Managed Mutual Recognition:
The New Approach to the Liberalization of Professional Services

Kalypso Nicolaïdis

Table Of Contents

I. Introduction

II. Mutual Recognition in the context of overall liberalisation

III. The European Experience: Emergence of managed mutual recognition

1. The historical sequence of alternative paradigms

2. The GSD: A multi-tiered mechanism of recognition for all the regulated professions

3. Assessing the new bargain

c. Beyond the GSD: the partial return of the sectoral logic

IV. Main features of MRAs

1. Variation in prior conditions for equivalence between national systems: Is harmonisation necessary?

2. Variation in automaticity: What is recognised at the individual level?

3. Variation in scope: Access to what?

4. Variation in ex-post guarantees: alternatives to host country control.

5. Tradeoffs between features of mutual recognition

V. Options and Guidelines for negotiating MRAs

1. Creating "mutual recognition-friendly" national environments.

2. The respective role of education, accreditation and licensing organisations

3. Horizontal vs Sectoral approaches to recognition

4. Multilateral Guidelines for sectoral MRAs

VI. Prospects for global mutual recognition

1. From non-discrimination to mutual recognition: Articles 6.4 and 7 of GATS

2. Developing guidelines for MRAs: International Obligations and Responsibilities

3. Encouraging expansion and enforcing transitivity

4. The role of OECD in promoting a culture of mutual recognition

VII. Suggested issues for discussion


Arkell, Julian, paper presented at the Services Industries Conference, Stockholm, June 1986. See also House of Lord Special Committee on the European Communities, Recognition of Higher Education Diploma---With Evidence. HL Session 1985-86, 22nd report, London, HMSO, HL 240.

____________, "Reduced Set of Factors as a Model for Mutual Recognition Agreements," DAFFE/INV (93) 43, OECD, 1993

Bernard Ascher, "Trade Agreements and the Professions," Paper presented at Euroservices: Transatlantic Trade in the 21st Century, US Department of Commerce, June 18, 1996.

Clarke, John, "Mutual Recognition Agreements," Journal of International Trade Law (Oxford, April, 1996)

Drake, William, and Kalypso Nicolaïdis, "Ideas, Interests and Institutionalization: 'Trade in Services' and the Uruguay Round," in International Organization 46, no.1 (Winter 1992): 37-100.

Feketekuty, Geza, The Liberalization of Trade in Services, (Washington: Ballinger, 1988).

Harvard University, "Final Report: World Trade in Services: A New Agenda to Ensure Continuing Expansion" (Cambridge: Kennedy School of Government, Business and Government Center, 1996).

Leebron, David, in OECD Proceedings, Regulatory reform and International Market Openness

Nicolaïdis, "Mutual Recognition: The Next Frontier of Multilateralism?," Project Promethee Perspectives, July 1989

________ "Mutual Recognition, Regulatory Competition, and the Globalization of Professional Services," in Yair Aharoni (ed) Coalition and Competition- The Globalization of Professional Services (London and New York: Routledge publishers, 1993).

_________ Mutual Recognition Among Nations -The European Community and Trade in Services. Harvard University, PhD Dissertation, 1993.

_________"International Trade in Information-Based Services: Beyond the Uruguay Round," in William Drake (ed), The New Information Economy, New York: Twentieth Century Fund (1995): pp 269-304.

_________ "Mutual Recognition of Regulatory Regimes: Some Lessons and Prospects," in Regulatory Reform and International Market Openness, OECD Publications, November 1996

_________ "Keynote Address" in Sixth International Conference On Architectural Registration, December 1996

OECD Secretariat, Liberalisation of Trade in Professional Services, (Paris: OECD publications, 1995)

OECD Secretariat, International Trade in Professional Services: Assessing Barriers and Encouraging Reform (Paris: OECD publications, 1996)

Sauvé, Pierre, "The Long and Winding Road: NAFTA and the Professions," in OECD, 1995, op cit

Special Issue: Barriers to International Trade in Services, The University of Chicago Legal Forum, (Chicago, 1986).

Stamenka Uvalic-Trumbic, "Guidelines and Recommendations From the Working Group On Europe-U.S.A.: Mutual Recognition of Qualifications", CEPES-UNESCO, 1996

United States Trade Representative Office, "Multilateral Guidelines for Mutual Recognition Agreements on Professional Services," draft proposal introduced by USTR, March 4 1996.

