in all stages of training), 350, has increased by 40%, from 250 in 1995. Around 50 trainees passing the final examination in each of 1995 and 2000, with an pass rate of 100% in the latter year, and 96% in the former. The number of newly admitted members in 2000 was 213. The number of firms reported for 2000, 1244, agrees approximately with the statistical data cited above. The Pharmaceutical Society estimates the number of firms with incorporated status as having risen from 60% in 1995 to 73% in 2000. Most firms (93%) have one office, 5% have 2-5 offices, 1.1% have 5-20 offices, and 0.4% have between 20 and 50 offices (as of 2000). As regards firms from other countries, the highest number originate from UK, followed by Germany. 362 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Summary The market entry and conduct indexes we calculated for Ireland are – at least from an international comparative point of view – very low (1.47 for entry and 1.2 for conduct). If this calculation would have been done for the time between 1996 and the beginning of 2002 the entry index would have been much higher, as the maximum number of pharmacies was fixed in this time by a kind of “economic needs test”. This regulation has been abolished by the beginning of 2002. However, maybe our entry index in fact underestimates the problems of market entry for young would-be pharmacists in Ireland. It does not reflect the fact that the number of places for university education in pharmaceutical sciences is very limited in Ireland. At the same time, if one has been studying abroad, even as an Irish citizen, it is only possible under relatively rigid preconditions to open one's own pharmacy in Ireland. On the other hand Ireland is one of the rare Member States of the European Union where no “needs test” for the opening of a new pharmacy applies and conduct regulation concerning pharmacies is not very rigid in Ireland. This is especially true with regard to advertising, form of business, branch offices and inter-professional co-operation. The direct effects of the removal of the market-entry-barriers mentioned above in the beginning of 2002 is not clear at the moment. We suggest that there only can be an effective liberalisation of market entry , if at the same time changes in the number of places for pharmaceutical education in Ireland are imposed (which is planned and already implemented to some degree) or at least the restrictions concerning would-be pharmacists that have been studying abroad are lifted. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 363 11.2 The Profession of Pharmacists in Portugal: an overview The Portuguese pharmacists-system shows, as the health system in general, extensive regulation. In the Portuguese health system there are numerous and sometimes very restrictive controls over pharmaceutical goods, high-technology equipment and the education, training and registration of health personnel. In respect to pharmacies there are regulation barriers regarding the entry to the profession and opening a community pharmacy. The number of pharmacies is restricted and there are rigorous rules on the ownership of pharmacies. Pharmacies are equipped with broad exclusive rights for the supply of medical goods. At the same time wide regulations on running a pharmacy exist. This is true in respect of price regulation, rules concerning marketing and advertising as well as forms of business etc. All in all the pharmacists sector in Portugal shows strong signs of a state-imposed monopoly which in cases has led to sub-optimal market-outcomes. We will show that the density of pharmacies per population is very low in Portugal, even for South-European standards. At the same time there are growing problems of controlling the public costs of pharmaceuticals; according to WHO, the respective price formation and –control systems are sub-optimal. For pharmacies in Portugal we calculated a market entry index of 4,19 and a conduct index of 3,8. Both are high from an international comparative point of view. The representative body for the pharmaceutical profession is the Pharmaceutical Society (Ordem dos Farmacêuticos ), for which membership is compulsory. It covers pharmacists and others licensed to work in industry, laboratories and enterprises and is the legal representative of people with a degree in pharmaceutical sciences. It has regulatory and disciplinary powers. In addition to the Pharmaceutical Society, which represents all pharmacists in general, Portuguese community pharmacists, in particular, are represented by the National Association of Pharmacies (Associação Nacional das Farmácias; ANF). Membership in ANF is not compulsory. The ANF has strongly been committed to the support of its members’ interest, particularly with regard to professional, economic and legal aspects. As an associative structure, the ANF does economic and financial consultancy as well as information technology support and professional training. Almost 95% of pharmacists are members of the National Association of Pharmacists; however some choose to remain independent. The Association offers incentives in order to maintain membership rates such as computers, software, continuous education and other services which are of benefit to the pharmacist. The National Association of Pharmacists also has, as the WHO terms it, a “powerful corporate role”. It operates as a fund which handles the majority of pharmaceutical payments between the National Health System and the pharmacists. 364 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Market Entry Tasks and exclusive tasks provided by Portuguese Pharmacists In Portugal Pharmacists have the exclusive right of preparation, control, selection, purchase, storage and dispensation of human and veterinary medicines as well as medical devices. All drugs, including over-the-counter drugs (OTC) can only be sold in a pharmacy. It is not permitted for drugs of any sort to be sold through other outlets. This means that pharmaceutical products generally are solely distributed through pharmacies, and their subsidiaries. Hospitals as a basic principle have a pharmaceutical depot for internal use only. There is presently a limited service within hospitals for dispensing prescriptions to outpatients, but only those drugs which carry no co-payment are allowed to be dispensed. The idea of extending pharmacy services in hospitals to allow direct sales by the NHS is being debated within the Ministry of Health. Similarly, in health centres only those vaccinations which are provided free of co-payment are dispensed directly by the health centre. Otherwise patients have to take their prescriptions to a private pharmacist whether or not they receive the prescription from a NHS doctor in a health centre or from an outpatient department of a hospital. This means that Doctors/Medical Practitioners in principle are not allowed to dispense medicines on their own. Only veterinary surgeons may dispense medicines when carrying out emergency operations. Other exclusive tasks of Portuguese pharmacists are the quality control of medicines and medical devices in quality control laboratories. Apart from medicinal products and other products associated with health pharmacies in Portugal may also sell Cosmetics, skin-care, dietetic, orthopaedic, phytopharmaceutical, optometric and homeopathic products. Education and Entrance to the Profession To become a pharmacist in Portugal one has to graduate in Pharmaceutical Sciences at the University. The study-programme takes 5 years plus 6 months of pre-graduate training. There is, for people with Portuguese nationality, no other education qualification enabling application for entrance to the profession. At the same time no additional practise is needed to become a full member of the profession. A special professional exam has only recently been introduced. This professional examination was established by the Pharmacist’s Society's new bylaws, approved on November 2001. The professional exam will only be implemented from 2003 onwards and candidates from accredited degrees in Pharmaceutical Sciences are excused from this examination. As already mentioned above for practising pharmacists a membership in the Ordem dos Farmacêuticos is compulsory. A membership in the ANF is not obligatory. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 365 For a long time there were only three faculties of pharmacy in Portugal. This meant that a low number of pharmacists graduated each year and therefore the professional market was for a long time eager to receive them at various sites. Recently, in a period of only six years, four other faculties have started to offer students courses in pharmaceutical sciences. The majority of young pharmacists in Portugal pursue careers in community pharmacy. This may be because legislation still restricts pharmacy ownership to pharmacists and also because pharmacies in Portugal are making an effort to have at least two pharmacists working in each pharmacy. However, regarding the areas of Community and Hospital Pharmacy, the job market is far from absorbing the annual number of graduates leaving the universities: pharmacy ownership is under very rigid control and, although it is a right exclusive to Pharmacists, the criteria for opening new pharmacies are so strict that they make it almost impossible for a young pharmacist to establish himself as a pharmacy owner in the first years after graduation (see below). In Hospital Pharmacy, the number of annual placements is extremely reduced as well. Regarding Industrial Pharmacy, the situation is not so good as well any more. The problem has two sides: on one hand, there isn't much pharmaceutical industry in Portugal; on the other hand, industry tends, more and more, to employ graduates other than pharmacists. However, still many find a job in the pharmaceutical industry, where they can choose between drug registration, marketing, quality assurance and production, although production in Portugal has been decreasing quite a lot over the last few years. As mentioned above, the regulations to open an own pharmacy in Portugal are rather rigid, even by international standards. Pharmacies must be owned by a qualified pharmacist. In addition to this regulation which reduces competition, the location of pharmacies is highly regulated (Portaria 936-A/99 of 22nd October 1999). There is a maximum number of pharmacists permitted in each community, which is one pharmacy for every 4,000 inhabitants in towns with a population of 4,000 or more (until the end of the 1990s the respective number has been 6,000). The distance between pharmacies must be more than 500 metres (until the end of the 1990s 250 m). However, a pharmacy may be authorised, irrespective of the number of inhabitants, in an area which does not have one if the real needs of the local population require it: - if there is a hospital or a medical centre and if the distance to the nearest pharmacy is more than 3 km; - if this distance is more than 5 km; - in areas which have a shopping centre provided for in town plans, providing certain conditions are met, etc. 366 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S For the pharmacies available open competitions are held nation-wide on the authority of the Ministry for Health - National Institute of Pharmacy and Medicines, at the request of the local health authorities. Admission to the open competition is as follows: - Priority is given to the owners of pharmacies in the same municipal area as the pharmacy for which the competition is organised, who wish to transfer their dispensary there. The next most successful candidate is given authorisation to open a dispensary in the locality from which the first pharmacy has been transferred; The following are not admitted: - pharmacists or companies set up by pharmacists who already own a dispensary at the time of the competition (in an other area), or those who have owned a dispensary during the previous ten years; - companies with one or more members to whom the above conditions apply. Candidates are listed according to the number of years of professional experience, their period of residence in the area, their age and, finally, the marks and grades obtained during university studies. Conduct Regulation Prices and Fees The system for prices and fees for pharmacists in Portugal is rather fragmented and the information on this point is inconsistent. The Pharmaceutical Society in the questionnaire sent to us indicated that there are no special regulations on prices and fees of Portuguese Pharmacists. This information appears to be misleading according to other sources. According to Vasco/Da Silva3 wholesaler and pharmacies’ prices for prescription-only pharmacies in Portugal tend to be fixed. The pricing of pharmaceuticals is a two-step process. In the first instance, DGCC (Directorate-General for Trade and Competition, which is part of the Ministry of Finance) agrees to the maximum price for every new medicinal product (except hospital-only specialities). Subsequently, INFARMED (Instituto Nacional da Farmacia e do Medicamento National Institute for Pharmacies and Medicines) processes reimbursement applications, 3 Country Profile Portugal, Pharmaceutical Pricing and Reimbursement; LSE study on healthcare in individual countries; Worldwide survey on pharmaceutical pricing and reimbursement structures; http://pharmacos.eudra.org/F3/g10/docs/tse/Portugal.pdf I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 367 where a product price can be lower in order to obtain reimbursement status. Prices are set by the Directorate-General for Trade and Competition (DGCC), according to the Regulation nº 29/90. The initial manufacturers’/importers’ maximum selling prices (PVA) are based on the lowest ex-factory price of identical or similar pharmaceutical product containing the same active ingredient in three reference countries: Spain, France and Italy. Normally, all prices are reviewed annually and a rate of revision is fixed. According to WHO these rules for price-fixing for prescription-only medicines are not always implemented in practise4: “Since 1991 (Decree Law 72/91) the price of drugs has been established using an artificial price based on comparisons with other countries. An attempt was made in 1998 to introduce reference pricing. This system groups drugs according to their active ingredients and sets a reference price for the group (often the average or lower-priced drug in the group). In Portugal, if two drugs of similar properties were already on the market, any new drug entering the market had to be priced at least 10% cheaper than the existing products. But this policy has been shrouded in controversy. Some products were misclassified and it is still unclear whether this controversy will have tarnished the policy irredeemably or whether the government will persist with its implementation.” (p. 68). According to Vasco/da Silva (p11) the gross wholesaler margin is 8% of the Pharmacy Selling Price excluding tax (PSP); the pharmacist margin is 20% of the PSP. Non-medicinal products (that are permitted to be sold in pharmacies) may have a higher marketing margin. This regulations of maximum prices and margins do not apply to OTC products. Regulation 261/91 states that OTC products have free pricing and distribution margins. OTC products are not reimbursed and can be sold only through pharmacies, except in exceptional circumstances justifiable on grounds of public health reasons. As to WHO (1999: 77) overthe-counter drugs yield the greatest profit. Pharmacists obtain their income from three main sources: direct payment from the patient for OTCs, the co-payment directly from the patient and the remainder from the NHS (via the Regional Health Administration: RHA) or the appropriate insurance fund. The payment system follows a provider pays model. This means that whoever prescribes pays. So in the case of public hospitals, the individual hospital must cover the cost of the drug. If the prescription is from a health centre the payments are centralised through the RHA. As mentioned above about 95% of pharmacists are members of the National Association of Pharmacists and only few choose to remain independent. Members of the Association invoice the Association who reimburses them immediately; it then bills the RHA in bulk on behalf of its members. The Association is powerful and has negotiated a minimum payment period of two months with the RHA and has the ability to levy interest from the RHA for late payment. For most of the other relevant professions the minimum payment period is 4 months. 