Should Notaries be exempt from the provisions of the draft Mutual Recognition of Qualifications Directive?

Background

A proposal has been tabled by Mr Stefano Zappala, MEP, to exempt notaries from the provisions of this draft Directive. The reasons he has given for this proposed exemption, I understand, are that he argues that:

1. Notaries are exempt from the provisions of the EU Treaties with regard to free movement of persons due to Article 45 of the EU Treaty, which specifies that these rights shall not apply to those who exercise “official authority.”

2. A recent case about Spanish ship captains exempted those captains from the free movement provisions of the Treaty, and some comments made in that case,(which revolved around Article 39(4) of the EU Treaty)referred to ship captains’ notarial functions

In reply I argue that:

1. Notaries do not exercise official authority and have produced no convincing arguments of any kind to suggest that they might.

2. The Commission is currently in the process of taking enforcement proceedings against notaries for failure to comply with Treaty obligations and has given both notaries and their Member States two opportunities to submit the fullest arguments they could wish to supply. It has read all these arguments over the course of several years, considered them fully, and considers them no bar to free movement.

3. This proposal to exempt notaries is a manoeuvre to try to legalise an illegal exemption under the Treaty, and to avoid a Court of Justice case which notaries know they will lose. It is a waste of the Committee’s time, and should be dropped, allowing that court case to decide the legal issues involved.

4. The process of breaking down barriers has already begun, and Spain, Portugal and Italy have dropped the nationality condition for notaries, amending their legislation under the above­mentioned pressure from the Commission. It would be wrong to reverse this process.

5. All concerns about the maintenance of standards, the proper legal qualification of the professionals, ethical rules and the protection of the public can and will be observed for notaries just as they are for all other professions, within the framework of the Directive. These alleged problems have been overcome for other legal professions within the framework of Directive 89/48 and there is no reason to think that they cannot be in the new Directive. Indeed, just because notaries have such high levels of ethics, intelligence, and training the problems should be easier to solve!

6. Since the rules for notaries and their status vary from country to country it is most unlikely that all notaries everywhere would be exempt even if some of them were. The Court of Justice has specifically stated in the leading case on Article 45 [Reyners – Case 2­74] (which involved a lawyer trying to practise in Belgium) that ‘the possible application of the restrictions on freedom of establishment provided for by the first paragraph of Article 55 (note – this was the former number of what now is Article 45) must therefore be considered separately in connection with each member state having regard to the national provisions applicable to the organisation and the practice of this profession.’ The emphasis is mine but the point is clear, both in logic and in law. Notaries are keen to state that they consider that U.K. notaries are not the same as other European notaries, so they themselves accept the idea that differences do exist between notaries. It is therefore not correct to simply accept all of them as entitled to an exemption which none or only a few of them might deserve.

7. The highest French court, the Cour de Cassation has already specifically decided that French notaries do not exercise public power prerogatives nor official authority.

8. It is particularly unfortunate that the question of exempting notaries comes up at a time when support is being sought for a new constitution for Europe. To exempt an elite profession, and thus deny the possibility of cross border movement and competition, at a time when that competition and freedom is applied to nearly everyone else, would seem to be a spectacular own goal, politically speaking. Of course, I argue that, wise or not, the idea of an exemption is simply mistaken.

This note is necessarily brief to save Members’ time, but also because no published data is readily available to indicate any other or more detailed basis for the proposal of Mr Zappala. This absence of detailed argument in public is indeed typical of any defence by notaries and I invite the committee to take note of this absence of public debate and open discussion (and the possible reasons for it) when they consider the matter. I of course intend no criticism of Mr Zappala for this, since, as you all must, he has to rely on briefings from interested parties. Other notaries have given him one version of matters, this is my version.

I declare my own interest as an English lawyer, qualified as a notary in England. I have researched the issue for years and am the complainant who has asked for the action to be brought by the Commission. I do not claim any impartiality whatever. I would point out that we, as English notaries have at least 7 years of training as lawyers and notaries before we can practise.

Article 45 EU Treaty

It is important to remember that one of the key principles of the EU is the right to free movement. If we are to have the ever growing union of European peoples which is one of the core ideals behind Europe,  the idea must be to allow and facilitate free movement wherever possible.

I suggest that the Court of Justice cases on free movement, and particular on alleged exemptions to it, bear witness to this guiding light.In practically every case in which Article 45 (formerly Article 55) has been argued as a defence, it has not succeeded.