Vademecum sur le Système de Reconnaissance Des Qualifications Professionnelles Instauré par la directive 89/48/CE et Complété par la Directive 92/51/CEE, Rapport Final-Clifford Chance, Brussels, 1994

"A proposal for the Trans-Tasman Mutual Recognition of Standards for Goods and the Professions: A discussion paper circulated by the Council of Australian Governments and the Government of New Zealand," Australian Government publishing services, April 1995

"New Trade Agreements: Implications for Education and the Professions", Conference on Trade Agreements, Higher Education and the Emergence of Global Professions: The Quality Dimension, organised by the Centre for Quality Assurance in International Education, Washington, May 8-10, 1996.


i. See Kalypso Nicolaïdis, "Mutual Recognition of Regulatoy Regimes: Some Lessons and Prospects," in Regulatory Reform and International Market Openness, OECD Publications, November 1996.

ii. See "Regulatory reform project-Draft chapter on Professional Business Services," DAFFE, OECD, November 1996.

iii. Article 7 of GATS encourages signatories to adopt measures, byway of bilateral agreements or autonomously, "to recognize the education or experience obtained, requirements met, or licenses or certification obtained in a particular country."

iv. MRAs in the field of products are being now negotiated or considered both bilaterally -e.g. between the United States and the European Union, Australia and New Zealand- plurilaterally -the G4 countries- and regionally -within APEC, ASEAN, NAFTA and the FTAA.

v. See Bernard Ascher, "Trade Agreements and the Professions," Paper presented at Euroservices: Transatlantic Trade in the 21st Century, US Department of Commerce, June 18, 1996, p4.

vi. See OECD Documents, 1995, Liberalisation of Trade in Professional Services, and OECD Documents,1996, International Trade in Professional Services: Assessing Barriers and Encouraging Reform (referred to hereafter as OECD Documents, 1995 and 1996). Measures are recorded in the OECD Inventory of Measures Affecting Trade in Professional Services and the survey on Regulation on Acces to the Professions and their Activities.

vii. Article 57.1. Although the European Court decided in a series of cases in the mid-1970s that the provision of the Treaty were to be self-executing in the absence of the Commuity directives it called for, this did not extend to mutual recognition.

viii. This includes pharmacists, doctors, dentists, engineers, architects, accountants, lawyers, veterinarians, midwifes, opticians, nurses.

ix. Every profession was treated along the same scheme under three separate directives concerning respectively, a) the abolition of legal restrictions on freedom of movement; b) the mutual recognition of qualifications; c) and coordination of conditions for the taking up and pursuit of the professions.

x. For greater detail see Jean-Eric de Cockborne in OECD Documents, 1995; and Nicolaïdis, OECD, 1996.

xi. Directive 89/48/CEE completed by 92/51/CEE. The first general directive entered into force in January 1991 and the second in 1994. For a detailed description see for instance, Vademecum sur le Systeme de Reconnaissance Des Qualification Pofeionnelles Instauré par la directive 89/48/CE et Complété par la Directive 92/51/CEE-Rapport Final-Clifford Chance, Brussels, 1994.

xii. Article 3 the GSD stipulated that, "where, in a host member state, the taking up or pursuit of a regulated profession is subject to possession of a diploma, the competent authority may not, on the grounds of inadequate qualifications, refuse to authorize a national of a Member State to take up or pursue that profession on the same conditions as applied to its own nationals : (a) if the applicant holds the diploma required in another member state for ... the profession in question... (b) if the applicant has pursued the profession in question full time for two years during the previous ten years in another member state which does not regulate that profession, ... and possesses evidence of one or more formal qualifications ... awarded by a competent authority...which show that the holder has successfully completed a post-secondary education course of at least three years duration... and where appropriate that he has successfully completed the professional training required in addition to the course, and which have prepared the holder for the pursuit of the profession."

xiii. This is in keeping with the general philosophy set out in the Court's judgement Cassis de Dijon (1979) where any alcoholic product was to be allowed free entry in any member state if "lawfully produced and marketed" in another member state.

xiv. The first three correspond to alternative levels of training and constitute the basic organizing categories; the next two have been added by the second GSD to cover particular cases (attestation de competence and title FGEPS). The last two -title of training and regulated title of training- cover qualifications acquired in a home state that does not regulate a profession.