4 WHO (1999): Health Care Systems in Transition, Portugal, European Observatory of health Care Systems. 368 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S According to WHO (1999: 77) it is “one of the perverse incentives of the payment system for pharmacists (...) that they benefit from dispensing more expensive drugs. As a result pharmacists do not stock the cheapest drugs.” The WHO sums up the problems of pharmacies pricing in Portugal as follows (1999: 95): „As in many other European countries, Portugal faces the problem of controlling expenditure growth on drugs and pharmaceuticals. The industrial lobby and the professional lobby are both very strong. The drug market is characterised in Portugal by freedom of prescription for doctors (outside the hospital inpatient setting), lax price controls on the drug companies and a monopoly position for the pharmacist who sells the drugs. Despite attempts by the government to regulate the sector, it remains largely limited to the quality and safety of drugs. Government regulation of pharmacists actually protects their monopoly position and the method of payment creates perverse incentives for the dispensing of more expensive products.“ Advertising According to the Law Decree 100/94, direct consumer advertising of prescription-only pharmaceuticals is prohibited in Portugal. The National Council for the Publicity of Medicinal Products is a consultative board created within INFARMED; its function is to analyse the advertisement of medicinal products for human use, to issue opinions on legislative proposals in this area and to present recommendations in order to improve the quality of the advertisements. According to the questionnaire sent to us by the Ordem dos Farmacêuticos all advertising for pharmacists in Portugal is strictly prohibited. This information probably is misleading, as other sources state that only the advertising of medicines is prohibited (Law Decree 100/94 of 19 April modified by Law Decree 48/99 of 16 February). For the pharmacy itself, the advertising of products other than medicines that are sold by the pharmacy and other activities carried out in the pharmacy (e.g. pregnancy tests, blood pressure) is allowed, subject to compliance with the general rules relating to all advertising to the public and the profession’s Code of Ethics. Overall this means that advertising by pharmacists is restricted, not generally forbidden. Forms of Business, Inter-Professional Co-operation, Location and Diversification Only pharmacists may establish and/or own a community pharmacy. Partnerships with other pharmacists are possible; partnerships with non-pharmacists are not permitted. Pharmacists may also establish limited companies, but ownership is reserved to the profession. Additionally a pharmacist may not own or co-own more than one dispensary. She/He must offer guarantees of professional and good character and his name must have been entered in the register of pharmacists. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 369 Continuing Education Continuing education traditionally was not obligatory for pharmacists in Portugal. This has changed recently. The Society's new bylaws, approved on November 2001, establish mandatory continuing education for all its members and links it with professional license revalidation within the Pharmaceutical Society. Every 5 years pharmacists must accomplish a minimum of credits granted by attending continuous education activities accredited by the Society. This will be implemented as from 2003. In non-compulsory form ongoing training programmes for pharmacists have been in place for the past 15 years or so, held jointly with the Lisbon, Oporto and Coimbra Faculties of Pharmacy, with the Pharmaceutical Society and the ANF. Organised in different areas, the continuing education system has been undergoing a consolidation process in the last few years, with 57% of the Portuguese community pharmacies having already received training curricula. Specialisation in the Profession Specialisation in the profession is organised by the different specialist colleges (Hospital Pharmacy; Clinical Biology; Pharmaceutical Industry; Regulatory Affairs) of the Ordem dos Farmacêuticos. Specialisation is conferred after a minimum period of practise and examination. It leads to a title of specialist in the specific area of specialisation which may be advertised. Compulsory Indemnity Insurance For pharmacists in Portugal, as in most EU-Member-States, there does not exist a compulsory indemnity insurance. Economic Characteristics Portugal – Structure and dynamics (NACE 5231) Enterprises, Turnover, Employment:5: The nominal turnover share of pharmacies in Portugal reached a level of nearly 462 million Euro in 2000, equivalent to exactly 0.4% of GDP, which represents the fourth highest of our survey of 14 member states, after that of France, Belgium, and Spain, in decreasing order (c.f. corresponding Overview-table in Chapter 5). 5 EUROSTAT 370 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Output of the sector rose however at a yearly compound average of 6.1% during the second half of the 1990’s. This represents a real growth in pharmacy services of just 3.6% per annum, compared to the stagnant growth of employment, which was 0.3% p.a. over the period 1996-2000, so productivity has been risen. In fact, the real turnover share per employed person increased by 13.6% over this period. Table 11-3 Key Statistics, Pharmacy Services, Portugal 5231 1996 2 769 Total Turnover in Mio EUR 1 823 1997 2 698 1 943 389 13 641 1998 2 471 1 884 377 12 176 1999 2 719 2 077 415 13 484 2000 2 832 2 311 462 14 227 Number of Firms Turnover Share in Mio EUR 365 2001 Employment No. of Professionals 14 032 9 498 Source: EUROSTAT, IHS The number of firms has also stayed more or less constant, being just under 2800 in 1997 and just over 2800 in 2000, an average compound rate of increase of just 0.6% p.a. (see Table). The slightly higher rate of increase in enterprises relative to employment is indicative of a minimal trend towards smaller pharmacies i.e. indeed the average firm gave employment to 5.0 persons in 2000, compared to a 5.1 person average in 1997. However the total number of enterprises in this branch, at 283 per million of population, makes Portugal one of the countries with the highest density of pharmacies, after Spain, Belgium, France, and Ireland, in decreasing order. The average turnover share per firm (in 1999) of over 160,000 euro is, however, very low in international comparison – in absolute terms, the only country with a lower value being Spain. Adjusted for the lower prices and output level of the whole economy, however, this (volume per firm) takes on a position in the middle of our surveyed member states. The level of employment of the branch is, at over 1400 persons per million of the population in 2000, also typical, whereas the level of productivity, as measured by the turnover share per employed person is, at 32,000 euro in 2000 in absolute terms, the lowest value of countries included in our survey. Seen in the light of the adjustment for prices as well as for the output of the whole economy in Portugal (in terms of GDP in PPS per capita), the relative volume (share) per employee of the pharmacy branch in Portugal is paradoxically the highest among the member states surveyed. We prefer this latter measure for international comparison, as it takes into account the lower GDP, and hence consumption level (nominally) of Portugal. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 371 Table 11-4 Key Statistics, Pharmacy Services, Portugal 5231 Turnover Share per Firm Employment per 1000 firms 1000 EURO Turnover Share per person employed Employment Firms per per Mio. of Mio. of Pop Population 1000 EURO 1996 132 5 068 26 1 414 279 1997 144 5 056 28 1 373 272 1998 152 4 928 31 1 223 248 1999 153 4 959 31 1 351 272 2000 163 5 024 32 1 423 283 Source: EUROSTAT, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1996 values indexed at 100. Chart 11-2 Relative Growth Rates, Portugal 5231 140 130 120 110 100 90 80 70 60 1996 1997 Number of Firms 1998 Turnover Share 1999 2000 Employment Source: EUROSTAT, IHS Professionals: The Ordem Dos Farmacêuticos reported a total of 9,498 professional pharmacists in Portugal in 2001 (IHS questionnaire). This figure has increased by 67% since 1990, from 5,697. The number of new members in 2000 was particularly high, at 528, almost double the number in each of the years 1995 (273) and 1990 (285). 372 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Summary The sector of pharmacies in Portugal is highly regulated. This is true for market entry as well as for conduct. Although some regulatory changes have occurred in recent years, there are no signs of real liberalisation. It seems that the established pharmacists in Portugal have a strong lobby. At the same time it is not only our opinion, but also that of the WHO, that several regulations of the pharmacies sector in Portugal lead to sub-optimal market outcomes. This is true at least for the rigid entry regulations, the lack of educational facilities for those who want to study pharmaceutical sciences in Portugal as well as for the pricebuilding system in order. The number of graduated pharmacists in Portugal is low, the same is true in regards of pharmacies-density per population. At the same time growing problems of medicines-costs for the public health care system occur. The example of pharmacies in Portugal shows that high regulation does not per se lead to optimal outcomes. On the contrary, the opposite appears to be true. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 373 11.3 The Profession of Pharmacists in Sweden: an overview The Swedish pharmacies-system differs very much from all other national systems of this sector in the European Union. In Sweden, the community pharmacies are not organised as a kind of “liberal profession”, as it is the case in the other EU Member States. All pharmacies are part of one company, Apoteket AB, owned by the government. Apoteket AB was founded in 1971 and is wholly owned by the Swedish state. Apoteket has an exclusive right to sell pharmaceuticals to the public and is obliged to satisfy the need for drugs nation-wide. It is required to maintain a countrywide distribution system and decides which sales outlets it wishes to have and where to be located in order to fulfil the requirement of availability. The price of drugs is the same, no matter in which part of the country they are purchased. Apoteket has a duty to supply all the drugs that have been approved for the Swedish market. Apart from sales to the public, Apoteket is responsible vis-à-vis the health services for the purchasing and supply of drugs. The healthcare principals, mainly County Councils and municipalities, have the option of assuming responsibility for this under their own management. At present, however, all the healthcare principals have chosen Apoteket as their provider of these services. Apoteket AB recently had just over 11,500 employees (equivalent to an average of 10,308 full-time employees) and was operating approximately 900 pharmacies (800 community pharmacies plus 100 hospital pharmacies). Market Entry Tasks and exclusive tasks provided by Swedish Pharmacies There is a monopoly on retail sales of pharmaceuticals in Sweden. Pharmaceuticals can only be sold from a pharmacy, and, as mentioned above, all pharmacies are part of one state owned company. Additionally, OTCs can be sold in pharmacies only and not in other outlets. Pharmacies in Sweden generally carry only medications and not products such as cosmetics. Education and Entrance to the Profession To become a pharmacist in Sweden one has to have studied for five years at University level after leaving school. This education ends with the so-called Apotekarexamen. There is no obligation for membership in or registration with a professional body etc. Another profession in the field is that of prescriptionists, who have had two or three years of higher education. Apart from pharmacists also persons with this education work in retail sale for Apoteket AB. Training as a pharmacy technician is now available in a number of locations, at both upper 374 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S secondary school level and beyond. Due to the state monopoly in the dispensation of drugs in Sweden one can only work in a community or hospital pharmacy as an employee of Apoteket AB. There are no self employed community pharmacists, who own their own pharmacy. Conduct Regulation Prices and Fees In Sweden, the pricing of pharmaceuticals is free. However, if a product is to be covered by the Drug Benefit Scheme, the company marketing the product must apply to Riksförsäkringsverket (RFV; National Social Insurance Board) for establishing a reimbursement price. RFV is a central government agency responsible for the National social insurance, and accountable to the Ministry of Health and Social Affairs. The Division of Drug Affairs is the unit within RFV responsible for setting up the reimbursement prices of pharmaceutical products that are included in the Drug Benefit Scheme. The pricing process is characterised as being quite consensual. The parties involved in the discussions usually reach mutual agreement on the price of the product. However, the price is formally set in a unilateral decision by the RFV. If the company regards this decision as unacceptable it can either put the product on the market as a non-reimbursable product or appeal against the RFV decision. Such outcomes of the pricing process are, however, rare. Prices are set at the level of the pharmacy purchase price (AIP) but RFV also decides on the pharmacy-selling price (AUP). In 1999, the composition of the consumer price (AUP) was on average: Marketing company: 79.5%, Wholesaler: 3.2%, Pharmacy 17.3%. Prices for non-reimbursable medicines and other products sold by pharmacies are not fixed. Advertising The Swedish Medical Products Agency is responsible for regulations on the promotion of pharmaceuticals. Prescription-drugs are not advertised at all (only in journals addressed to physicians, dentists and other health personnel), under a code of ethics with exists in Sweden on a voluntary basis. All other drugs can be advertised but it is not the pharmacies which promote marketing; it is the producer. Forms of Business, Inter-professional Co-operation, Location and Diversification Due to the state monopoly in drug dispensation in Sweden the question of “forms of business” does not arise in the same way as it does in other countries. There are no special I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 375 regulations on this point. The same is true for the subject of inter-professional co-operation, location and diversification. Apoteket AB is required to maintain a countrywide distribution system and decides which sales outlets it wishes to have and where to be located in order to fulfil the requirement of availability. Continuing Education For pharmacists in Sweden an obligation for continuing education does not exist. Specialisation in the Profession There are no special regulations in respect to professional specialisation. Compulsory Indemnity Insurance Special regulations concerning compulsory professional indemnity insurance do not exist. (There being no need, being wholly stated owned.) Economic Characteristics Sweden – Structure and dynamics (NACE 5231) Enterprises, Turnover, Employment6: The nominal turnover share of pharmacies (outlets) in Sweden reached a level of nearly 650 million Euro in 2000, equivalent to less than 0.3% of GDP, which lies at the middle of our survey of 14 member states (c.f. corresponding Overview-table in Chapter 5). Output of the sector rose however at a yearly compound average of 9.9% during the 1990s and at the same rate in the period 1997 to 2000. This represents a real growth in pharmacy services of 6.4% per annum, more than employment, which actually increased just marginally, at a rate of 0.4% p.a. over the period 1993-2000, so productivity has been increased considerably. In fact, the real turnover share per employed person was up by only 13.7% over the years 1997 - 2000 (the longest period for which we have data). 