These cases include teachers in Greece[Commission v. Greece Case 147/86], lawyers in Belgium [Reyners Case C­2/74], security staff in Spain [Commission v. Spain Case C­114/97], internal auditors [Thijssen Case C­42/92] programming and computer systems for public administration [Commission v. Italy Case C­3/88] experts’reports on traffic accidents [Commission v. Greece Case C­306/89] and public lotteries [Commission v. Italy C­272/91]

The Article 45 defence failed on each occasion.

The exemption has been claimed for various professions, as shown above. Why do so many different professions, exercising vastly different skills, claim the protection of the same Treaty Article?

I suggest an answer : If you only have one defence you must use it whether it is appropriate or not. If it is raining and you have no umbrella, you have to use a newspaper or blanket on your head. It is not the right tool, but it is the only one you can find.

I suggest that those who seek to avoid the application of EU law with regard to free movement have effectively no defence save for arguments about the safety of the public (easily solved through training, supervision and regulation)and the supposed defence of official authority. They cannot rely on anything else, and try to force themselves into an exemption clearly not covering them, or intended to cover them. So it is with notaries.

What is official authority?

The treaty drafters did not define this and its exact definition has perhaps never been finalised through the court cases.The closest case by analogy however, to the present one, is the case of Reyners [Case 2­74] Reyners was a Dutch national wishing to practise at the Belgian bar.

He was refused the right on the basis that he did not have to be admitted because the profession of avocat was one involving official authority under Article 45 (then 55) of the EU Treaty.

Many governments argued in favour of the official authority exemption, claiming variously that the state appointment of lawyers, their ethical code, their legal monopolies on appearance for clients in court, their similar training to judges and responsible position gave them”official authority”.

The Court of Justice (ECJ) rejected all these arguments and said that lawyers (contrary to the assumption of the legal community at that time) did not exercise official authority.

The ECJ also noted that each activity of the lawyer had to be considered separately (for example in this case, appearing in court, writing letters, drafting legal documents etc). The Court was very clear that the limitation on free movement allowed by Article 45 must not go further than is necessary.If the activities which are covered by Article 45 can be separated from the rest of the activities carried on by the profession, then all that would be permissible would be to refuse free movement in respect of those specific activities. It would not be justifiable to extend that restriction to the entire profession.

Again, what is needed in the present case before you is a detailed examination, on a case by case basis, of each specific country, to see whether this official authority would or would not apply to any individual country.This is not, I understand, what is being proposed. You are simply being asked to wave all notaries through on a single blanket exemption, on the grounds that they all have the same situation and the same defence.

I would further suggest that it is very clear that many activities carried on by French notaries, to take but one example, cannot be connected with official authority since notaries often give legal advice and consultation, which the Court in Reyners specifically decided was not an example of official authority.Legal advice outside the area of those matters governed by the statutory notarial monopoly constitutes a very important part of the work of French notaries.They also act as estate agents, another activity certainly not connected with official authority.

But even in the purest case, that of the acte authentique, I will argue later that this official authority not only does not exist, as a matter of reasoning, but that such official authority has been denied, as a matter of law, by the Cour de Cassation, France’s highest court, with regard to the specific case of notaries.

Subsequent ECJ cases have reinforced the interpretation of the meaning of “official authority” and the specific words used above have been quoted as a guideline. So too have the further words of the Court in the same case, warning against unilateral interpretation by each state as to the meaning of the phrase. The Court said in Reyners: “this consideration must however take into account the community character of the limits imposed by Article 55 on the exceptions permitted to the principle of freedom of establishment in order to avoid the effectiveness of the Treaty being defeated by unilateral provisions of other states”[paragraph 50]

In other words, individual states or notarial professions cannot simply take it on themselves to define themselves as having official authority, it must be proven that they do have such official authority as interpreted by the Court.Otherwise, every state could simply declare that every one of its professions exercised official authority.

In fact, it is unclear who indeed would exercise such official authority, certainly very few of those who have claimed they do up till now. How likely is it that notaries will prove to be the exception? And why not let the court decide?

So why do notaries claim they exercise official authority?

Although notaries are secretive about their legal reasoning, the main, and, I think, only real argument they use is that because, in some limited instances, some contracts signed before them by consenting parties can be enforced without going to court, the notary is somehow exercising “official authority”

Allied to this is the argument that because states have permitted the notaries to issue the copies of the contracts which are enforced in this way, then the states have delegated part of their own authority to the notaries, who thus share the “official authority” and majesty of the state. By an obscure reasoning, they also seem to suggest that since these contracts can be enforced like a judgement, notaries are equivalent to judges, who do enjoy official authority, so notaries suggest they must have this authority too. By the same token, of course, one could argue that since physics teachers and astronauts have studied physics, physics teachers are all astronauts.