xv. In virtually all the member states regulated professions are concentrated in the same fields: education, health care, shipping, law and finance. But social and cultural differences explain variance beyond this core. A professional activity is considered as regulated under two conditions: 1) the regulation is issued by public authority or private authority with delegated public authority. Private professional authorities must be deemed competent to deliver a certificate under the MR system; 2) the regulation must be aimed at conditioning access to the practice of a profession-directly or indirectly- to the possession of a stated type of qualification.

xvi. A year prior to the passing of the GSD, the Court had indicated how proportionality ought to apply in the case of salaried activities, stating that host states were required to "take into account" training received in the country of origin and could not refuse access if such training complied with a number of criteria of equivalence. While the case concerned free movement of workers (EEC Treaty, article 48), it was interpreted as applicable by analogy to the professions. Case 222/86, Heylen, judgement of 15 October 1987, ECR 4116.

xvii. Explanatory memorandum, Commission, Bulletin of the European Communities, es, Supplement 8/85, p7.

xviii. Article 9, GSD. In addition, the Commission committed itself to step up its support for Community wide education data bases such as the information center on the academic recognition of diplomas and period of study established in 1976 by the Council.

xix. Explanatory memorandum, p7.

xx. Some states have chosen to adopt a general horizontal measure, transposing the GSD's general principles and appointing competent authorities, with detailed rules for each professions awaiting secondary legislation; others have chosen to transpose vertically, profession by profession. See Economic Advisory Group, "The Impact and Effectiveness of the Single Market, 30 October 1996, Communication from the Commission to the European Parliament and Council, European Commission, DGIII and accompanying bacground information in The 1996 Single Market Review, 15 November 1996.

xxi. See Luis Orzack, "The General Systems Directive: Education and the Liberal Professions," in Hurwitz and Lequesnes, eds, The State of the European Community, (Boulder: Lynne Rienner, 1991).

xxii. For an extensive analysis, see Sydney Coyne, International Trade in Legal Services, Little, Brown and Company, 1996.

xxiii. Commission of the European Communities, "Proposal for a European Parliament and Council Directive to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualication was obtained," COM (94) 572 final, Brussels, 21.12.1994, 94/0299 (COD); Amended Proposal, Com (96) 446 fin. For a description of the negotiations, see Coyne, op cit.

xxiv. See David Leebron in OECD Proceedings, Regulatory reform and International Market Openness, 1996.

xxv. These correspond to technical standards and conformity assessment procedures for goods.

xxvi. "UIA Accord on International Recommended Standards of Professionalism in Architectural Practice,"adopted by the UIA Assemby in Barcelona, Spain, 9 July 1996. The agreement builds on an accord between the US and Canada, first signed in 1978 and expanded in the annex on Architecture in the US-Canada Free Trade agreement. The FTA established the need for common standard on accreditation without spelling out these standards specifically. A process of recognition under the FTA has actually been set in motion between the National Council of Architectural Registration board and the Commission of Canadian Architectural Council.

xxvii. The convention was sgned between UNESCO (CEPES), the Council of Europe, and the European Union, through their respective national information networks on academic recognition, such as the European National Information Centres on Academic Recognition and Mobility (ENIC). See "Guidelines and Recommendations From the Working Group On Europe-U.S.A.: Mutual Recognition of Qualifications," by Stamenka Uvalic-Trumbic, CEPES-UNESCO, 1996.

2xxviii. In the current discussions towards a possible MRA in architecture between Mexico, US and Canada, teams of experts from each country have been given the task of visiting Schools in Mexico. They will then meet to go over the results and assess whether the schools are actually up to standards.

xxix. When there is no further precision and specific provisions are mentioned the term GSD refers to the first directive.

xxx. To ensure that the system would not be abused the United Kingdom added an explanatory statement that the associations and organizations recognized in a special form were those which are incorporated under Royal Charter (statement 9). The lists provided by Ireland and the UK includes Institutes and Chartered bodies supervising Accountants, Loss Adjusters, Management Accountants, Chartered Secretaries and Administrators, Insurance, Actuaries, Bankers, Surveyors, Planning, Physiotherapy, Chemistry, Psychology, Libraries, Foresters, Building, Engineering (structural, civil, mining, electrical, gas, mechanical, chemical, production, Marine), Energy, naval Architects, Aeronautical Society, the Institute of Metals, the Institute of Measurement and Control, the British Computer Society.