6 EUROSTAT 376 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 11-5 Key Statistics, Pharmacy Services; Sweden 5231 1993 3 Total Turnover in Mio EUR 1 859 1996 1 2 752 550 1997 1 2 486 497 11 021 1998 2 2 627 525 10 952 1999 1 2 967 593 11 039 2000 2 3 300 660 11 150 Number of Firms Turnover Share in Mio EUR 372 Employment No. of Professionals 5 000 2001 Source: EUROSTAT, IHS The number of enterprises has been either 1, 2 or 3 in the statistics, reflecting the state monopoly (see Table). The level of employment is, however, typical for the branch, at around 1300 persons per million of the population in the year 2000, whereas the level of productivity, as measured by the turnover share per employed person is, at 59,000 euro in 2000 in absolute terms, just above the median value of countries included in our survey. Even when adjusted for the higher price levels in Sweden, as well as for the output of the whole economy (in terms of GDP in PPS per capita), the relative volume (share) per employee of the pharmacy branch in Sweden occupies the same middle place among the member states surveyed. Table 11-6 Key Statistics, Pharmacy Services; Sweden 5231 Turnover Share per Firm Employment per 1000 firms 1000 EURO Turnover Share per person employed Employment Firms per per Mio. of Mio. of Pop Population 1000 EURO 1993 123 905 1996 550 480 0.3451 1997 497 220 11 021 000 45 1 246 0.1131 1998 262 680 5 476 000 48 1 238 0.2261 1999 593 360 11 039 000 54 1 247 0.1129 2000 330 030 5 575 000 59 1 258 0.2257 0.1132 Source: EUROSTAT, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1997 values indexed at 100. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 377 Chart 11-3 Relative Growth Rates, Sweden 5231 140 130 120 110 100 90 80 70 60 1993 1994 1995 1996 1997 Turnover Share 1998 1999 2000 Employment Source: EUROSTAT, IHS Sveriges Farmacevtförbund: The Swedish pharmaceutical association reported a 7 membership of 7,200 in 2001 , all being, of course non self-employed. (IHS questionnaire). In 2001, 300 new members were admitted. It is not clear whether the 200 firms referred to in the questionnaire are regional groupings of outlets. Summary The regulation of pharmacies, as it exists in Sweden, is, from an international comparative point of view, a very special case. Pharmacies in Sweden are organised as a statemonopoly. For this market entry for single pharmacists is not possible as self employed. The Swedish state, as the owner of Apoteket, has recently made clear that it has no plans to change the regulatory system which controls drug retailing. However, in respect of market dynamics, product innovation etc. it makes perhaps not that much difference if the pharmacy sector is run via a state monopoly or a very strongly regulated private sector. At least, in a system of state monopoly, the pharmacists may not operate as licensed private profit-oriented profession using their economic and political power for erecting market- barriers and thus to build up a monopoly in which private nearterm market interests may dominate. On the other hand, it may well be the case that there are other potential economic welfare losses including X-inefficiency and less incentives to meet consumer preferences. 7 The number of practising professionals working in pharmacies, 5,000, used in Chapter 5, was obtained from telephone information from Farmacevtförbund. 378 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S 11.4 The Profession of Pharmacists in Germany: an overview The profession of pharmacists, originated in the middle-age, belongs traditionally to the liberal professions. Pharmacists understand their profession as a part of the health system on the level of other medical professions and feel like members of any liberal professions with a commercial component. Compared to other professions in this study, however, the pharmacist does not belong to the liberal professions under the tax laws. In the decision of The Federal Constitutional Court (Bundesverfassungsgericht) of 1956 pharmacists have been classified as tradesmen. The pharmacist has the task of providing the population with medicine in accordance with the regulations. This covers the development, production, examination, storage, selling and registration of risks of medicine as well as the information from doctors and patients to medicine. Pharmacists work in Germany in so called community pharmacies, in hospitals, in the industry or, among other things, also in test institutions. The following explanations refer, however, to pharmacists, who work in a community pharmacy. The Federal Organisation of German Pharmacist Association (ABDA - Bundesvereinigung Deutscher Apothekerverbände) is the leading organisation of the approx. 53,000 German pharmacists. The aim of this association is the fulfilment and improvement of the common interests of this profession. Member organisations of the ABDA are the 17 pharmacists chambers and 17 pharmacists associations. The Regional Pharmacist Chambers (Landesapothekerkammern) are united in the Federal Pharmacist Chamber (Bundesapothekerkammer) in Frankfurt/Germany, the pharmacist associations in the German Pharmacist Association (Deutschen Apothekerverband). The ABDA arranges an intensive exchange of views, in order to promote the interests of its member organisations. It advises them about all the news in the health care system and the medicine sector. In Germany pharmacists have to be members of one of the corresponding regional pharmacist chambers. The 17 pharmacist chambers are organised on a district level. The Federal Pharmacist Chamber (Bundesapothekerkammer) is a working group of the Regional Pharmacist Chamber (Landesapotherkammer). Besides the chambers, there exist 17 pharmacist associations, which are based on optional membership. Together with the regional pharmacist chambers these are also organised in the Federal Organisation of German Pharmacist Association (Bundesvereinigung Deutscher Apothekerverbände) in Frankfurt/Germany. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 379 Market Entry Tasks and exclusive tasks provided by German Pharmacists The general tasks that are provided by German Pharmacists have already been mentioned above. The main exclusive contribution that German pharmacists provide is the distribution of so called “pharmacy-only medicines” and “medicinal products” (apo-thekenpflichtige Arzneimittel; apothekenpflichtige Medizinprodukte). Apart from this, they also sell over-thecounter (OTC) medicines (freiverkäufliche Arzneimittel) and OTC medicinal products, for which not only Pharmacists, but for example also chemist’s shops (Drogerien) have the right to sell them. Another kind of service is the distribution of goods customarily offered in pharmacies (apothekenübliche Waren, § 25 Apothekenbetriebsordnung). They may be sold by other retailers as well. In addition pharmacists also have the right to offer screening measures, e.g. blood test or taking blood pressure. This service is provided by doctors as well. Education and Entrance to the Profession The legal basis for the education to be a pharmacist is the licence to practice regulation (Approbationsordnung) for pharmacists dated July 19, 1989, which came into force in a changed version October 01, 2001. The pharmaceutical study includes: - a study of four years at an university; - a clinical training (Famulatur) of eight weeks; - a practical training of twelve months and - the pharmaceutical exam with three examination sections. Famulatur / Clinical elective During the part of the study at university, a student has to make a famulatur / clinical elective, while not having any lectures. Four weeks of this famulatur have to be at a community pharmacy and during the rest of the time one can choose among other pharmaceutical jobs, e.g. hospital pharmacy or the pharmaceutical industry. 380 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S After finishing the second part of the study at university (the so called main study) follows a 12 months practical training (third part), where knowledge is supposed to be deepened, extended and applied practically. A minimum of 6 months have to be served at a community pharmacy; the rest of the time in a hospital or military pharmacy, the pharmaceutical industry, in a scientific institute, e.g. university, or a pharmaceutical investigation centre. The practical year is completed with a four to six week course, where the practically gained issues are taught. Also the third part ends, as does the second part, with a state examination. After successfully passing the pharmaceutical examination, one can apply for a licence to practise as a pharmacist. This license authorises the individual to use the title of pharmacist and allows him the unlimited practice of this profession. Conduct Regulation Prices and Fees For pharmacy-only medicines there is a law fixing the prices (Arzneimittelpreisverordnung; Drug Price Ordinance). On the basis of free manufacturers' prices this leads to uniform consumer prices for pharmacy-only medicines throughout Germany. Prices for OTC medicines and other goods offered by pharmacists are not fixed. Advertising For Pharmacists in Germany some, but not all, forms of advertising are forbidden. Advertising is forbidden in the following cases: - prescription-only medicines, - price advertising as far as pharmacy-only medicines are concerned. Furthermore, advertising must conform with the European Law (Chapter VIII of Dir. 2001/83/EEC), the Law on Advertising in the Health System (Heilmittelwerbegesetz) the profession's law (Berufsordnungen der Apothekerkammern) and general regulations on advertising. The Federal Constitutional Court (Bundesverfassungsgericht) has clarified in its decision of May 22, 1996 that the pharmacist chambers are not allowed to intervene with a publicity prohibition into the competitive process just to hinder competition. It is also not possible in reference to the constitutional right of the freedom of the profession (Berufsfreiheit) according to article 12 paragraph 1 GG to exclude certain advertising media as improper, e.g. shirt advertisement or too big advertisements. Such prohibitions are I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 381 according to the point of view of The Federal Constitutional Court (Bundesverfassungsgericht) incompatible neither with the public good nor does it correspond to the principle of proportionality (Verhältnismäßigkeit) . Altogether, today pharmacists are able to use almost the full range of advertising instruments and marketing. But there are still some barriers. For example, advertisement, which is misleading or seems to exaggerate in reference to its content and frequency and favours an additional use or misuse (compare IFB 20018) is not allowed.. Forms of Business and Inter-Professional Co-operation Pharmacies very often are run in the form of a sole practitioner. Partnership is allowed as far as a private partnership (Gesellschaft bürgerlichen Rechts) or general partnership (offene Handelsgesellschaft) are concerned. In these cases each pharmacist needs permission to run the relevant pharmacy and each one is fully liable. This means that inter-professional cooperation is not possible in the form of running a business together. At the same time incorporation, e.g. in form of a Limited Liability Partnership or a Public Limited Company, are not allowed. In addition, it is forbidden for pharmacists and doctors to work too close together. The patients may not be assigned to specific pharmacists/doctors, but must have the free choice (§ 11 Apothekengesetz ApoG; Pharmacies Act). Location and Diversification Germany is one of the few member states of the European Union, where the number of Pharmacies is not restricted (e. g. by economic needs tests etc.). Any pharmacist may open and run a community pharmacy at the place of his own choice. But one pharmacist may open only one pharmacy and under normal conditions may not run a branch office. It is only in very specific cases, where this is permitted: there must be a “state of emergency in the supply with medicines” in a specific region (Notstand in der Arzneimittelversorgung; § 16 ApoG). In such a case one pharmacist may only run one additional branch office and it is a precondition that this additional branch office is directed by a pharmacist as well. Due to the also existing ban of mail-service (Versandhandel) of pharmacy-only medicines, a certain natural geographical restriction is imposed. Continuing Education The profession's law generally says that continuing education must take place and the profession's chambers (Apothekerkammern) organise frequent seminars on varying topics. Notwithstanding this. a general control of single pharmacists does not take place. 8 See http://www.ifb-bayern.de/Werbung-Apotheker.PDF. 382 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Specialisation in the Profession The profession's chambers offer seminars on specialisation. After certain time (e.g. 3 years) of seminars and practice, there are exams. The title that can be obtained is "Fachapotheker", with various specialisations. This may be advertised. Compulsory Indemnity Insurance For pharmacists in Germany there are no regulations on compulsory professional indemnity insurance. Actual challenges and recent changes in regulations In Germany, the current political discussion is focused – beyond the labour market topic – around a new health reform. It is to be expected – but still open – that the reform will also effect the German pharmacists. Economic Characteristics Germany – Structure and dynamics (NACE 5231) Enterprises, Turnover, Employment9: The nominal turnover share of pharmacies in Germany reached a level of nearly 7,200 million Euro in 2000, equivalent to less than 0.4% of GDP, which represents somewhat more than the median of our survey of 14 member states. (c.f. corresponding Overview-table in Chapter 5). Output of the sector rose however at a yearly compound average of 2.5% during the second half of the 1990’s. This represents a real growth in pharmacy services of just 0.3% per annum, just slightly ahead of employment, which actually decreased at a rate of 0.3% p.a. over the period 1995-1999, so productivity has been virtually stagnant. In fact, the real turnover share per employed person was slightly down by only 2.5% over this period. It is noted here that the turnover (net of VAT) recorded by the Eurostat statistics is consistently somewhat lower than the figures reported by ABDA, as described later in this section. Nevertheless the former is used as a comparable basis for all countries in Chapter 5. 