The normal and commonsense response to all this is of course a rather deep scepticism. But let us, like the theatregoer, “suspend disbelief” and look at the argument more closely.

Who is doing what, when we visit a notary?

Members of the public see notaries for a great many things.What notaries do for their clients in fact varies quite a lot from state to state, but often involves buying selling and transferring property, dealing with inheritances and wills, setting up companies, recognising illegitimate children, and much general legal advice on matters such as tax, providing for one’s children and dependants etc. which could be done by any other lawyer. In some countries, like France, notaries also act as estate agents.

In most of these cases, by far the most common, it is difficult to see even a possibility of the alleged coercive power of the notary.  Indeed, the only time French notaries, to speak of one group only, even claim they have coercive power is when there is a contract for the payment of a certain sum of money which is signed before the notary and the money becomes payable.  Then and only then does the alleged power of the notary come into play, since he, or more rarely she, can issue an enforceable copy of the contract and the bailiff can enforce the payment without need of a court judgement.   I have yet to see in print any other example given of any other supposed example of “official authority”.

Since this is not only the strongest, but indeed the only real argument of notaries for their”official authority” let us look at it more closely.

When two parties sign a contract, let us say A lends B 1000 euros to be paid back with interest in a month, and B does not pay and has his car taken and sold to pay the debt, it is no doubt all rather unpleasant for B.But has B been coerced?

Let us remember, B signed the contract of his or her own free will and had the right to be advised by his own avocat or notary, without compulsion of any kind. Both parties may even have used the same notary.There was no need to sign the contract, no need to see the notary, and no need to agree to the enforcement.

Despite all that lack of compulsion, B has gone ahead and freely agreed, that if B does not pay on time, enforcement will follow. Where is the coercion, where are the powers”outside the general law” demanded by the case law of the ECJ?

I suggest that even in this case (the only example quoted of coercive power by notaries themselves), there is no coercion at all, but a free consent to a certain consequence by the person owing the money. Far from the debtor being coerced, it is the debtor’s own will, and that of the creditor, that is being enforced.

Indeed it could not be otherwise, since if the borrower had been forced to agree to the contract, it would be void, since one of the key principles of all contract law is that consent must be voluntary.

The bailiff does not come that often

I argue above that even the strongest case notaries can muster, with the only example they ever give of constraint being applied by anyone,(the enforcement of a liquidated sum) is weak and mistaken. Let us assume that I am wrong and that this does constitute official authority.What then? Have the notaries won the point?

I suggest that they have not.

The court in Reyners made it clear that the exemption given by Article 45 referred to activities.

To quote the court:

“46. An extension of the exception allowed by Article 55 [now 45] to a whole profession would be possible only in cases where such activities were linked with that profession in such a way that freedom of establishment would result in imposing on the member state concerned the obligation to allow the exercise, even occasionally, by non­nationals of functions appertaining to official authority.

47. This extension is on the other hand not possible when, within the framework of an independent profession, the activities connected with the exercise of official authority are separable from the professional activity taken as a whole”.

In other words, if the enforcement of liquidated debts represents a separable activity from the rest of notarial work, it is still not permissible to exempt the profession as a whole from compliance from free movement, even if this enforcement did represent the exercise by the notary of official authority.

I suggest that it is clearly separable and that the great majority of work done by notaries does not involve such contracts for liquidated sums.

French writers on Notaries and contracts

The notarial profession in its modern form has been strongly influenced by France, which exported its Civil code to many other countries in Napoleonic times.Although, unlike other EU notaries, I do not think all notaries are all exactly the same, it is instructive to look at what French writers on contract and notaries have written. Indeed, as I argue throughout, every notarial profession has to be looked at separately.

Jean Carbonnier in his extensive treatise on French Civil law, has a firm place for notaries, as the supreme witness.The notary makes records of what has happened and his testimony, as to what he has seen and witnessed with his own eyes, is essentially practically unchallengeable.

Yet Carbonnier notes that an error is made by those who equate notaries withjudges. He states that the judge can impose his will on the parties, without respect of their wishes, and thus has an independent will.The notary, by contrast, cannot impose any decision or indeed any term which is not agreed by both parties, since his job is to record those agreements and make them legally effective. The presence of the notary is simply the external condition which makes the parties’own will effective.

