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Cipolla case : Compatibility of national rules concerning lawyers’ fees with European rules on competition and freedom to provide services

Pranvera Këllezi , 16 décembre 2006

In joined cases C-94/04 and C-202/04, the Court of Justice, sitting in Grand Chamber of nine judges, answered the questions referred by the Corte d’appello di Torino and the Tribunale di Roma in relation to Italian rules concerning lawyers’ fees. An Italian Royal Decree provides that the criteria for determining fees, and the level of the fees itself, are to be set every two years by the National Lawyers’ Council and must be approved by the Minister of Justice. It begs the question whether a national regulation which approves a minimum and a maximum level for prices is incompatible with EC rules pertaining to competition and freedom to provide services. The Italian regulation prohibits a lawyer or his/her client from deviating from the regulated fees, but does permit the courts to derogate from this level.

Four years ago, the Italian Royal Decree was examined in the Arduino case (case C-35/99), where the Court rendered a judgment while sitting in full court of thirteen judges. In this case, the Court held that Article 10 EC, read in conjunction with Article 81 EC, “d[id] not preclude a Member State from adopting a regulation which approves, on the basis of the draft procedure by a professional body of members of the Bar, a tariff fixing minimum and maximum fees for members of the profession.” The question in the Cipolla case was whether the Court would confirm the precedent established in the Arduino case, or would it reverse the judgement, following the request of the Commission.

The intervention of European law against Italian regulations is faced with a series of difficulties. First, as stated by Advocate General Maduro (see opinion of Advocate General Maduro of 1 February 2006), the Court is circumspect with regards to reversing an interpretation given in earlier judgments, except in the presence of changes in the legal system or the social context, as well as new factors ; second, the review of national legislation in the light of Article 10 and 81 EC is limited due to the concern to preserve the powers of Member States. For the advocate general, a parallel can be drawn between EC law and US antitrust laws that recognise the ‘state action doctrine’, according to which a legislative measure taken by states under their sovereign powers are excluded from the scope of antitrust laws (see opinion of Advocate General Maduro, § 36).

Regarding competition rules, the core question was therefore whether the procedure followed in Italy to fix lawyers’ fees was a regulation or a delegation for private operators, in which case Article 81 EC fully applied. In rejecting the private nature of the measure, the Court observed that the National Lawyers’ Council was responsible only for producing a draft scale for fees. It is the Minister of Justice that approves the level of fees, if this is necessary after they are amended. In addition, the fees are to be set by the Italian courts which may depart from the maximum and minimum limits fixed by the Royal Decree. The measures at issue therefore maintain the character of legislation that allows them to escape from the scope of European competition rules. The conclusions of the Court confirmed the judgment held in the Arduino case for legal services as well as for out-of-court services.

In addition to clarifying the Arduino judgment in relation to competition rules, in the Cipolla case, the Court examined for the first time the compatibility of the Italian Royal Decree with the freedom to provide services. Unlike Articles 81 and 82 EC, which prohibit private behaviour, Article 49 EC is directed towards national regulation, and aims at precluding any national rules that affect the making of provisions of services between Member States more difficult than the provision of services at the national level. The Court observed that minimum fees set by national regulation and the prohibition of derogation from that level may render access to the Italian legal services market more difficult for lawyers established in other Member States and limit the choices of service recipients in Italy. As a consequence, the freedom to provide services is restricted.

The Court then examined whether such a measure may be justified on the basis of overriding public interests. The Court pointed out that the protection of consumers and the safeguarding of the proper administration were capable of justifying a restriction of freedom to provide services. In that regard, the national court should assess whether the setting of minimum fees was an appropriate measure for attaining the above mentioned objectives, which are inextricably linked to the quality of services. On this point, the Italian government and Commission exchanged views that related to competition in the market and were also relevant to the assessment of the competitive impact of these rules at the national level. On the one hand, the Italian government submitted that excessive competition between lawyers might result in a deterioration in the quality of the services provided. The Commission contests this claim by observing that there is no causal link between the setting of a minimum fee and the high quality of legal services. Measures pertaining to qualifications, ethics, access to the profession, supervision and liability, are liable to have a direct relationship of cause and effect and are thereby suitable and sufficient in and of themselves for securing the objectives. Although it is for the national court to determine whether there is a correlation between the level of fees and the quality of the legal services, the Court of Justice observed that, in the Italian context of extreme competition, due to an “an extremely large number of lawyers”, it is conceivable that minimum fees may prevent lawyers from offering services at a discount and therefore deteriorating the quality of the services provided. This point of view could apply to the theory of “destructive competition”, understood not as a competitive process which drives some participants from a market, but as a process that produces low quality services instead of encouraging better services. Such a view can be accepted only if one takes into account the asymmetry of information between clients and lawyers, which was emphasised by the Court of Justice itself.

Reproduction autorisée avec indication : Pranvera Këllezi, "Cipolla case : Compatibility of national rules concerning lawyers’ fees with European rules on competition and freedom to provide services", www.ceje.ch, actualité du 16 décembre 2006.

Catégorie: Concurrence