9 EUROSTAT I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 383 Table 11-7 Key Statistics, Pharmacy Services, Germany 5231 1995 19 291 Total Turnover in Mio EUR 20 531 1996 19 399 21 037 6 669 167 100 1997 19 377 20 662 6 550 164 900 1998 19 311 21 174 6 712 166 552 1999 19 491 22 638 7 176 160 081 Number of Firms Turnover Share in Mio EUR 6 508 Employment No. of Professionals 162 100 42 790 46 078 2000 Source: EUROSTAT, IHS The number of firms has also stayed more or less constant, being just under 19,300 in 1995 and just under 19,500 in 1999, an average compound rate of increase of just 0.3% p.a. (see table). The slightly higher rate of increase in enterprises relative to employment is indicative of a slight trend towards smaller pharmacies; indeed the average firm gave employment to 8.2 persons in 2000, compared to a 8.4 person average in 1995. However the total number of enterprises in this branch, at 238 per million of population, makes Germany the last of the countries with a higher than median density of pharmacies, after Spain, Belgium, France, Ireland, Portugal and Italy, in decreasing order. The average turnover share per firm (in 1999) of almost 370,000 EUR is lower than the correspondingly figure - for turnover – for technical services (470,000 EUR) and accounting services (490,000 EUR) in Germany – but on a par with turnover for legal services’ firms (380,000 EUR). Again Germany occupies a position just above halfway among the member states in our survey10. The level of employment is, however, high for the branch, at nearly 2,000 persons per million of the population in 1999, whereas the level of productivity, as measured by the turnover share per employed person is, at 45,000 EUR in 1999 in absolute terms, below the median value of countries included in our survey. Even when adjusted for the price levels in Germany, as well as for the output of the whole economy (in terms of GDP in PPS per capita), the relative volume (share) per employee of the pharmacy branch in Germany occupies the same place among the member states surveyed. 10 Note: value added is typically 70-75% of turnover for legal and accounting services, 50-55% of turnover for technical services. 384 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 11-8 Key Statistics, Pharmacy Services, Germany 5231 Turnover Share per Firm Employment per 1000 firms 1000 EURO Turnover Share per person employed Employment Firms per per Mio. of Mio. of Pop Population 1000 EURO 1995 337 8 403 40 1 988 237 1996 344 8 614 40 2 042 237 1997 338 8 510 40 2 011 236 1998 348 8 625 40 2 030 235 1999 368 8 213 45 1 951 238 Source: EUROSTAT, IHS The differential rates of growth in enterprises, turnover, and employment are illustrated in the chart, with the 1995 values indexed at 100. Chart 11-4 Relative Growth Rates, Germany 5231 115 110 105 100 95 90 1995 1996 Number of Firms Source: EUROSTAT, IHS 1997 Turnover Share 1998 Employment 1999 2000 No. of Professionals I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 385 Turnover, Margin and Profits: German pharmacies achieved a total turnover of 52,6 Bill. DM (without value added tax in 2000). This is an increase of 4.5% over the previous year.11 Table 11-9 Total turnover of pharmacies* in Germany 1992 to 2000 Total Turnover of Pharmacies West – East West – East Germany West Germany East Germany in Bil. DM in Bil. DM in Bil. DM in Bil. DM 1% 1992 40.99 35.31 5.68 29.63 72.3 1993 38.15 31.8 6.35 25.45 66.7 1994 40.58 33.45 7.13 26.32 64.9 1995 43.26 35.46 7.8 27.66 63.9 Year Germany Germany 1996 45.4 37.2 8.2 29 63.9 1997 45.64 37.52 8.12 29.4 64.4 1998 48.4 39.95 8.45 31.5 65.1 1999 50.3 41.6 8.7 32.9 65.4 2000 52.6 43.5 9.1 34.4 65.4 * without value added tax 1 in % of Germany Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003, own calculations Within the 1990s the turnover of pharmacies in Germany increased altogetherfrom 40.99 Bill. DM in 1992 to 52.6 Bill. DM in 2000 by 28.3%. However, the development in West and East Germany was quite different: the West German turnover growth rate in this time period was 23.2%, in East Germany 42.6%. Evidently this is due to the start-up situation in the new Bundesländer. Interestingly the gap in total turnover between West and East rose from 29.63 to 34.4 Bill. DM; however, the relative difference decreased from 72.3% to 65.4% in that period. The turnover per pharmacy from 1980 to 2000 in Germany is shown in the table. In 2000 on the average each pharmacy had a turnover of about 2.37 Mio. DM. From 1980 to 1990 the growth rate of turnover per pharmacy was 49.4%. Such an increase was not achieved in the 1990s: the growth rate from 1990 to 2000 was 43.2%. Within the 1990s almost no change was seen between the turnover situation in 1996 and 1997. The turnover in the last two years increased instead again around 4% per year. 11 Note. There is a discrepancy between these figures and the data from Eurostat! 386 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 11-10 Turnover per pharmacy* 1980 to 2000 in Germany Turnover per pharmacy Year Turnover in 1 000 DM Relative Change 1 % 1980 1 108 - 1990 1 655 49.4 1993 1 750 5.7 1994 1 840 5.1 1995 1 950 6 1996 2 040 4.6 1997 2 050 0.5 1998 2 180 6.3 1999 2 270 4.1 2000 2 370 4.4 * without value added tax 1 in % of Germany Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003, own calculations As the Federal Chamber of Pharmacists points out, and according also to the Institute for Trade Research (Institut für Handelsforschung, IfH), in 2001 there was a trade margin (Handelsspanne) of 26.7% of the gross turnover, 0.4 percentage points less than the year before (see table). From 1980 this margin continuously decreased from 32.7% to 26.7% in 2001. However, the decrease in the 1990s is not as strong as in the 1980s. Table 11-11 Business economic results: trade margins, expenditure and turnover profits of pharmacies in Germany 1980 to 2001 Year Trade Margin % Expenditure Share % Turnover Profits % 1980 32.7 29.8 2.9 1990 28.8 27.3 1.5 1995 28.1 27.4 0.7 1996 28.1 27.5 0.6 1997 27.9 27.8 0.1 1998 27.5 27.5 0.0 1999 27.3 26.5 0.8 2000 27.1 26.2 0.9 2001 26.7 25.3 1.4 Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003, Institute for Trade Research (IfH) I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 387 The expenditure burden (inclusive calculatory wage of the entrepreneur and own capital interest) in 2001 was 25.3% of the gross turnover (26.2% in the year before). As the table shows, the expenditure share decreased from 1980 to 2000 from 29.8% to 25.3%. The decrease again was higher in the 1980s than in the 1990s. The development of the trade margins and the expenditure shares finally yield the turnover profits. Again according to IfH, in 2000 the relative expenditure burden of 25.3% was 1.4% lower than the trade margin, which yields a business economic result (turnover profit) of 1.4%. From 1998 onwards this measure of business success was continuously increasing from 0% to 1.4%. The Federal Statistical Office in Germany provides some additional information about the expenditure (cost) structure. Based on a sample of 572 regarded pharmacies they count an average turnover of 2,105 Mio. DM without value added tax and about 2,412 Mio. DM with value added tax. The turnover per employee (inclusive the self-employed pharmacist and helping family members) is 241,500 DM. The gross profit (Rohertrag) as turnover minus material expenditures per pharmacy is 643,400 DM and per employee is 73,800 DM. Members of the profession: In Germany there are now 45,869 pharmacists working in 21,569 public pharmacies per 31.12.2001 (see table). From all of these, about 53,000 pharmacists the 45,869 pharmacists in public pharmacies are about 86.5%. About 1,829 (3.5%) pharmacists work in hospitals, and about 5.507 (10.4%) in industry, administration, organisations and sciences (end of year 2001). This structure did not change substantially compared to ten years ago: From all pharmacies at the end of year 1991 about 85% worked public, 3% in hospital and about 12% in industry, administration and science. Table 11-12 Pharmacists, pharmacies and supply of pharmacies in Germany 1980 to 2001 16 244 Pharmacists/ Pharmacy 1.7 Inhabitants/ Pharmacy 3 788 18 029 1.9 3 500 21 119 2.0 3 867 43 629 21 290 2.0 3 847 1997 45 271 21 457 2.1 3 820 1998 45 465 21 556 2.1 3 800 1999 46 064 21 590 2.1 3 800 2000 46 078 21 592 2.1 3 800 2001 45 869 21 569 2.1 3 810 Year* Pharmacists Pharmacies 1980 27 693 1990 35 118 1995 42 790 1996 *Per December 31 of each year Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003 388 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S The mean pharmacist per pharmacy quota is about 2.1, which is almost constant since 1997. Within the 1990s the number of pharmacists raised from 35,118 in 1990 to 45,869 in 2001 by 30.6%. The number of public pharmacies, on the contrary, raised from 18,029 in 1990 to 21,569 in 2001 by 19.6% resulting in an increased pharmacists density per pharmacy. The growth in the number of pharmacists in the 1990s by 30.6% was higher than in the 1980s with a growth rate of 26.8% from 27,693 pharmacists in 1980 to 31,118 in 1990. The pharmacy density, measured as all German inhabitants divided by the number of pharmacies, over the years remains constant since 1998 with 3,800 after an increase in the early 1990s from 3,500 to 3,847 inhabitants served by a pharmacy on average. Trainees; ABDA reported that the number of pharmacy trainees in 2000 (in all stages of prequalification) was 13,108, an increase of 17% on the figure for 1990 of 11,195.12 As the number of new trainees in 2000 is approximately the same as in 1995 (ca. 2,500), the period of time in training status is upwards of 5 years. Women in the profession: Compared to many other liberal professions the female quota within pharmacists is relatively high. At the end of the year 2001 almost two out of three pharmacists were women (65.1%, see table). Table 11-13 Female pharmacists in Germany 1980 to 2001 Year* All Pharmacists Male Pharmacists Female Pharmacists 1980 27 693 13 348 14 345 Female Pharmacists quota % 51.8 1990 35 118 14 995 20 123 57.3 1995 42 790 16 389 26 401 61.7 1996 43 629 16 448 27 181 62.3 1997 45 271 16 977 28 294 62.5 1998 45 465 17 004 28 461 62.6 1999 46 064 17 136 28 928 62.8 2000 46 078 15 989 30 089 65.3 2001 45 869 16 008 29 861 65.1 *Per December 31 of each year Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003. The female quota rose by 7.8 percentage points from 57.3% in 1990 to 65.1% in 2001, 12 IHS questionnaire I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 389 Chart 11-5 Male and female pharmacists 1980 to 2001 (end of years) in Germany 35000 30000 25000 20000 15000 10000 5000 0 1980 1990 1995 1996 1997 1998 1999 2000 2001 Male Pharmacists Female Pharmacists . Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003, own calculations As the chart shows, there is a remarkable growing gap between the number of male and female pharmacist apprentices: whereas in 1980 their number was almost the same, in 2001 the difference between male and female apprentices grew to 13,853, which is 30.2% of all pharmacy apprentices. It is to be expected that the female quota will continue to increase because the actual licences (Approbationen) with 1,894 has an even higher female quota of 74%. The pharmacists’ female quota, however, shows a broader range within the different pharmacy types: whilst in the public pharmacies actuallly 65.1% are women, 52% of pharmacists in hospitals and 47% in industry, administration, organisations, science are women. Age structure: There is no information from the Federal Chamber of Pharmacists about the age structure of pharmacists available. Function as employers and instructors: The importance as employers and instructors is shown in two tables: the number of respective persons and the structure as percentage of all active persons in pharmacies (including all pharmacists). 390 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Table 11-14 Year* Employees in pharmacies in Germany 1980 to 2001 Pharmacy Practitioner Pharmacist Assistant Pharrmaceutical Technical Assistant Helpers/PKA others Total Employment 81 001 1 1980 1 113 4 542 (PTA) 11 920 35 733 27 693 1990 1 899 4 168 25 009 33 416 35 118 99 610 1995 1 669 11 501 32 102 38 483 42 781 126 536 1996 1 758 11 344 33 809 39 478 43 629 130 018 1997 1 859 11 313 35 150 38 814 45 271 132 407 1998 1 780 11 367 37 149 39 030 45 465 134 791 1999 1 750 11 141 37 821 38 116 46 064 134 892 2000 1 649 10 835 39 792 38 116 46 078 136 470 2001 1 748 10 294 40 805 38 614 45 839 137 300 * Per December 31 of each year 1 incl. PTA practitioners Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003 The 21,569 public pharmacies provided more than 137,000 working places at the end of the year 2001. The dominant shares of employees in 2001 are pharmaceutical technical assistants (PTA) with 40,805 persons (29.7% of all active persons in pharmacies including pharmacists) and helpers 38,614 (28.1%). 10.294 persons are pharmacist assistants (7.5%) and 1,748 persons (1.3%) are pharmacy practitioners. Table 11-15 Pharmaceutical personnel in pharmacies 1980 to 2001 (end of years) in Germany (Structure in percent of total employment of previous table) Year* Pharmacy Practitioner Pharmacist Assistant Pharrmaceutical Technical Assistant Helpers/PKA All pharmaceutical personnel** 1 1980 1.4 5.6 (PTA) 14.7 44.1 65.8 1990 1.9 4.2 25.1 33.5 64.7 1995 1.3 9.1 25.4 30.4 66.2 1996 1.4 8.7 26 30.4 66.4 1997 1.4 8.5 26.5 29.3 65.8 1998 1.3 8.4 27.6 29 66.3 1999 1.3 8.3 28 28.3 65.9 2000 1.2 7.9 29.2 27.9 66.2 2001 1.3 7.5 29.7 28.1 66.6 * Per December 31 of each year 1 incl. PTA practitioners ** excludes 'others' of previous table Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003 As in 200, of 38,116 helpers/PKA (pharmaceutical commercial assistants) 30,122 had finished their apprenticeship and 7,994 were apprentices as PKA. The percentage of apprentices as PKA at about 21% has been roughly constant over the last years. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — 391 In the 1990s the number of active persons increased from 99,610 in 1990 to 137,300 in 2001 by 37.8%, whereas in the 1980s this growth rate was lower at 23%. Also the employee structure in the 1980s differs from the 1990s to the beginning of this century: whereas the gap between PTAs (14.7%) and helpers/PKA (44.1%) was almost 30 percentage points, this gap decreased to 8 percentage points (33.5% minus 25.1%) and further in 2001 to only -1,6 percentage points (28.1% minus 29.7%). Indeed, the number of PTAs ‘finally’ overtook the number of helpers/PKAs in 2000 and 2001. As the table also shows, the share of pharmacists remains constant at about one third over the past 22 years. ABDA reports that about 95% of pharmacies have altogether between 3 and 10 employees, with the remaining 5% having more than 10 employees (IHS questionnaire). Students: In Germany there were 13,108 pharmacy students as of 1999/2000 (see table). As the table shows, there is a remarkable increase by 19.6% in the 1980s (1980/81 to 1990/91) and a similar increase till 1995/96 by 17.1%. From the mid 1990s there was almost no change, the reason being that recently there has been a ‘numerus clausus’ introduced in Germany for the study of pharmacy. The central authority (Zentralstelle für die Vergabe von Studienplätzen) allows about 2,500 students each year to start with a pharmacy study. Table 11-16 Year Pharmacy students 1980/81 to 2000/01 in Germany All Pharmacy Students Relative Change % 1980/81 9 359 - 1990/91 11 195 19.6 1995/96 13 106 17.1 1996/97 13 085 -0.2 1997/98 13 275 1.5 1998/99 13 123 -1.1 1999/00 13 108 -0.1 Per December 31 of each year Source: ABDA Federal Chamber of Pharmacists (Bundesapothekerkammer), www.abda.de, 3.1.2003 Thus, there is no dramatic change in the future development to be expected within the next years. 