Carbonnier writes: « En parallèle avec une tendance qui revendique l’autonomie du droit notarial en face du droit civil, on a essayé, à l’étranger, de faire apparaître entre les parties et le notaire un rapportjuridique notarial, de droit mi­public, mi­privé, qui aurait son contenu et son esprit propres – un peu à l’image de l’action en justice, conçue comme un rapport juridique entre plaideurs et juge. L’analogie ne peut être poussée très loin, car le notaire n’a pas sur les parties la même autorité que le juge dans l’instance; non seulement il ne juge pas, mais il ne fait pas acte de volonté ; son activité (constater, vérifier, qualifier) n’est qu’une condition extrinsèque de l’efficacité de l’acte juridique émanant de la volonté des parties. » [J. Carbonnier : Droit Civil page 151, published by Presses Universitaires de France]

Indeed, the very cornerstone of the French notarial system was defined in the law of 25 ventôse an X I.

“Les notaires sont des officiers publics établis pour recevoir tous les actes et contrats auxquels les parties doivent ou veulent faire donner le caractère d’authenticité attaché aux acts de l’autorité public et pour en assurer la date, en conserver le depot, en délivrer des grosses et expeditions”

No mention is made here of notaries having power over citizens, by contrast it is clear that it is the parties to the contracts who are seeking to make them authentic, and seeing a notaire is a way to do this.The only power given is one to confer authenticity on contracts and agreements.

The difference is thus clear, the judge imposes his will, the notary brings into force the combined will of the parties and has a duty to be impartial.Indeed he cannot and must not force his will on anyone. The coercive power needed to give the notary the right to exclude notaries’compliance with the EU treaty(if it existed) would actually disqualify the notary from being a notary at all. Indeed if notaries did exercise this coercive force the notarial profession would have been suppressed long ago.

Every citizen has official authority

I suggest that French law itself provides that any citizen can, in certain contexts, do exactly what notaries claim is so special about their work. Notaries in France can and usually do draft the acts which are called “actes notariés”.However, as a French law textbook makes clear, the parties to a purely private document, drafted by themselves without any notarial intervention at all, can give that act the same value as one drafted by the notaire himself, simply by both going to a notary, proving their identity and acknowledging their signatures, and depositing the document with the notary for safe keeping.

I argue that this practice simply reflects the legal reality. The contract is the expression of the free will of the two parties. The notary is there as a supremely trustworthy witness, as record keeper and legal advisor, but his supposedly sacred act, the supreme manifestation of his art, is one which can be equalled in legal effect by two private individuals.

I quote the French text : “L’ordonnance nº45­2590 du 2 novembre 1945 investit les notaires d’un monopole pour recevoir les actes ou contrats auxquels les parties doivent ou veulent faire donner le caractère d’authenticité attaché aux actes de l’autorité publique..En revanche, les parties peuvent conférer à l’acte sous seing privé une valeur équivalente à celle d’un acte notarié, en procédant d’un commun accord à son dépôt aux minutes d’un notaire avec reconnaissance d’écritures et de signatures (Décret du 14­10­1955 art 66 ) .

I suggest that this undermines the argument of the exclusive power of notaries, since the state has delegated its power to everyone, not just to notaries, provided that the parties deposit their agreement with a notary and prove their identity and signature.

The Cour de Cassation

The Cour de Cassation is the highest and most authoritative court in France.On 22nd June 1999 it gave its judgement on the interpretation of the words “un dépositaire ou agent de l’autorité publique” [a holder or agent of public authority] in the French law on libel of 1881­07­29 article 31.(Nºde pouvoir : 98­83514)

The case concerned a notary, and whether he was or was not a person covered by the above definition. The court decided that notaries were not covered by the definition and upheld the ruling of the previous court “dès lors qu’un notaire, qui n’est pas investi de prérogatives de puissance publique, n’a pas la qualité d’agent de l’autorité publique” [since a notary, who is not someone invested with the prerogatives of official authority, does not have the status of an agent of public authority]

Please note that “puissance publique” and “autorité publique” the meaning of which was decided above, in respect of French notaries by a French court, are exactly the qualities claimed by notaries to exempt them from the application of the Treaty.

I suggest that, whatever arguments are put forward by other notarial professions, the French notarial profession, at least, has lost this argument. Their own courts do not accept their argument about official authority, so why should anyone else?

Please also note that the French notarial profession was closely copied by other notarial professions in Europe so that it is likely that the same ruling may be made in other countries.

Each profession needs to fight its own case if it wants an exemption since they are all different

Although notaries (in their desire to scuttle behind the wall of Article 45) claim that all notaries in every EU state deserve the same exemption, I suggest that it is inherently unlikely that the same arguments will apply to each state, or that, even if the exemption applied in one country, it would necessarily apply in another State.