xxxi. In land surveying and pharmacy they have done so for 100 years! Architects have automatic registration since 1990. Automatic cross registration is currently being implemented for teachers, veterinary sciences and dentistry and is under way for radiography. See "A proposal for the Trans-Tasman Mutual Recognition of Standards for Goods and the Professsions: A discussion paper circulated by the Council of Australian Goverments and the Government of New Zealand," Australian Government publishing services, April 1995.

xxxii. Jean-Eric de Cockborne, OECD Documents, 1985.

xxxiii. An element of clarification was attempted in the statement 15 added to the directive: "the Council and the Commission agree that matters differ substantially ...where the activities in question cannot be pursued satisfactorily in the host member state unless they have been mastered."

xxxiv. This was a controversial point in the GSD negotiations. Ultimately, the right was not included in the directive but the object of an informal understanding under statement 3, "the Council and the Commission agree that applicants must possess the linguistic knowledge necessary for the pursuit of their profession." How far member states could go in enforcing language requirements was thus left unclear and subject to ECJ review. In a well publicized case regarding a foreign teacher in Ireland, the Court did allow for language requirements on the grounds of preserving national identity.

xxxv. Council Directive of 22 March 1977, OJ No 78, 26.3. 1977.

xxxvi. At this stage it is important to ensure that the host country does not reintroduce an entry test through the backdoor. Under statement 11 of the GSD, for instance, the adaptation period is the object of an assessment on the part of host country regulators, provided that this assessment only pertains to the activities under supervision and "in no case" takes the form of a formal written or oral test.

xxxvii. The formula is actually more complex, with X and Y as respectively lengths of studies in home / host countries (years), T as years of training, C as years of controlled practice, P as maximum years of professional experience which can be required as a compensatory measure: Y=X+aT=>P=2x(a); Y=X+bC=> P=b

xxxviii. See notably contributions by Ursula Knapp, James Murray, "Liberalisation and the consumer,"and Jenny in OECD Documents, 1996

xxxix. See Coyne, op cit.

xl. EU member states are allowed to derogate from the right to choose: i) for the legal profession; ii) "for professions whose practice requires precise knowledge of national law in respect of which the provision of advice and/or assistance concerning national law is an essential and constant aspect of the professional activity (article 4);" iii) for all professions, subject to a notification procedure with the Commission (art 10). France for instance asked for a derogation in tourism and professions requiring a detailed knowlege of national law (e.g. industrial property consultant). See directive 89/48/EEC, Article 11 Reports (1991/1992), Member States reports.

xli. See Article 11 Reports, op cit.

xlii. Ibid, Ireland Report. The French report also cites French nationals trained as psychotherapists in Belgium.

xliii. This is evident in the EU Member States reports on the implementation of the GSD which are due every two years after the implementation of the GSD on 6 January 1991. In the first two years, the rate of automatic acceptance varied greatly across pairs of countries and professions. Even between the UK and Ireland where there is probably the highest flow,the automatiity ratee ranged from 96% for solicitors, to a third for secondary school teachers. The UK's rate of 75% automatic acceptancee was the highest reported.

xliv. A good example can be found with the legal profession in Europe. In Germany the test consists in two written exam covering respectively a compulsory topic and a topic in an area selected by the candidate, and an oral on professional rules. In France the National Bar council reviews each applicant's qualification and in light thereof requires the applicant to take from one to 3 oral exams, sometimes complemented with a four hour written exam. In the UK the Aptitude test consists of two three hour written exam on property law and litigation, and short exams on professional conduct and account, and principles of the common law.

xlv. See for instance statement 15 of the GSD: "The Council and the Commission agree that neither the adaptation period not the aptitude test should constitute a disguised means of imposing upon applicants a more stringent requirement than is necessary."

xlvi. More generally, regulations and therefore rights of access can apply to the actvity per se or to certain modes of practice ( in addition these include the use of titles, the reimbursement of professional acts in the field of health or right to added compensation, such as a government subsidy due to a collective agreement). Access to these other modes of practice can be a precondition for local practice or simply an added bonus.

xlvii. The distinction may be more or less important to different countries. In architecture for instance there is a great difference of culture between the napoleonic tradition of granting a title as a precondition for professional practice and the anglo-saxon culture where the title is protected by law but not the practice. In the UK many bodies carry out the function of architect under other professional labels such as engineers; quantity surveyor and building surveyor and technicians.