392 — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Pharmacy 5231 Table 11-17 Turnover, output and gross return per pharmacy total turnover firms output classes incl. VAT in units excl. VAT in 1000 DM in % of turnover trade turnover retail wholesale 1 total output per firm per person 3 employed in 1000 DM 2 gross return per firm per person employed in 1000 DM 572 2 411.6 2 104.5 98.6 1.3 2 104.5 241.5 643.4 73.8 100000 500000 6 (399) (289.9) (100) (-) (289.9) (92.0) (99.0) (91.4) 500000 1000000 34 998.0 870.2 99.8 _ 870.2 135.3 265.4 41.3 1000000 2000000 192 1 724.7 1 504.3 99.2 0.7 1 504.8 211.1 456.1 64.0 2000000 5000000 286 3 211.6 2 803.7 99 0.9 2 803.9 267.1 867.1 82.6 5000000 10000000 40 7 377.0 6 431.5 84.9 4.3 6 413.5 342.9 1 925.2 102.7 10000000 50000000 14 15 083.1 13.1 87.8 12.3 13 149.0 401.7 3 702.8 113.2 total thereof (Source: Statistisches Bundesamt) 1 total output=turnover without VAT plus/minus changes in stock of semi-finished products gross return=total output minus material expenditure 3 including unpaid persons employed 2 Research Report Economic impact of regulation in the field of liberal professions in different Member States Regulation of Professional Services Iain Paterson, Marcel Fink, Anthony Ogus Section co-authors: Joachim Merz*, Felix Fink*; Helmut Berrer Final Report – Part 3 Study for the European Commission, DG Competition** January 2003 * (Case Studies: Germany, France) **The contents of the study do not necessarily reflect the opinion or position of the European Commission. Institut für Höhere Studien (IHS), Wien Institute for Advanced Studies, Vienna Contact: Iain Paterson : +43/1/599 91-152 email: paterson@ihs.ac.at email: paterson@ihs.ac.at Affiliations Anthony Ogus: Centre for Regulation and Competition, University of Manchester School of Law Joachim Merz, Felix Fink: Research Institute on Liberal Professions, University of Lüneburg Marcel Fink: Department of Government, University of Vienna Iain Paterson, Helmut Berrer: Department of Economics & Finance, Institute for Advanced Studies, Vienna Thanks go to the IHS project team members Niki Graf and Hermann Kuschej, and to the many correspondents at professional bodies, member states’ statistical offices and Eurostat. Part 3 - References and Annexes Contents REFERENCES ANNEXES ANNEX A1 COMPOSITION OF REGULATION INDICES ANNEX A2 COMPOSITION OF REGULATION INDICES ANNEX A3 COMPOSITION OF REGULATION INDICES ANNEX A4 COMPOSITION OF REGULATION INDICES ANNEX A5 COMPOSITION OF REGULATION INDICES ANNEX A6 COMPOSITION OF REGULATION INDICES - LAWYERS……………………………..I NOTARIES …………………………….II ACCOUNTANTS ………………………III ARCHITECTS ……………………...…IV ENGINEERS …………………………..V PHARMACISTS ………………………VI ANNEX B1 EXCERPTS OF COMPARABLE STRUCTURE DATA -- ITALY, LEGAL SERVICES,,,,,,,VII ANNEX B2 EXCERPTS OF COMPARABLE STRUCTURE DATA -- DENMARK, ACCOUNTANCY SERVICES………………………………………………………………………………………..VIII ANNEX B3 EXCERPTS OF COMPARABLE STRUCTURE DATA --GERMANY, TECHNICAL SERVICES…………………………………………………..……………………………………..IX ANNEX C1 GDP PER CAPITA IN PURCHASING POWER STANDARD (PPS)……...……………X ANNEX C2 POI – PRICE AND OUTPUT INDICES…………………………………………………XI ANNEX D1 SOURCES OF ESTIMATES FOR 'NUMBER OF PROFESSIONALS’ - LEGAL SERVICES…………………………………………………………………………………………XII ANNEX D2 SOURCES OF ESTIMATES FOR 'NUMBER OF PROFESSIONALS’ - ACCOUNTANCY SERVICES………………………………………………………………………………..………XIII ANNEX D3 SOURCES OF ESTIMATES FOR 'NUMBER OF PROFESSIONALS’ - TECHNICAL SERVICES………………………………………………………………….…………………….XIV ANNEX D4 SOURCES OF ESTIMATES FOR 'NUMBER OF PROFESSIONALS’ - PHARMACY SERVICES………………………………………………………………………………………...XV ANNEX E1 RETURNS OF IHS QUESTIONNAIRES FROM MEMBER STATES - SUMMARY STATISTICS…………………………………………………………………………………..…..XVI ANNEX E2 SYNOPSIS OF IHS QUESTIONNAIRE RETURNS -- CASE STUDY COUNTRIES/PROFESSIONS………………………………………………………….………….XVII ANNEX E3 IHS QUESTIONNAIRE I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — References AKERLOF, George A., 1970, The Market for “Lemons”: Qualitative Uncertainty and the Market Mechanism, Quarterly Journal of Economics, Vol. 84, 488-500. BARTELS, K. D., 1996, Aus- und Fortbildung des Accountancy Berufsstandes. Ein Vergleich zwischen dem Vereinigten Königreich und der Bundesrepublik Deutschland, Frankfurt/Main. BLACK, Julia, 1996, Constitutionalising Self-Regulation, Modern Law Review, Vol. 59, 24-55. CLEMENT, Werner, KOLB Walter, 2000, Die Entwicklung des Arzneimittelsektors am Apothekenmarkt Österreichs im internationalen Vergleich 1989-1998, IWI Industriewissenschaftliches Institut, IWI Fachbereich Gesundheitsökonomie. FAURE, M., FINSINGER J., SIEGERS J., VAN DEN BERGH R., (eds.), 1993, Regulation of professions: A Law and Economics approach to the regulation of attorneys and physicians in the US, Belgium, The Netherlands, Germany and the UK, Antwerpen. FAURE, M., MAKS J.A.H., PHILIPSEN N.J., 2001, (Zelf)-regulering van de Apothekersmarkt, Maandschrift Economie, Vol. 65, 208-228. FELDERER et al, Bernhard, 2002, Umsatzsteuermodifikation am Arzneimittelmarkt Pros und Cons., IHS Research Report 679, Vienna. 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HERRMANN, H., 1996, Recht der Kammern und Verbände Freier Berufe: Europäischer Ländervergleich und USA, Baden-Baden. HOFMACHER, Maria, RIEDEL Monika, 2001, Ressourcenverbrauch in der EU: Innovation kostet Schwerpunktthema. Die Regulierung des Arzneimittelmarktes macht alle sicherer, Health System Watch, Beilage zur Fachzeitschrift Soziale Sicherheit, Hauptverband der österreichischen Sozialversicherungsträger. HOLEN, Arlene S.,1965, ‘Effects of Professional Licensing Arrangements on Interstate Labor Mobility and Resource Allocation’, Journal of Political Economy, Vol 73, 492-498. IBFD (International Bureau of Fiscal Documentation) (ed.), 2001, Steuerberater-Handbuch Europa, Länderdarstellungen, Rechtsvorschriften, Berufsrecht, Verwaltungsverlautbarungen, Querschnitts-darstellungen, Rechtsprechung, Lose-Blatt Sammlung, Bonn. IFB (ed.), 1993, Freie Berufe in Europa. Materialien zur Struktur und Lage der Freien Berufe in der Europäischen Gemeinschaft, in Österreich und der Schweiz, Bonn. IMS Health, 1999, Europäischer Spannen- und Leistungsvergleich für Apotheken. KAY, John A., 1988, The Forms of Regulation, in Seldon, Arthur (ed), Financial Regulation – or Over-Regulation, 33-42. Institute of Economic Affairs. KAY, John A., VICKERS John, 1990, Regulatory Reform: An Appraisal, in Majone, Giandomenico (ed.), Deregulation or Re-regulation: Regulatory Reform in Europe and the United States, London, Frances Pinter. KENWORTHY, l., 2001, Quantitative Indicators of Corporatism, Department of Sociology, Emory University, Atlanta, http://www.emory.edu/SOC/lkenworthy/QIoC-paper.pdf. KLOS, J., 1991, Der Berufsweg zum Wirtschaftsprüfer, in Steuer&Studium – Zeitschrift für die Aus- und Fortbildung im Steuerrecht, Heft 10/91 (Oktober), 363-367. LECG Ltd., 2001, Restrictions on Competition in the Provision of Professional Services”, Report for the Office of Fair Trading, in Competition in professions, OFT. MAKS, J.A.H., PHILIPSEN N.J., 2002, An economic analysis of the regulation of professions, in L. Vereeck (ed), The Regulation of Architects, Intersentia, Antwerpen. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — MILLER, J.C., 1985, The FTC and Voluntary Standards: Maximising the Net Benefits of SelfRegulation. The Cato Journal, Vol. 4, 897-903. NGUYEN-HONG, Duc, 2000, Restrictions on Trade in Professional Services, Staff Research Paper, Productivity Commission, Melbourne. OECD, 1996, International Trade in Professional Services. Assessing Barriers and Encouraging Reform, Paris. OECD. 1999, Employment Outlook, Paris. OGUS Anthony, 2000, Self-Regulation, in B. Bouckaer and g. De Geest (eds), Encyclopedia of Law and Economics, Vol. V: The Economics of crime and Litigation, Edward Elgar, 587-602. OGUS, Anthony, 1995, ‘Rethinking Self-Regulation’, Oxford Journal of Legal Studies, Vol 15 97-108. ÖSTERREICHISCHE APOTHEKERKAMMER, 2002, Die Österreichische Apotheke in Zahlen. PASHIGIAN, B. Peter, 1977, ‘The Market for Lawyers: The Determinants of the Demand for and Supply of Lawyers’, Journal of Law and Economics, Vol 20, 53-85. PASHIGIAN, B. Peter, 1979, ‘Occupational Licensing and the Interstate Mobility of Professionals’, Journal of Law and Economics, Vol 22, 1-25. PELTZMAN, Sam, 1976, ‘Toward a More General Theory of Regulation’, Journal of Law and Economics, 211-240. POSNER, Richard A., 1974, ‘Theories of Economic Regulation’, Bell Journal of Economics and Management Science, Vol 5, 335-358. ROSIAN, Ingrid, HABL Claudia, VOGLER Sabine, WEIGL Marion, 2001, ÖBIG, Arzneimittel Steuerung der Märkte in der EU, Österreichisches Bundesinstitut für Gesundheitswesen. STD (Svensk Teknik och Design), 2001, Sector Review, Swedish Federation of Consulting Engineers and Architects. — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S STEPHEN, Frank H., 2002, An Economic Perspective on the Regulation of Legal Service Markets, Evidence submitted to the Justice 1 Committee's Inquiry into the Regulation of the Legal Profession, Scottish Parliament, Official Report. STEPHEN, Frank H., LOVE James H., 2000, Regulation of Legal Profession, in Bouckaert, B. and De Geest, G. (eds.), Encyclopedia of Law and Economics, Edward Elgar,.9871017. STIGLER, George J., 1971, The Theory of Economic Regulation, Bell Journal of Economics, Vol 2, 3-21. SVORNY, Shirley, 2000, Regulation of Legal Profession, in Bouckaert, B. and De Geest, G. (eds.), Encyclopedia of Law and Economics, Edward Elgar,.296-328. VAN DEN BERGH, Roger, FAURE Michael G., 1991, Self Regulation of the Professions in Belgium, International Review of Law and Economics, Vol 11, 165-182. WASILEWSKI, R., 1997, Der Berufsstand in der Europäischen Perspektive, in: Bertl (Hrsg.), 201-267. WEIN, T., 1995, Recht durch Rechtsanwälte? Eine ökonomische Analyse des Marktes für Rechtsanwaltsdienstleistungen, Berlin. WHO (World Health Organisation), 1999, Health Care Systems in Transition, Portugal, European observatory of health care systems. I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — i Annex A1 Composition of Regulation Indices - Lawyers Lawyers Market entry ER ERLC ERED Market conduct ERED 1 ERED 2 ERED 3 ERED 4 ERQT MCR MCPR MCAD MCLOC MCDIV MCIC MCIC 1 MCIC 2 Total Austria 4.1 6.0 4.2 4.0 5.0 2.0 6.0 0.0 3.3 5.0 4.0 0.0 3.0 3.3 2.0 4.5 7.3 Belgium 2.5 3.0 3.3 5.0 3.0 0.0 6.0 0.0 2.1 0.0 2.0 0.0 3.0 4.8 5.0 4.5 4.6 Denmark 2.1 1.5 3.7 5.0 3.0 2.0 6.0 0.0 0.9 0.0 2.0 0.0 0.0 2.5 2.0 3.0 3.0 Finland 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.3 France 3.9 6.0 3.7 5.0 2.0 4.0 6.0 0.0 2.7 0.0 4.0 6.0 3.0 2.5 2.0 3.0 6.6 Germany 3.7 6.0 3.3 3.5 2.0 4.0 6.0 0.0 2.8 5.0 2.0 0.0 3.0 2.5 2.0 3.0 6.5 Greece 3.5 6.0 2.8 4.0 1.5 2.0 6.0 0.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 9.5 Ireland 2.4 3.0 3.0 4.0 2.0 4.0 2.0 0.0 2.1 0.0 4.0 0.0 0.0 6.0 6.0 6.0 4.5 Italy 2.6 3.0 3.4 4.0 3.0 2.0 6.0 0.0 3.9 6.0 4.0 0.0 3.0 4.8 5.0 4.5 6.4 Luxembourg 3.8 6.0 3.6 4.5 2.0 4.0 6.0 0.0 2.8 0.0 4.0 0.0 6.0 4.0 2.0 6.0 6.6 Netherlands 2.1 1.5 3.7 5.0 3.0 2.0 6.0 0.0 1.8 0.0 2.0 6.0 0.0 2.5 2.0 3.0 3.9 Portugal 3.5 6.0 2.8 4.0 1.5 2.0 6.0 0.0 2.2 2.0 6.0 0.0 0.0 3.3 2.0 4.5 5.7 Spain 3.4 6.0 2.5 5.0 0.0 2.0 6.0 0.0 3.1 2.0 4.0 0.0 3.0 5.5 5.0 6.0 6.5 Sweden 2.0 1.5 3.5 4.5 5.0 0.0 1.0 0.0 0.4 0.0 0.0 0.0 0.0 1.8 2.0 1.5 2.4 UK/E&W - Barristers 2.8 4.5 2.5 4.5 1.0 2.0 3.0 0.0 1.8 0.0 2.0 0.0 0.0 6.0 6.0 6.0 4.6 United Kingdom 2.9 4.5 2.9 4.5 2.0 2.0 3.0 0.0 0.6 0.0 2.0 0.0 0.0 1.0 2.0 0.0 3.5 Source: IHS questionnaires 2002 and other sources MCR: Market conduct regulation ER: Entry regulation MCPR: Market conduct regulation - Regulation on prices and fees ERLC: Entry regulation - Licensing MCAD: Market conduct regulation - Regulation on advertising ERED: Entry regulation - Requirements in education MCLOC: Market conduct regulation - Regulations on location ERED 1: Entry regulation - Duration of special education: University or other higher degr MCDIV: Market conduct regulation - Regulations on diversification ERED 2: Entry regulation - Duration of compulsory practise MCIC: Market conduct regulation - Regulations on form of business and inter-professional co-operatio ERED 3: Entry regulation - Number of professional exams MCIC 1: Market conduct regulation - Regulations on form of business ERED 4: Entry regulation - Number of entry routes to profession MCIC 2: Market conduct regulation - Regulations on inter-professional co-operation ERQT: Entry regulation - Quotas/Economic needs test ii — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex A2 Composition of Regulation Indices - Notaries Notaries Market entry Market conduct ER ERLC ERED Austria 5.4 6.0 4.6 4.0 6.0 2.0 Belgium 4.0 3.0 4.0 6.0 3.0 2.0 France 5.3 6.0 4.2 6.0 3.0 4.0 Germany 5.5 6.0 4.7 3.5 6.0 4.0 4.0 6.0 5.6 6.0 4.0 6.0 6.0 5.5 Greece 5.2 6.0 4.0 4.0 3.5 4.0 6.0 6.0 n.a. n.a. n.a. n.a. n.a. n.a. Italy 4.8 6.0 3.0 4.0 2.0 2.0 6.0 6.0 5.9 6.0 6.0 6.0 6.0 5.5 Luxembourg 5.1 6.0 3.7 5.0 3.0 2.0 6.0 6.0 n.a. n.a. n.a. n.a. n.a. Netherlands 3.6 4.5 4.6 4.0 6.0 2.0 6.0 0.0 2.6 3.0 2.0 0.0 6.0 Portugal 4.6 6.0 2.5 5.0 1.0 0.0 6.0 6.0 n.a. n.a. n.a. n.a. 4.6 6.0 2.5 5.0 0.0 2.0 6.0 6.0 4.8 6.0 6.0 6.0 Spain ERED 1 ERED 2 ERED 3 ERED 4 Total ERQT MCR MCPR MCAD MCLOC MCDIV MCIC MCIC 1 MCIC 2 6.0 6.0 4.2 4.0 4.0 0.0 6.0 5.5 5.0 6.0 6.0 6.0 5.3 5.0 4.0 6.0 6.0 5.5 5.0 6.0 9.3 4.0 6.0 4.7 5.0 6.0 0.0 6.0 5.5 5.0 6.0 10.0 5.0 6.0 11.0 n.a. n.a. n.a. 5.0 6.0 10.7 n.a. n.a. n.a. n.a. 1.5 0.0 3.0 6.3 n.a. n.a. 0.0 0.0 n.a. 0.0 6.0 6.0 6.0 9.4 Source: IHS questionnaires 2002 and other sources MCR: Market conduct regulation ER: Entry regulation MCPR: Market conduct regulation - Regulation on prices and fees ERLC: Entry regulation - Licensing MCAD: Market conduct regulation - Regulation on advertising ERED: Entry regulation - Requirements in education MCLOC: Market conduct regulation - Regulations on location 9.6 ERED 1: Entry regulation - Duration of special education: University or other higher degr MCDIV: Market conduct regulation - Regulations on diversification ERED 2: Entry regulation - Duration of compulsory practise MCIC: Market conduct regulation - Regulations on form of business and inter-professional co-operatio ERED 3: Entry regulation - Number of professional exams MCIC 1: Market conduct regulation - Regulations on form of business ERED 4: Entry regulation - Number of entry routes to profession MCIC 2: Market conduct regulation - Regulations on inter-professional co-operation ERQT: Entry regulation - Quotas/Economic needs test I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — iii Annex A3 Composition of Regulation Indices - Accountants Accountants Market entry ER ERLC ERED Market conduct ERED 1 ERED 2 ERED 3 ERED 4 ERQT MCR MCPR MCAD MCLOC MCDIV MCIC MCIC 1 MCIC 2 Total Austria 4.2 6.0 4.4 4.0 5.0 4.0 4.0 0.0 2.0 2.0 2.0 0.0 3.0 2.5 2.0 3.0 6.2 Belgium 3.9 6.0 3.8 4.0 3.0 4.0 6.0 0.0 2.4 0.0 4.0 0.0 3.0 4.8 5.0 4.5 6.3 Denmark 2.2 1.5 4.1 5.0 3.0 4.0 6.0 0.0 0.6 0.0 0.0 0.0 3.0 0.0 0.0 0.0 2.8 Finland 2.6 3.0 3.6 4.0 3.0 4.0 4.0 0.0 0.9 0.0 2.0 0.0 0.0 2.5 2.0 3.0 3.5 France 4.0 6.0 4.0 6.0 3.0 2.0 6.0 0.0 1.8 0.0 4.0 0.0 3.0 2.5 2.0 3.0 5.8 Germany 3.6 6.0 3.0 4.0 3.0 2.0 2.0 0.0 2.5 5.0 4.0 0.0 0.0 2.5 2.0 3.0 6.1 Greece 3.6 4.5 4.6 4.0 6.0 2.0 6.0 0.0 1.5 5.0 0.0 0.0 0.0 1.0 2.0 0.0 5.1 Ireland 2.7 3.0 3.7 3.0 5.0 4.0 0.0 0.0 0.3 0.0 2.0 0.0 0.0 0.0 0.0 0.0 3.0 Italy 3.2 4.5 3.4 4.0 3.0 2.0 6.0 0.0 1.9 2.0 2.0 0.0 0.0 4.5 6.0 3.0 5.1 Luxembourg 3.8 6.0 3.6 4.0 3.0 4.0 4.0 0.0 1.2 0.0 4.0 0.0 0.0 2.5 2.0 3.0 5.0 Netherlands 3.1 4.5 3.2 4.0 3.0 2.0 4.0 0.0 1.4 2.0 2.0 0.0 0.0 2.5 2.0 3.0 4.5 Portugal 2.7 3.0 3.7 5.0 3.0 2.0 6.0 0.