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Laurel S. Terry, The European Commission Project Regarding Competition in Professional Services, 29 Nw. J. Int'l L. & Bus. (forthcoming 2009), available at SSRN.

I have a personal reason for reviewing Laurel S. Terry’s account of the European Commission’s recent investigation into the European professional services market. As a former senior writer on The European Lawyer magazine, I was a first-hand witness to many of the events described in her paper, including the 2003 Brussels conference she mentions.

The main purposes of Professor Terry’s paper is to describe an ongoing EU initiative, which has the stated aim of making Europe’s professions– including its legal professions–more efficient and competitive. In all likelihood, the end result of the events described in Terry’s paper will be that many of Europe’s bar associations will be forced to liberalize their regulatory frameworks. What is more, she believes that, in an increasingly globalized world, other countries may decide to follow Europe’s lead. She fears such countries may decide to conduct their own investigations into their professional services markets, using a similar methodology to that employed by the EU.

Terry’s article will undoubtedly produce a polarized response from those interested in lawyers’ professionalism in general, and lawyers’ deontology (ethical rule-making) in particular. Those who believe that the professions’ freedom to set its own deontological/ethical standards protects the “public interest,” or serves the administration of justice, may well be appalled to learn of the European Commission’s broad-brush, antitrust-focused appraisal of the European professional services market. Conversely, those who take a more skeptical view of lawyers’ self-regulation may well have their views that bar associations “don’t get” public (as opposed to private)-interest deontological rule-making confirmed.

Terry also highlights the Janus-like positioning by various EU institutions in relation to professional services regulation. As she points out, “traditionally, legal practice in the EU has been regulated by each EU state.” This point is reinforced in her commentary of the Wouters and Arduino ECJ rulings, two remarkable cases from the same day in 2002 which–effectively–allowed EU bars to get away with clearly anti-competitive bar rules, mainly because the Dutch and Italian governments, respectively, had decided that such rules were acceptable.

Yet, as Professor Terry points out, within months of Wouters and Arduino, another branch of the EU–the European Commission–effectively kick-started a multifaceted programme of reform of lawyers’ profession rules. An important milestone in this initiative was the publication of a much-criticized comparative, multistate report into European professional services regulation, produced by Austria’s Institut für Höhere Studien (IHS). In addition, a new Services Directive (only briefly mentioned in Terry’s report) was introduced and, after much debate, eventually passed.

Although many of the events covered in Terry’s article are now several years old, it is important that readers do not treat it as an interesting–if historical–account of a period of regulatory upheaval. Instead, her report is a snapshot of a series of events, which are even now developing. Yet, the very fact that she is describing an ongoing process invariably poses its own problems. Since Professor Terry completed her review, a new report into the legal profession has been unveiled in France, which may well have far-reaching implications, not only for the French legal profession, but also for the European legal market as a whole. A quick Google translation-powered search around various EU justice ministry and competition authority press release sections suggests a wealth of ongoing activity. Even developments Terry highlights in her report, such as the 2006 Irish Competition Authority investigation, have moved on before her paper has been published–albeit by “moved on,” I mean various spokespersons from the Irish Competition Authority have repeatedly complained about the failure of various stakeholders to “take on board” many of the Authority’s suggested reform proposals.

As a US-based commentator, Professor Terry expresses a hope that US legal regulatory and professional bodies should proactively investigate their own regulatory arrangements, rather than passively react to any equivalent “stock-taking” exercise by the US government. This is certainly a wise suggestion. Historically, legal professions have struck what is known as a “regulatory bargain” with their governments: bars issued and enforced deontological rules “in the public interest”, in return for regulatory autonomy. But if bars choose to ignore their side of the bargain, and refuse to engage in timely and necessary reforms to their rules, they arguably only have themselves to blame if governments react by curtailing their right to regulate.

And, as Terry rightly says, even before this latest European initiative, a series of EU directives had placed limited on EU bars’ deontological rule-making capacity, on issues as varied as establishment, advertising and lawyers’ money laundering disclosure obligations. In effect, EU bars’ competence to self-regulate are being salami-sliced, year-by-year. Even if US frontline regulators manage to avoid an EU-style comprehensive review of their ethical codes, Terry foresees the possibility of enhanced federal oversight of the US legal market.

In concluding her paper, Professor Terry says that, despite her support for the EU’s overall objectives, she feels that any equivalent US investigation should learn lessons from Europe. In particular, she hopes the methodology of regulatory analysis would be more robust–and open to criticism–than that carried out by the IHS. She also calls for greater recognition to be given for the “non-economic” aspects of lawyers’ profession regulation.

This, of course, is paradox that countless academics have pondered for many years. Many of lawyers’ deontological rules are justified by reference to esoteric concepts as “the rule of law.” But, as Terry admits, in arguing on a “rule of law” basis “one may not always be able to offer hard data or offer quantifiable measures in support of the arguments.” Yet, if the main justification for an existing deontological rule is fundamentally  intangible, how does one accurately assess whether that rule is objectively justified?

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Cite as: Richard Parnham, Europe’s Competition Regulators Force its Bar Associations to Reform, JOTWELL (November 20, 2009) (reviewing Laurel S. Terry, The European Commission Project Regarding Competition in Professional Services, 29 Nw. J. Int'l L. & Bus. (forthcoming 2009), available at SSRN),