xlviii. The use of titles as signaling devices was introduced in the EU 1975 medical directives, where host states were allowed to require use of home state title followed by the name and location of the establishment or examining board which awarded it; in cases where the home title "may be confused" with a host state title, implying training which the person concerned had not undergone, the host state could require adaptation of the title through the introduction of "suitable wording." In addition, formal certificates of training were to be used only in the language of the member state of origin.

xlix. Other beneficiaries can use both the professional title of the host member state or the academic title of the home state. In the latter case the host state may require the applicant's title to be followed "by the name and location of the establishment or examining board which awarded it."

l. One of the traditional purposes of regulating professions has been to establish constraints on which activities could be exercised by whom. Compartmentalising functions and services serves to limit professionals' capacity to prescribe their own services. Different professions are designated to provide specific services where there may be conflict of interest (e.g. accounting and legal services). It also allows the imposition of different degrees of regulation which may lead to higher controls in some countries. Thus law counselling (solicitors) is more regulated in common law countries. Similarly, the right to represent clients is distinguished from the task of recording acts in many countries, and the right to request contruction permits reserved to architects not suveyors or engineers. See Steven Nelson, OECD Documents, 1996.

li. See Ehlermann-Cache and Ursula Knapp, OECD Documents, 1996. The scope of "foreign law" can itself be a matter of interpretation. According to USTR, lawyers with an office in the EU ought to be allowed to practice EU law since it is part of European law. Europeans countered that EU law often takes effect as the domestic law of member states.

lii. There are countries where titles serve as evidence of a level of training and allow for even more differentiated access, such as Germany. Certain types of organizations are free to reserve certain activities to "doctorate engineers" rather than "graduate engineers." In this case, full recognition implies that such distinctions cannot apply to foreign engineers.

liii. In another vein, lawyers traditionally needed to be accessible to the court and thus it was nomal that they maintain an establishment within its territory. Steven Nelson, OECD Documents, 1996.

liv. In the Gebhard case, the ECJ denied that the 1977 directive on cross-border provision allowed a German Rechtsanwalt to keep an office in Milan, to service nationals of the host country. "on a stable and continuous basis." Case c-55/94, European Court of Justice Judgement of Nov 30 1995.

lv. An interesting example is the combination of an obligation to establish for audit while cross border provision is accepted for book keeping. See Ursula Knapp, "Inventory of measures affecting Trade in Professional Services," OECD Documents, 1996.

lvi. For a discussion of the importance of this idea in the context of the Uruguay Round, see William Drake and Kalypso Nicolaïdis, "Ideas, Interests and Institutionalization: "Trade in Services" and the Uruguay Round," in International Organization 46, no.1 (Winter 1992): 37-100.

lvii. This line of thinking can be presented under the general category of "securing insecure contracts". For a discussion, see Nicolaïdis, OECD, op.cit, p18-20. Section IV.4 draws heavily on this chapter.

lviii. Pierre Sauvé, "The Long and Winding Road: NAFTA and the Professions," in OECD Documments, 1995.

lix. See Ascher, op cit, p. 7.

lx. See Rhonda Piggott in OECD Documents, 1996.

lxi. Under the NAFTA model, the NAFTA Commission, meeting at the ministerial level, is supposed to review and monitor progress. See Sauvé, OECD Documents, 1995.

lxii. See Ascher, op cit, p8 and discussion in IV.1.b. above.

lxiii. For instance, the American Bar Association that accredits Law schools in the US adopted such a waiver. See ABA, Standards for Approval of Law School and Interpretations, Standard 802 (October 1991), (ex.18).

lxiv. See Pierre Sauvé, OECD Documents, 1995.

lxv. Bernard Ascher, op cit, p. 7.

lxvi. For an early discussion, see Nicolaïdis, 1989. See also Nicolaïdis, OECD, 1996.

lxvii. This section draws extensively from Nicolaïdis, OECD, 1996.

lxviii. The same language appears in the FTA (Article 1403: Licensing and Certification), NAFTA (Article 1210: Licensing and Certification).

lxix. In the field of law for instance, the US requested that the EU grant US lawyers the same treatment accorded to English solicitors (e.g. right to advice) on behalf of all non-EU lawyers. US negotiators may have been ill-advised to make such a universal demand, for this was seized upon by the EU to refuse to consider the request. Under the draft establishment directive for lawyers, non-EU lawyers who qualify as English solicitors by passing the English Qualified Lawyers Test (e.g. from Canada, the US or Australia) or as Avocat by passing the French Special Exam would not be entitled to the benefits of the directive unless they were EU nationals. See Coynes, op cit

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