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Spain 1.9 1.5 3.3 3.0 3.0 4.0 4.0 0.0 1.5 1.0 4.0 0.0 0.0 2.5 2.0 3.0 3.4 Sweden 2.4 2.0 4.0 4.0 5.0 1.0 6.0 0.0 0.9 0.0 2.0 0.0 0.0 2.5 2.0 3.0 3.3 2.7 3.0 3.7 3.0 5.0 4.0 0.0 0.0 0.3 0.0 2.0 0.0 0.0 0.0 0.0 0.0 3.0 United Kingdom Source: IHS questionnaires 2002 and other sources MCR: Market conduct regulation ER: Entry regulation MCPR: Market conduct regulation - Regulation on prices and fees ERLC: Entry regulation - Licensing MCAD: Market conduct regulation - Regulation on advertising ERED: Entry regulation - Requirements in education MCLOC: Market conduct regulation - Regulations on location ERED 1: Entry regulation - Duration of special education: University or other higher degr MCDIV: Market conduct regulation - Regulations on diversification ERED 2: Entry regulation - Duration of compulsory practise MCIC: Market conduct regulation - Regulations on form of business and inter-professional co-operatio ERED 3: Entry regulation - Number of professional exams MCIC 1: Market conduct regulation - Regulations on form of business ERED 4: Entry regulation - Number of entry routes to profession MCIC 2: Market conduct regulation - Regulations on inter-professional co-operation ERQT: Entry regulation - Quotas/Economic needs test iv — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex A4 Composition of Regulation Indices - Architects Architects Market entry Market conduct ER ERLC ERED ERED 1 ERED 2 ERED 3 ERED 4 Austria 3.9 6.0 3.7 5.0 3.0 2.0 Belgium 2.4 3.0 2.9 5.0 2.0 0.0 Denmark 0.0 0.0 0.0 0.0 0.0 Finland 1.4 1.5 2.0 0.0 France 2.2 3.0 2.4 Germany 1.8 1.5 Greece n.a. Ireland Italy Total ERQT MCR MCPR MCAD MCLOC MCDIV MCIC MCIC 1 MCIC 2 6.0 0.0 1.2 1.0 2.0 0.0 0.0 2.5 2.0 3.0 5.1 6.0 0.0 1.6 5.0 2.0 0.0 0.0 0.0 0.0 0.0 3.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.4 6.0 0.0 0.0 6.0 0.0 0.9 0.0 2.0 0.0 0.0 2.5 2.0 3.0 3.1 3.0 4.0 3.0 0.0 6.0 0.0 2.7 6.0 4.0 0.0 0.0 2.5 2.0 3.0 4.5 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 6.0 2.0 5.0 0.0 2.0 1.0 0.0 3.0 6.0 6.0 0.0 0.0 2.5 2.0 3.0 6.2 Luxembourg 2.6 4.5 2.1 4.0 2.0 0.0 1.0 0.0 2.7 5.0 4.0 0.0 0.0 3.3 2.0 4.5 5.3 Netherlands 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Portugal 2.2 3.0 2.4 5.0 1.0 2.0 1.0 0.0 0.6 0.0 4.0 0.0 0.0 0.0 0.0 0.0 2.8 Spain 3.2 6.0 1.9 5.0 0.0 0.0 4.0 0.0 0.8 2.0 2.0 0.0 0.0 0.0 0.0 0.0 4.0 Sweden 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 United Kingdom 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Source: IHS questionnaires 2002 and other sources MCR: Market conduct regulation ER: Entry regulation MCPR: Market conduct regulation - Regulation on prices and fees ERLC: Entry regulation - Licensing MCAD: Market conduct regulation - Regulation on advertising ERED: Entry regulation - Requirements in education MCLOC: Market conduct regulation - Regulations on location ERED 1: Entry regulation - Duration of special education: University or other higher degr MCDIV: Market conduct regulation - Regulations on diversification ERED 2: Entry regulation - Duration of compulsory practise MCIC: Market conduct regulation - Regulations on form of business and inter-professional co-operatio ERED 3: Entry regulation - Number of professional exams MCIC 1: Market conduct regulation - Regulations on form of business ERED 4: Entry regulation - Number of entry routes to profession MCIC 2: Market conduct regulation - Regulations on inter-professional co-operation ERQT: Entry regulation - Quotas/Economic needs test I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — v Annex A5 Composition of Regulation Indices - Engineers Engineers Market entry Market conduct ER ERLC ERED ERED 1 ERED 2 ERED 3 ERED 4 Austria 3.8 6.0 3.5 5.0 3.0 1.0 Belgium 0.0 0.0 0.0 0.0 0.0 0.0 Denmark 0.0 0.0 0.0 0.0 0.0 Finland 1.1 1.5 1.3 3.0 France 0.0 0.0 0.0 Germany 3.7 6.0 Greece n.a. Ireland Italy Total ERQT MCR MCPR MCAD MCLOC MCDIV MCIC MCIC 1 MCIC 2 6.0 0.0 1.2 1.0 2.0 0.0 0.0 2.5 2.0 3.0 5.0 0.0 0.0 1.2 0.0 4.0 0.0 3.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 4.0 3.5 0.0 6.0 0.0 3.7 5.0 2.0 6.0 3.0 2.5 2.0 3.0 7.4 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.4 6.0 2.5 5.0 0.0 2.0 6.0 0.0 3.0 6.0 6.0 0.0 0.0 2.5 2.0 3.0 6.4 Luxembourg 2.7 4.5 2.2 4.0 1.0 0.0 6.0 0.0 2.7 5.0 4.0 0.0 0.0 3.3 2.0 4.5 5.3 Netherlands 1.5 2.0 1.7 3.0 1.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 Portugal 3.4 6.0 2.4 4.0 2.0 0.0 4.0 0.0 n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 n.a. Spain 3.2 6.0 2.1 5.0 0.0 0.0 6.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 Sweden 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 United Kingdom 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Source: IHS questionnaires 2002 and other sources MCR: Market conduct regulation ER: Entry regulation MCPR: Market conduct regulation - Regulation on prices and fees ERLC: Entry regulation - Licensing MCAD: Market conduct regulation - Regulation on advertising ERED: Entry regulation - Requirements in education MCLOC: Market conduct regulation - Regulations on location ERED 1: Entry regulation - Duration of special education: University or other higher degr MCDIV: Market conduct regulation - Regulations on diversification ERED 2: Entry regulation - Duration of compulsory practise MCIC: Market conduct regulation - Regulations on form of business and inter-professional co-operatio ERED 3: Entry regulation - Number of professional exams MCIC 1: Market conduct regulation - Regulations on form of business ERED 4: Entry regulation - Number of entry routes to profession MCIC 2: Market conduct regulation - Regulations on inter-professional co-operation ERQT: Entry regulation - Quotas/Economic needs test vi — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex A6 Composition of Regulation Indices - Pharmacists Pharmacists Market entry Market conduct ER ERLC ERED ERED 1 ERED 2 ERED 3 ERED 4 Austria 3.6 1.5 2.8 4.5 1.0 2.0 Belgium 3.6 3.0 2.1 5.0 0.0 0.0 Denmark 2.3 1.5 2.1 5.0 0.0 Finland 4.0 4.5 2.3 5.0 France 3.8 3.0 2.5 Germany 1.6 1.5 Greece 4.4 Ireland Total ERQT MCR MCPR MCAD MCLOC MCDIV MCIC MCIC 1 MCIC 2 6.0 6.0 3.7 3.0 4.0 0.0 6.0 4.8 5.0 4.5 7.3 6.0 6.0 1.8 3.0 2.0 0.0 3.0 0.0 0.0 0.0 5.4 0.0 6.0 3.0 3.6 5.0 2.0 0.0 3.0 6.0 6.0 6.0 5.9 0.5 0.0 6.0 6.0 3.0 3.0 2.0 0.0 3.0 6.0 6.0 6.0 7.0 5.0 1.0 0.0 6.0 6.0 3.5 5.0 4.0 0.0 3.0 4.0 2.0 6.0 7.3 2.9 4.0 1.0 6.0 1.0 0.0 4.1 5.0 2.0 0.0 6.0 5.5 5.0 6.0 5.7 6.0 2.4 4.0 0.5 2.0 6.0 6.0 4.5 5.0 4.0 0.0 6.0 6.0 6.0 6.0 8.9 1.5 1.5 2.6 4.0 1.0 2.0 6.0 0.0 1.2 3.0 2.0 0.0 0.0 0.0 0.0 0.0 2.7 Italy 4.8 6.0 3.3 5.0 2.0 2.0 6.0 6.0 3.6 3.0 2.0 0.0 6.0 6.0 6.0 6.0 8.4 Luxembourg 4.0 4.5 2.2 4.5 0.5 0.0 6.0 6.0 3.9 3.0 4.0 0.0 6.0 6.0 6.0 6.0 7.9 Netherlands 1.2 1.5 1.9 6.0 0.0 0.0 1.0 0.0 1.8 3.0 2.0 0.0 3.0 0.0 0.0 0.0 3.0 Portugal 4.2 4.5 2.7 5.5 0.0 2.0 6.0 6.0 3.8 3.0 6.0 0.0 6.0 4.0 2.0 6.0 8.0 Spain 3.6 3.0 2.1 5.0 0.0 0.0 6.0 6.0 3.9 3.0 4.0 0.0 6.0 6.0 6.0 6.0 7.5 Sweden 4.2 6.0 2.1 5.0 0.0 0.0 6.0 6.0 5.4 6.0 2.0 6.0 6.0 6.0 6.0 6.0 9.6 United Kingdom 2.7 1.5 3.0 4.0 1.0 4.0 6.0 3.0 1.4 2.0 2.0 0.0 0.0 2.5 2.0 3.0 4.1 Source: IHS questionnaires 2002 and other sources MCR: Market conduct regulation ER: Entry regulation MCPR: Market conduct regulation - Regulation on prices and fees ERLC: Entry regulation - Licensing MCAD: Market conduct regulation - Regulation on advertising ERED: Entry regulation - Requirements in education MCLOC: Market conduct regulation - Regulations on location ERED 1: Entry regulation - Duration of special education: University or other higher degr MCDIV: Market conduct regulation - Regulations on diversification ERED 2: Entry regulation - Duration of compulsory practise MCIC: Market conduct regulation - Regulations on form of business and inter-professional co-operatio ERED 3: Entry regulation - Number of professional exams MCIC 1: Market conduct regulation - Regulations on form of business ERED 4: Entry regulation - Number of entry routes to profession MCIC 2: Market conduct regulation - Regulations on inter-professional co-operation ERQT: Entry regulation - Quotas/Economic needs test I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — vii Annex B1 Excerpts of Comparable Structure Data -- Italy, Legal Services ITALY - k7411 Legal services 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Key Variables: F in units T in Mio EUR E in units 74 158 1 5 818 1 131 184 1 77 367 1 7 824 1 131 409 1 80 241 1 7 824 1 136 694 1 70 254 1 8 222 1 128 185 1 79 093 1 87 608 1 9 104 1 11 273 1 135 842 1 148 665 1 139 500 2 57.61 1 57.68 1 1 1 108 1 1 166 1 117 3 115 3 129 3 1 825 3 1 717 3 1 697 3 64 3 67 3 76 3 2 227 3 2 358 3 2 577 3 1 220 3 1 373 3 1 519 3 Professionals in units 57.33 1 1 971 78 3 1 769 3 44 3 2 291 3 1 295 3 1 182 3 1 592 3 66 3 81 3 1 497 3 1 066 3 1 530 3 T per cap. in EUR 102 3 T in % of GDP 0.69 3 Population in Mio. GDP in Bil. EUR 57.27 1 839 57.46 1 57.56 1 1 1 1 030 1 069 101 3 1 699 3 98 3 1 704 3 60 3 57 3 2 292 3 2 379 3 1 349 3 1 396 3 Key Indicators: T per Firm in 1000 EUR E per 1000 firms T per E in 1000 EUR E per Mio. of Pop F per Mio. of Pop Prof per 1000 F T per Prof in 1000 EUR E per 1000 Prof Prof Density (per Mio. Pop) 136 3 0.81 3 7 014 3 122 3 Vol per firm in 1000 EUR* Vol per E in 1000 EUR* Vol in POI-adjusted Mio. EUR* Vol per cap. in EUR* Vol per Prof in 1000 EUR* 1 Source: Eurostat 2 Value refers to year 2001 3 Value calc. by IHS 2 419 3 158 3 195 3 0.82 3 0.97 3 8 989 3 10 073 3 12 577 3 156 3 175 3 218 3 106 3 128 3 127 3 144 3 62 3 70 3 74 3 85 3 90 3 136 3 143 3 0.76 3 0.77 3 8 557 3 8 479 3 149 3 148 3 95 3 111 3 53 3 65 3 80 3 viii — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex B2 Excerpts of Comparable Structure Data -- Denmark, Accountancy Services DENMARK - k7412 Accountancy 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Key Variables: F in units T in Mio EUR E in units 7 377 1 7 532 1 4 022 3 4 104 3 1 048 1 1 067 1 1 199 3 1 376 3 20 246 1 19 370 1 16 366 3 17 024 3 5 077 2 5.31 1 5.33 1 165 1 176 1 298 4 335 4 4 069 4 4 148 4 73 4 81 4 3 739 4 3 080 4 3 194 4 1 454 4 757 4 770 4 Professionals in units 5.18 1 1 119 1 142 4 142 4 2 744 4 2 572 4 52 4 55 4 E per Mio. of Pop 3 922 4 F per Mio. of Pop 1 429 4 Population in Mio. GDP in Bil. EUR 5.16 1 114 5.20 1 128 1 5.22 1 138 1 5.25 1 144 1 5.28 1 149 1 5.29 1 156 1 Key Indicators: T per Firm in 1000 EUR E per 1000 firms T per E in 1000 EUR Prof per 1000 F T per Prof in 1000 EUR E per 1000 Prof 203 4 0.92 4 766 4 Vol per cap. in EUR* 148 4 Vol per firm in 1000 EUR* 104 4 38 4 T in % of GDP Vol in POI-adjusted Mio. EUR* Vol per E in 1000 EUR* 206 4 0.90 4 755 4 146 4 100 4 39 4 Vol per Prof in 1000 EUR* 1 Source: Eurostat 2 Value refers to year 2001 3 Source: Danish national data from Danmarks Statistik 4 Value calc. by IHS 4 271 4 3 353 4 953 4 226 4 258 4 0.72 4 0.78 4 820 4 938 4 154 4 176 4 204 4 229 4 50 4 55 4 185 4 Prof Density (per Mio. Pop) T per cap. in EUR 1 237 I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — ix Annex B3 Excerpts of Comparable Structure Data --Germany, Technical Services GERMANY - k742 Technical services 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Key Variables: F in units T in Mio EUR E in units Professionals in units Population in Mio. GDP in Bil. EUR 69 880 1 32 490 1 360 269 1 130 148 2 82.16 1 20 255 1 Key Indicators: 465 3 5 156 3 90 3 E per Mio. of Pop 4 385 3 F per Mio. of Pop 850 3 1 862 3 T per Firm in 1000 EUR E per 1000 firms T per E in 1000 EUR Prof per 1000 F 250 3 E per 1000 Prof 2 768 3 Prof Density (per Mio. Pop) 1 584 3 T per cap. in EUR 395 3 T in % of GDP 1.60 3 T per Prof in 1000 EUR 29 711 3 Vol per cap. in EUR* 362 3 Vol per firm in 1000 EUR* 425 3 82 3 228 3 Vol in POI-adjusted Mio. EUR* Vol per E in 1000 EUR* Vol per Prof in 1000 EUR* 1 Source: Eurostat 2 Value refers to year 2001 3 Value calc. by IHS x — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex C1 GDP per capita in Purchasing Power Standard (PPS) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Belgium Denmark Germany Greece Spain France Ireland Italy Luxembourg Netherlands Austria Portugal Finland Sweden UK 107.2 110.4 106.7 60.6 80.9 110.3 76.8 105.6 161.1 104.5 108.5 65.0 93.7 106.4 97.2 110.0 108.0 108.8 62.3 78.9 108.8 80.0 105.1 163.2 104.2 108.5 65.9 87.3 101.0 98.2 113.2 113.2 108.6 64.2 79.6 107.0 83.3 102.3 172.2 106.1 111.7 68.4 91.5 100.1 99.3 113.0 116.6 110.2 64.9 77.9 104.8 87.9 103.1 175.2 106.2 111.4 70.2 91.4 100.5 98.9 112.2 118.1 110.0 65.9 78.2 104.0 93.3 103.4 170.8 109.2 110.3 70.6 96.9 102.5 96.4 110.7 119.3 109.6 66.7 79.3 101.9 94.1 103.2 169.3 106.8 111.6 70.6 95.3 101.4 99.1 111.0 120.0 107.8 65.8 79.8 99.2 103.6 102.0 175.2 112.4 111.1 74.5 99.3 102.2 102.5 110.5 119.4 106.1 66.6 79.1 99.0 105.7 103.4 178.7 115.2 109.5 72.8 101.2 101.5 103.4 109.9 118.9 105.3 67.2 80.3 99.1 112.1 102.5 183.3 115.3 109.7 73.8 100.8 101.8 103.9 110.5 120.4 104.4 68.6 81.0 98.7 118.9 101.6 194.1 116.7 109.6 73.6 102.9 101.9 104.5 EU15 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Eurostat I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — xi Annex C2 POI – price and output indices1 1991 1992 1993 1994 EU-15 Belgium Denmark Germany Greece Spain France Ireland Italy Luxembourg Netherlands Austria Portugal Finland Sweden UK 106.2 136.1 115.7 46.1 73.9 109.4 70.8 107.1 0.0 104.9 113.2 42.5 128.8 0.0 93.8 108.7 136.9 120.4 46.4 73.9 110.3 72.6 104.0 0.0 105.9 115.4 47.2 103.4 0.0 89.1 113.2 141.4 127.2 47.5 67.3 114.4 73.9 91.9 0.0 112.3 122.6 45.8 89.7 0.0 87.9 114.6 144.8 127.4 47.5 64.0 113.4 76.0 88.8 0.0 112.4 123.1 45.3 97.6 0.0 89.0 1995 1996 1997 1998 1999 2000 100 100 100 100 100 100 118.3 149.5 130.4 48.7 64.5 113.5 80.0 82.9 188.0 116.3 126.6 47.2 109.7 117.8 84.4 113.3 148.4 124.0 50.6 66.1 111.2 86.0 91.4 184.7 113.0 122.4 48.2 106.0 126.2 86.8 109.5 145.5 117.0 52.5 64.9 107.1 99.4 92.3 191.2 109.8 115.9 48.8 108.3 122.8 103.0 108.3 144.9 115.2 50.9 65.8 106.7 102.8 91.5 199.9 110.3 115.1 49.8 110.3 119.0 106.8 108.4 146.3 113.2 52.3 67.5 105.6 111.8 90.4 202.2 111.1 114.3 51.0 109.7 120.2 109.6 107.5 146.7 109.4 51.8 68.5 103.1 121.2 89.6 214.4 111.9 112.0 51.1 112.8 123.4 116.1 Source: Eurostat 1 Constructed as the product of Purchasing Power Parities (PPP) deflators, which remove the effect of price level differences between countries, and GDP per capita in Purchasing Power. xii — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex D1 Sources of Estimates for 'Number of Professionals’ - Legal Services country number reference year value given for AUT 4 592 2001 2000 BEL 14 888 2001 2000 DNK 4 359 FIN 2 120 unclear 2000 or 2001 2002 FRA 39 940 2000 2001 GER 105 724 2000 2000 GRC ~ ~ ~ IRL 7 476 2001 1999 ITA 139 500 2001 2000 LUX 830 2001 2000 NLD 13 222 2001 1999 PRT ~ ~ ~ ESP 105 269 2001 1999 SWE 8 480 2000 2000 UK 111 772 2001 2000 2000 2000 sources 1) Österreichische Rechtsanwaltskammer (ÖRAK) - member statistic (sent by ÖRAK electronically) 2) Österreichische Notariatskammer (ÖNK) - IHS questionnaire 1) Ordre des barreux francophones et germanophones - telephone 2) Vereniging van Vlaamse Balies - telephone 3) Fédération Royale des Notaires de Belgique - IHS questionnaire 1) Det Danske Advokatsamfund - IHS questionnaire 1) Suomen Asianajajaliito - website <http://www.asianajajaliitto.fi> 1) Ministry for Justice - website <http://www.justice.gouv.fr> 2) Conseil National des Barreaux - IHS questionnaire 3) Conseil Supérieur du Notariat Francais - IHS questionnaire 1) Bundesrechtsanwaltskammer (BRAK) - website <http://www.brak.de> (BRAK-member statistic) 2) Bundesnotarkammer - website <www.bnotk.de> (BNK - member statistic) ~ 1) Law Society of Ireland - IHS questionnaire 2) Bar Council - website <http://www.lawlibrary.ie> 1) Autorita garante della concorrenza e del meracato 1) Ordre des Avocats du Barreau de Luxembourg - IHS questionnaire 2) Chambre des Notaires du Grand-Duché de Luxembourg - telephone 1) Nederlandse Orde van Advocaten - IHS questionnaire 2) Koninklijke Notariële Beroepsorganisatie - IHS questionnaire ~ 1) Consejo General del Notariado - questionnaire, 2) Consejo General de la Abogacia Espanola - website <http://www.cgae.es/> (Censo de Colegiados 2001) 1) Sveriges Advocatsamfund - IHS questionnaire 2) IHS calculations 1) General Council of the Bar- IHS questionnaire 2) Law Society England and Wales - IHS questionnaire 3) Faculty of Advocates of Scotland - telephone 4) Law Society of Scotland - IHS questionnaire 5) General Council of the Bar in Northern Ireland - IHS questionnaire I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — xiii Annex D2 Sources of Estimates for 'Number of Professionals’ - Accountancy Services country number AUT 3 068 2000 2000 BEL ~ ~ ~ DNK 5 077 2001 2000 FIN 3 126 2001 2000 FRA 14 800 2002 2000 GER 14 078 2000 2000 GRC ~ ~ ~ IRL 2 696 2001 2000 ITA 88 421 2001 2000 LUX 346 2001 2000 NLD 6 359 2001 1999 PRT ~ ~ ~ ESP 5 162 1999 2001 SWE 4 100 2001 2000 UK 51 675 reference year value given for 2001 2000 sources 1) Kammer der Wirtschaftstreuhänder - IHS questionnaire ~ 1) Foreningen Registrerede Revisorer (FRR) - IHS questionnaire 2) Foreningen af Statssutoriserede Revisorer (FSR) - IHS questionnaire 1) Central Chamber of Commerce of Finland - IHS questionnaire 2) KHT-yhdistys, Föreningen CGR RY, Finnish Institute of Authorised Public Accountants - telephone 1) Conseil Supérieur de lÓrdre des Experts-Comptables (Mr. Monnot) telephone) 1) Wirtschaftsprüferkammer - website <http://www.wpk.de/> (WPKmember statistic) ~ 1) The Institute of Chartered Accountants in Ireland - IHS questionnaire 2) IHS - estimate 1) Consiglio Nazionale dei Dottori Commercialisti - IHS questionnaire 2) Consiglio Nazionale dei Ragionieri Commercialisti - IHS questionnaire 1) Ordre des Experts-Comptables - telephone 1) Koninklijk Nederlands Instituut van Registeraccountants - website <http://www.nivra.nl/> (NIVRA - member statistic) ~ 1) Instituto de Auditores-Censores Jurados de Cuentas de Espana telephone 1) Revisorsnämnden (RN) - website <http://www.revisorsnamnden.se> 1) Accountancy Foundation Review Board 2) Institute of Chartered Accountants of England and Wales - website <http://www.icaew.co.uk> (ICAEW - member statistic) 3) The Chartered Institute of Management Accountants - telephone 4) The Chartered Institute of xiv — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex D3 Sources of Estimates for 'Number of Professionals’ - Technical Services country number reference year value given for AUT 7 673 2000 2000 BEL ~ ~ ~ DNK 11 595 2000 2000 FIN 6 500 2001 2000 FRA 80 300 2000 2000 GER 130 148 2001 2000 GRC ~ ~ ~ IRL 7 189 2001 1999 ITA 131 448 2001 2000 LUX 789 2001 2000 NLD 39 000 2001 1999 PRT ~ ~ ~ ESP 48 723 2001 2000 SWE 17 850 2001 2000 UK 199 039 2000 2000 sources 1) Bundeskammer der Architekten und Ingenieurkonsulenten - IHS questionnaire 2) Fachverband Technische Büros - Ingenieurbüros IHS questionnaire ~ 1) Danish Association of Consulting Engineers - IHS questionnaire 2) Federation of Danish Architects - IHS questionnaire 1) The Finnish Association of Graduate Engineers TEK - telephone 2) Finnish Association of Architects SAFA - telephone 1) Conseil national de l'Ordre des architects - IHS questionnaire 2) Consiglio Nazionale degli Architetti, Pianificatori, Paesaggisti e Conservatori - website <http://www.archieuro.archiworld.it/> 3) Conseil national des ingénieurs et des scientifiques de 1) Bundesarchitektenkammer - IHS questionnaire 2) Bundesingenieurkammer - IHS questionnaire ~ 1) Royal Institute of the Architects of Ireland - IHS questionnaire 2) The Institution of Engineers of Ireland - IHS questionnaire 1) Sindicato Nazionale Ingegneri Liberi - Professionisti Italiani - IHS questionnaire 2) 2) Consiglio Nazionale degli Architetti, Pianificatori, Paesaggisti e Conservatori - website <http://www.archieuro. archiworld.it/> 1) Ordre des Architectes et Ingénieurs Conseils de Luxembourg OAI IHS questionnaire 1) Koninklijk Instituut van Ingenieurs (KIVI) - telephone 2) Royal Institute of Dutch Architects - IHS questionnaire ~ 1) Consejo Superior de los Colegios de Arquitectos de España (CSCAE) - IHS questionnaire 2) TECNIBERIA CIVIL - Asociación Espanola de Empresas Consultatoras de Ingenieria Civil - IHS questionnaire 1) STD - Swedish Federation of Architects and Consulting Engineers report 1) The Engineering Council - report 2) Architects Registration Board IHS questionnaire I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — xv Annex D4 Sources of Estimates for 'Number of Professionals’ - Pharmacy Services country number reference year value given for sources AUT 4 581 2001 2000 1) Österreichische Apothekerkammer - IHS questionnaire BEL 8 000 2001 1999 1) Ordre des Pharmaciens- Conseil National - telephone DNK 1 008 2001 2000 1) Danish Ministry of the Interior and Health - letter to IHS FIN 4 200 2002 2000 1) The Finnish Pharmacists' Association - website <http://www.farmasialiitto.fi/sflinenglish.htm> FRA 57 650 2002 2000 1) Pharmazeutische Zeitung - website <http://www.pharmazeutischezeitung.de/pza/2002-36/titel.htm> GER 46 078 2000 1999 1) Bundesvereinigung Deutscher Apothekerverbände (ABDA) - IHS questionnaire GRC ~ ~ ~ IRL 2 966 1999 1999 1) The Pharmaceutical Society of Ireland - IHS questionnaire ITA 64 000 2000 2000 1) Federazione Ordini Farmacisti Italiani - IHS questionnaire LUX 292 1998 2000 1) World Health Organization - Health for all - Database NLD 2 528 1999 1998 1) World Health Organization - Health for all - Database PRT 9 498 2001 2000 1) Ordem dos Farmacêuticos - IHS questionnaire ESP 19 641 2000 2000 1) Consejo General de Colegios Oficiales de Farmaceuticos España website <http://www.portalfarma.com/home.nsf> SWE 5 000 2001 2000 1) Sveriges Farmacevtförbund - telephone UK 31 000 2001 2000 1) Royal Pharmaceutical Society of Great Britain (RPSGB) - IHS questionnaire ~ xvi — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex E1 Returns of IHS Questionnaires from member states - Summary statistics I H S — Paterson, Fink, Ogus et al. / Regulation of Professional Services — xvii Annex E2 Synopsis of IHS Questionnaire returns from professional bodies - for Case Study countries/professions1 part 3 Professional field Country Denmark Contacts repart 1 part 2 plied number of members or profs. Det Danske Advokatsamfund Bundesrechtsanwaltskammer Deutscher Anwaltverein e. V. Germany Bundesnotarkammer Deutscher Notarverein Landesnotarkammer Bayern General Council of the Bar The Law Society U.K. England/Wales The Faculty Office of the Archbishop of Canterbury Scrivener's Company (London Notaries) Faculty of Advocates U.K. Scotland The Law Society of Scotland Society of Solicitor Advocates General Council of the Bar of Northern Ireland Legal Services U.K. North. Ireland Law Society of Northern Ireland Consiglio Nazinale Forense Consiglio dell'Ordine degli Avvocati e Procuratori di Roma Italy Consiglio dell'Ordine degli Avvocati e Procuratori di Milano Consiglio Dell'Ordine degli Avvocati e Procuratori di Napoli Consiglio Nazionale del Notariato Barreau de Paris Conférence des Batonniers Association française des Avocats Conseils d'Entreprise Confederation Nationale des Avocats France Fédération Nationale des Unions de Jeunes Avocats Syndicat des Avocats de France Conseil National des Barreaux Conseil Supérieur du Notariat Francais Koninklijk Nederlands Instituut van Registeraccountants Netherlands De Nederlandse Orde van Belastingadviseurs De Nederlandse Federatie van Belastingadviseurs Wirtschaftsprüferkammer Institut der Wirtschaftsprüfer in Deutschland Germany Accountancy Bundesverband Deutscher Unternehmensberater BDU e.V. Bundessteuerberaterkammer Der Deutsche Steuerberaterverband Conseil Supérieur de lÓrdre des Experts-Comptables France Institut Francais des Experts Comtables (IFEC) La Compagnie Nationale des Commissaires aux Comptes Consiglio Nazionale dei Dottori Commercialisti Italy Consiglio Nazionale dei Ragionieri Commercialisti ed Economisti d'impresa Associazione Nationale Tributaristi Italiani 1 Parts of Questionnaire: Part 1- current regulations; Part 2 – recent changes in regulation; Part 3 – structure data etc. Other data All data xviii — Paterson, Fink, Ogus et al. / Regulation of Professional Services — I H S Annex E2 (cont’d) Synopsis of IHS Questionnaire returns from professional bodies - for Case Study countries/professions 2 part 3 Professional field Contacts Country repart 1 part 2 plied number of members or profs. Bundeskammer der Architekten und Ingenieurkonsulenten Austria Fachverband Technische Büros - Ingenieurbüros Verband Österreichischer Ingenieure Österreichischer Ingenieur- und Architekten-Verein Consejo Superior de los Colegios de Arquitectos de España CSCAE Asociación Española de Consultores en Ingeniería y Organización Spain Colegio de Ingenieros de Caminos, Canales y Puertos TECNIBERIA CIVIL - Asoc. Espanola de Empresas Consultatoras de Ingenieria Civil Instituto de la Ingenieria de Espana Technical services Finnish Association of Architects SAFA Finland Finnish Association of Consulting Firms * The Finnish Association of Graduate Engineers TEK The Association of Finnish Civil Engineers Conseil national de l'Ordre des architects Union Nationale des Syndicats Français d’Architectes UNSFA France Chambre des Ingénieurs-Conseils de France Syntec-Ingénierie Conseil national des ingénieurs et des scientifiques de France Ordre des géomètres-experts - Secrétaire Général Germany ABDA, Bundesvereinigung Deutscher Apothekerverbände Apoteket AB Sveriges Farmacevtförbund Sweden Socialstyrelsen - National Board of Health and Welfare (Leif Gudmundson) Ministry of Health and Social Affairs (Mr Lars Hedengran) The Pharmaceutical Society of Ireland Ireland Pharma-cies Hospital Pharmacists Association - Ireland Irish Pharmaceutical Union Associação Nacional das Farmácias Sindicato Nacional dos Farmacêuticos Ordem dos Farmacêuticos Portugal Associação dos Farmacêuticos Católicos Associação Portuguesa dos Farmacêuticos Hospitalares - APFH Associação Portuguesa dos Jovens Farmacêuticos - APJF Instituto Nacional da Farmacia e do Medicamento * members are industrial firms (not individuals) 2 Parts of Questionnaire: Part 1- current regulations; Part 2 – recent changes in regulation; Part 3 – structure data etc. Other data All data Annex E3 - IHS Questionnaire Survey Questionnaire “Professional Services” These data sheets may be filled in ‘electronically’. For this purpose two types of grey input-boxes are provided: - square click-boxes ( ). Click as appropriate to reply “yes” or “no” to questions. - rectangular text-boxes ( ). Fill in if question elicits a response of a number, a name or a few words or sentences. The size of the box depends on the amount of text-input. Part I. INFORMATION ON PROFESSIONAL REGULATIONS 1. General Information 1.1. Professional Field (please choose) Accountancy Services Legal Services Architectural Services Engineering Services Pharmacists 1.2. Name of Profession (please fill in) Official Name: English Name (where appropriate) 1.3. This Data Sheet was filled in by … Name: Organisation and Position: Postal Address Street name and No.: City and Postal Code: Country: E-Mail Address: Tel. Nr.: Fax. Nr.: 1 2. Organisational Characteristics of the Profession 2.1. The following is true for the main organisational structure of the profession...(see Note 1) (please choose one) Licensing and compulsory membership in a professional association Licensing without compulsory membership in a professional association. No compulsory licensing and voluntary membership in a professional association (=certification). No compulsory licensing nor voluntary membership in a professional association (=certification). 2.2. Regulations are created ... (please choose one) exclusively by public authorities exclusively by the responsible professional association by public authorities and by the professional association 2.3. The implementation of the regulations is organised and controlled... exclusively by public authorities exclusively by the responsible professional association by public authorities and by the professional association 2.4. Disciplinary sanctions for failure to respect these regulations are decided... exclusively by public authorities exclusively by the responsible professional association by public authorities and by the professional association there are no such sanctions 2 3. Market Entry Regulations Yes No Yes No 3.1. Are there specific regulations on access to the profession / gaining a professional title? 3.2. Are there specific regulations on access to the professional market / tasks or services offered exclusively by licensed professionals if “no” go to question 3.4. 3.3. a. Please list (up to ten) services that your profession has a exclusive right to offer. Type of exclusive service 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 3.3. b. Please list (up to ten) services that your profession and other professions have the right to provide, and name these other professions. This type of service may also be offered by Type of service (please fill in name of profession/s) 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 6. 6. 7. 7. 8. 8. 9. 9. 10. 10. 3 Yes 3.4. Is a University Degree a necessary precondition to enter the profession? if “yes”, which degree and what is the minimum duration of study: name of degree years (please give exact information) Yes No No 3.5. Is there any other higher education qualification enabling application for entrance to the profession? if “yes”, of what duration: name of qualification years (please give exact information) Yes No Yes No Yes No 3.6. Are there requirements in regard of relevant practice in order to become a full member of the profession? if “yes”, of what duration: years (please give exact information) 3.7. Does there exist a requirement to pass one or more special professional exams in order to become a full member of the profession and offer services that are restricted to the profession? if “yes”, how many? (please fill in the number and names) 3.8. Is compulsory membership in a professional association required in order to become a full member of the profession and offer services that are restricted to the profession? if “yes”: are there more than one such professional organisations for this profession? if “yes”, how many? (please fill in the number and names) 4 Yes No 3.9. Is the establishment of a business in the profession restricted to specific forms of business (such as limited liability partnerships or public companies)? if “yes”: please click on the kinds of business structures which are not permitted: Sole practitioners Limited Liability Partnerships Public limited companies Private company Other, (please name) Yes No Yes No 3.10. Is the establishment of a business in the profession restricted by quotas/economic needs tests? (see Note 2) 3.11. Are there regulations on compulsory professional indemnity insurance? if “yes”: what is the minimum amount for which professionals must be insured (please fill in EUR) per case per business 4. Regulations on market behaviour Yes 4.1. Are there special regulations for the fees/prices for services the profession is offering? if “no” go to question 4.3. 4.2. Of what kind are these regulations? (please choose one) binding minimum prices for all kinds of services binding maximum prices for all kinds of services binding minimum prices for some kinds of services binding maximum prices for some kinds of services non-binding recommended prices for all kinds of services non-binding recommended prices for some kinds of services other, (please describe): 5 No Yes No Higher Lower Yes No Yes No 4.2. a. Are these prices/recommendations always respected in practice? If “no”, are real prices higher or lower, on average? 4.2. b. Are there any restrictions on particular pricing arrangements (e.g. contingency fees)? If “yes”, please specify: 4.3. Are there special regulations on advertising and marketing? if “no” go to question 4.5. 4.4. Of what kind are these regulations? all forms of advertising are strictly forbidden, most forms of advertising are forbidden some forms of advertising are forbidden, these being: direct mailing price advertising (general) comparative price advertising other (please fill in): 1. 2. 3. Yes 4.5. Are there special regulations on location and diversification? if “no” go to question 4.7. 4.6. Of what kind are these regulations? geographical restrictions on offering services restrictions on establishing branch offices other, (please describe): 6 No Yes No 4.7. Are there special regulations on interprofessional co-operation? if “no” go to question 4.9. 4.8. Of what kind are these regulations? interprofessional co-operation of any form is generally forbidden. interprofessional co-operation only in the form of incorporation is generally forbidden. interprofessional co-operation only with some comparable licensed professions is allowed in various commercial forms (incl. incorporation). interprofessional co-operation in the form of incorporation is allowed only with comparable licensed professions, incorporation is forbidden. If other circumstances pertain, please describe briefly: Yes No 4.9. Is continuing education an obligation to the members of the profession? if “yes”: To what extent and how is the continuing education organised and controlled? Please describe briefly: Yes No 4.10. Are there any regulations on specialisation in the profession (for example see Note 3) if “yes”: how is specialisation organised?; is there a right to a title for this specialisation?; may this specialisation be advertised? Please describe briefly: 7 5. Other Instruments for Quality Control Yes No 5.1. Do there exist special information or benchmarking systems for the profession, where information about the quality of services of individual firms is given? if “yes”: please describe briefly and give a short overview of the experience with these instruments: Yes No 5.2. Are there any special (voluntary) certification systems, which coexist alongside the traditional licensing or certification model (see Note 4) if “yes”: please describe briefly and give a short overview of the experience with these instruments: Yes No 5.3. Does there exist any other special instrument of quality control not mentioned in the data sheet so far? if “yes”: please describe briefly and give a short overview of the experience with these instruments: Thank you for completing this part of the questionnaire. Now please turn to Part II. 8 Part II. Background to the Regulatory Framework 6. Changes, Reforms and Innovations in Regulations Please give a brief outline of areas in which regulation of the profession has been changed in the past 10 years. If you wish to include a longer exposition, reports, or study results (e.g. Regulatory Impact Analysis), please indicate this. Area of Regulation Change in Regulation (and Date of Implementation) 1. 2. 3. Further: Further: 9 Purpose of and Advantages / Disadvantages associated with this change 7. Regulations currently being reviewed Please give a brief outline of areas in which regulation of the profession is currently being discussed. If you wish to include a longer exposition, reports, or study results, please indicate this. Area of Regulation Change in Regulation under Discussion (proposed by Profession?, Government?) 1. 2. 3. Further: Further: 10 Proposed Purpose of and Benefits claimed for this change / Arguments against change 8. Reasons for Regulation/Liberalisation You may be aware that regulations on your profession vary, sometimes greatly between EU countries. If you have any knowledge of the regulatory systems of other countries, please fill out the table below. Please give brief details of areas in which the profession is known to be differently regulated, or liberalized, (in comparison to the regulatory system elsewhere), along with a synopsis of the reasons for adopting this position. If you wish to include a longer exposition, reports, or study results, please indicate this. Area of Regulation/Liberalisation Reasons for Regulation 1. 2. 3. Further: Further: Thank you for completing this part of the questionnaire. Now please turn to Part II 11 OR: Reasons for Liberalisation Part III. Structure and Dynamics of the Profession 9. Data Source-Year In this section data is requested for the years 1990, 1995 and 2001. If some data for 2001 is not yet available, please give all data for 2000 and click here accordingly: Most recent data is for: 2000 (please click if appropriate) 2001 (please click if appropriate) If you are NOT representing a professional body, please proceed to question 12 in this section (questions concerning the profession as a whole). 10. Membership of the Professional Body Please state, if known Total no. of members 1990 1995 2000/01 Total Membership of your Professional Body By membership category (name as appropriate) 11. Stages in Access to the Profession Please fill in the number of ... 1990 newly admitted profession members in year… professional trainees (in all stages of preQualification) trainees passing Final Qualifying Examinations in year… trainees taking Final Qualifying Examinations in year… new trainee entrants in year … graduates from relevant disciplines, if known (e.g. law faculties) 12 Total no. 1995 2000/01 12. Questions about the Profession as a whole (see Note 5) 12.1. Country of reference: Country or Jurisdiction (see Note 6) Please answer all the following questions with concrete data, or, if this is not available, with an estimate! 12.2. Professionals 1990 1995 Total no. 2000/01 Total no. of professionals (regardless of professional affiliation) practicing in your country Percentage of above, self-employed Percentage of above, non-self-employed Total no. No. of professionals with professional affiliation in your country practicing abroad No. of professionals with professional affiliation in your country practicing in rest of EU or EU candidate countries No. of professionals with professional affiliation in your country practicing in other (non EU/Candidate) countries 12.3. Total Employment (Professionals and Non-professionals) in your country 1990 1995 Total no. 2000/01 1990 1995 Total no. 2000/01 Professionals and Non-professionals (see Note 7) Percentage of above, full-time employment Percentage of above, part-time employment 12.4. Firms Practicing the Profession in your country (see Note 8) Firms in your country % Percentage of above, non-incorporated status Percentage of above, incorporated status 13 12.4.1. Size of Firms (in terms of Professionals) 1990 1995 % 2000/01 1990 1995 % 2000/01 1990 1995 % 2000/01 1995 Total no. 2000/01 Percentage of Firms with… 1 Qualified Professional 2 Qualified Professionals 3-5 Qualified Professionals 5-30 Qualified Professionals more than 30 Qualified Professionals 12.4.2. Size of Firms (in terms of Non-professional Employees) Percentage of Firms with… 0 Employees 1-2 Employee 3-10 Employees 10-50 Employees more than 50 Employees 12.4.3 Size of Firms (locational). (see Note 9) Percentage of Firms with… 1 Office 2-5 Offices 5-20 Offices 20-50 Offices more than 50 Offices 12.5. Firms with head office in your country: Cross-Border Activity 1990 Firms with offices outwith your country in… All countries rest of EU or EU Candidate countries other countries 12.5.1. Firms with head office in other countries: country of origin (EU or non-EU) with largest number of offices registered in your country (in descending order). Name of the country Country with largest no. of offices Country with second largest no. of offices Country with third largest no. of offices 14 12.6. Output of the Profession 12.6.1. Please indicate the branch represented by your profession (see Note 10) Branch (Please give name) 12.6.2. Please indicate currency used for economic data in the questions below: 1990 1995 2000/01 Currency (see Note 11) 12.6.3. Turnover 1990 1995 2000/01 1990 1995 % 2000/01 1990 1995 % 2000/01 100% 100% 100% Turnover before tax of branch in… own country All countries abroad Rest of EU and EU Candidate countries other countries 12.7. Concentration of the Branch (see Note 12) Market Share of the 5 (five) largest firms Market Share of top 10% largest firms Market Share of top 30% largest firms 12.8. Cost Structure of Firms (Please enter best estimates) The ‘median firm’ has costs broken down into… Remuneration of Professionals other Salaries and Wages Cover for Professional Insurance and Risk Investment in office premises Investment in technology (Computers) on-going professional education (courses) other costs Sum of above Thank you for completing these questions. Please send questionnaire when completed to: ‘Electronic’ version (preferred): Hardcopy versions: graf@ihs.ac.at Institute for Advanced Studies Department of Economics and Finance ‘SURVEY OF PROFESSIONAL SERVICES’ (Iain Paterson) Stumpergasse 56 A-1060 Vienna Fax: ++43 - 1 - 599 91 - 555 15 Notes supplementary to the Survey Questionnaire Note 1: Professional Institutional Model „Licensing“ stands for cases where there is a requirement for official/legal permission to offer specific services on the market. Such licensing is typically carried out by public authorities and/or the responsible professional association. In this model only the service providers licensed in this way are allowed to use a specific professional title. „Certification“ stands for cases where there is no requirement for licensing in order to offer specific services on the market, but usually where (some/not all) service providers are organized in one or more professional bodies and for this certification have to fulfil certain quality (e.g. educational) requirements. Usually only the service providers certified in this way are allowed to use a specific professional title. Note 2: Quota Restrictions In general terms this question deals with quantitative limits on the number of people who may enter the profession / offer the respective professional services. Such limits may be related to economic needs tests or other types of proviso. Note 3: Specialisation Specialisation my take different forms. A lawyer may, for example, acquire specific skills and some kind of additional certification (see note 1) in the field of marriage law. In this context “specialisation” means that the respective member of the profession not only has the advantage of acquiring specific skills but that this specialisation is recognised by some kind of institutionalised certification. This may take place within the traditional licensing or certification model adopted by the profession, or as a separately organised grouping. Note 4: Additonal Certification For the term “certification” see note 1. This question deals with special voluntary certification that, for example, may exist in the context of further specialisation (see note 3) or international co-operation (e.g. lawyers in different countries specialising in European Community Law and setting explicit quality standards for the co-operating members). Note 5: Questions about the Profession as a whole Membership of a Professional Body may not necessarily extend to include all professionals in your field. Nevertheless in this section information regarding your knowledge about the profession as a whole is sought. Please answer with concrete data, or, where this is not available, with an estimate based on your knowledge of the profession. If you wish to draw attention explicitly to the fact that an entry to a question is an estimate, you may choose to enclose the estimate in brackets. Note 6: Country of reference Unless otherwise indicated questions refer to the professionals and firms in the country of your own professional body. In many cases this will be identical 16 Note 9: Office Locations Location here refers access by clients/consumers. Different offices (branch offices) in the same town or city are also different locations. Note 10: Branch Branch refers to the economic sector activity relevant to your professional body. This may be different in different member states. For example, in some countries Notaries will be a separate branch, in others it will possibly be included under ‘Lawyers’. Please name the relevant branch for your profession. Note 11: Currency Please indicate as appropriate e.g. BEF, DEM, GBP, EUR etc. Note 12: Concentration ‘Market Share’ refers to the percentage of total branch turnover. ‘Largest’ firms are those with highest turnover before tax. ************************************************************************************************* ON FILLING OUT THIS DOCUMENT ELECTRONICALLY IT MAY INCREASE IN LENGTH AND LOSE ITS ORIGINAL ‘SHAPE’. THIS IS NOT IMPORTANT: JUST SEND THE FILLED-IN VERSION WITHOUT REGARD TO APPEARANCE.. ************************************************************************************************* Thank you for completing these questions. Please send questionnaire when completed to: ‘Electronic’ version graf@ihs.ac.at (preferred): Institute for Advanced Studies Department of Economics and Finance Hardcopy versions: ‘SURVEY OF PROFESSIONAL SERVICES’ (Iain Paterson) Stumpergasse 56 A-1060 Vienna Fax: ++43 - 1 - 599 91 - 555 17 About ENEPRI T he European Network of Economic Policy Research Institutes (ENEPRI) is composed of leading socio-economic research institutes in practically all EU member states and candidate countries that are committed to working together to develop and consolidate a European agenda of research. ENEPRI was launched in 2000 by the Brussels-based Centre for European Policy Studies (CEPS), which provides overall coordination for the initiative. While the European construction has made gigantic steps forward in the recent past, the European dimension of research seems to have been overlooked. The provision of economic analysis at the European level, however, is a fundamental prerequisite to the successful understanding of the achievements and challenges that lie ahead. ENEPRI aims to fill this gap by pooling the research efforts of its different member institutes in their respective areas of specialisation and to encourage an explicit European-wide approach. ENEPRI is composed of the following member institutes: CASE CEE CEPII CEPS CERGE-EI CPB DIW ESRI ETLA FEDEA FPB IE-BAS IER IER IHS ISAE NIER NIESR NOBE PRAXIS RCEP SSB SFI TÁRKI Center for Social and Economic Research, Warsaw, Poland Center for Economics and Econometrics, Bogazici University, Istanbul, Turkey Centre d’Études Prospectives et d’Informations Internationales, Paris, France Centre for European Policy Studies, Brussels, Belgium Centre for Economic Research and Graduated Education, Charles University, Prague, Czech Republic Netherlands Bureau for Economic Policy Analysis, The Hague, The Netherlands Deutsches Institut für Wirtschaftsforschung, Berlin, Germany Economic and Social Research Institute, Dublin, Ireland Research Institute for the Finnish Economy, Helsinki, Finland Fundación de Estudios de Economía Aplicada, Madrid, Spain Federal Planning Bureau, Brussels, Belgium Institute of Economics, Bulgarian Academy of Sciences, Sofia, Bulgaria Institute for Economic Research, Bratislava, Slovakia Institute for Economic Research, Ljubljana, Slovenia Institute for Advanced Studies, Vienna, Austria Istituto di Studi e Analisi Economica, Rome, Italy National Institute of Economic Research, Stockholm, Sweden National Institute of Economic and Social Research, London, UK Niezalezny Osrodek Bana Ekonomicznych, Lodz, Poland Center for Policy Studies, Tallinn, Estonia Romanian Centre for Economic Policies, Bucharest, Romania Research Department, Statistics Norway, Oslo, Norway Danish National Institute of Social Research, Copenhagen, Denmark Social Research Centre Inc., Budapest, Hungary ENEPRI publications include three series: Research Reports, which consist of papers presenting the findings and conclusions of research undertaken in the context of ENEPRI research projects; Working Papers, which constitute dissemination to a wider public of research undertaken and already published by ENEPRI partner institutes on their own account; and thirdly, Occasional Papers (closed series) containing a synthesis of the research presented at workshops organised during the first years of the network’s existence. 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