After all, if the systems were the same everywhere, presumably there would be free movement of notaries now, and no national boundaries. The attempt to defend notaries as a class from free movement involves identifying them all as one body entitled to the same blanket exemption.

Since the exact way the notarial system operates in each country is different, both as to the laws to be interpreted, the monopolies enjoyed in one country by one set of notaries, and the work that notaries actually do, I suggest that each notarial system needs to be considered and argued separately, so that each individual country needs to make its specific application for exemption and to produce solid, detailed and publicly available arguments for examination and criticism.None of them will I think stand up to objective scrutiny.

This separate, detailed examination is indeed what the Court of Justice has specifically said must occur in the case of lawyers or indeed any profession claiming exemption under Article 45.

What about the Spanish sea captains? What is that all about?

In case C405­1 of 2003 the ECJ decided that Spain did not have to recognise the qualifications of captains (or those second in command) of other EU nations, in respect of ships bigger than a defined size. The decision was based on a number of factors, chief of which was the extensive powers ship captains have.

On a ship crises can arise which are literally matters of life and death. The captain bears the responsibility for these. In this case one can see quite easily that he is equipped with powers both of command and coercion in his decisions(e.g. who gets into the lifeboats, who stays on board, whether to abandon ship etc) which are not consensual decisions and which do evidence official authority.

He also has to deal with incidents on board, (fights, mutinies, assaults etc) and has extensive power of coercion and control. He can lock passengers up until he reaches port. He has, as the Court noted, police powers.

The official power is a real one, not an imaginary, hypothetical one.

It is true that the case also referred to the ship captain’s notarial functions and stated, without making much of it, that these functions appeared to be associated with the exercise of the prerogatives of public power.

However one has to note that:

1. The notarial side of matters was not fully argued, as it was largely irrelevant to the case.

2. Ship captains actually do exercise coercive power and are thus like generals or judges.

3. The Commission knows of this case and has not changed its mind with regard to the legal weakness of notaries’arguments for exemption.

4. The case is actually a demonstration as to why the notaries should be included in the Directive, since if the government of any particular country thinks that its notaries are protected by Article 45, it can refuse to apply the Qualifications Directive, be sued by the Commission, and win or lose in the venue appointed by the Treaties for this, the Court of Justice. If successful, that country’s notaries will not have to comply with the Directive, just as the Spanish sea captains will not have to.

5. Before Reyners, it had been assumed that all lawyers were covered by the official authority exemption. That assumption was wrong, and proved wrong as soon as it was fully examined in court.

6. The decision pointed out that the powers of the captain were considered together, i.e. his police powers and his notarial functions. If they were considered separately one would no longer have the element of coercive power to contend with, since your local notary cannot lock you up. I suggest that the answer will be different when the matter is fully considered.

7. The case needs to be fully argued in the ECJ to ensure that justice is done to both notaries and consumers.

Proportionality ­or: Why are we all engaged in Europe?

From a legal point of view, proportionality is a key principle of EU law. It states that if one of the fundamental freedoms is to be infringed, the least damaging means must be chosen, i.e. the one which causes least harm to the fundamental principle of maintaining that freedom.

In this case the fundamental freedom is that of free movement.It is with the idea and the spirit of promoting and enabling free movement that the Directives on Mutual Recognition of Qualifications have been drafted and enforced and it is that spirit which is behind the present draft Directive.

Let us for a moment grant, as a hypothesis, that notaries are right and that they do exercise official authority, would that entitle them all to a blanket exemption from the Treaty and the draft Directive?

I suggest the answer must be No, since:

(a)  If the concern is to make sure that only qualified notaries can practise, the Directive will take care of that

(b) If the concern is that the consumer must be protected, the Directive will provide for that too.

(c)  If there is any other concern it has not been made plain

The key problem with notaries’ arguments is that they are so busy trying to find something that will protect them from competition that they forget to ask why it is that they should be protected at all.

Other professions are not so protected, and survive and thrive, and are indeed enriched by contact with professionals from other countries. More work develops as lawyers realise that they can share contacts, client referrals and experience, and serve a rapidly expanding market of people who have not one but several nationalities and homes notjust in one country but two or more. There is a bigger cake to share and a better service to the clients.

Just what would happen if fully qualified notaries were able to pass the tests set under the Directive, what earthquake would occur or what grave problem arise? Why should anything but good for the consumer happen?

Notaries cannot answer this question, because they have never really considered it, and because they are not concerned with the objective of making the Treaty and the European project work, but in frustrating it. Free movement they see as a threat, not an opportunity, something to be opposed, not welcomed.

It is interesting to note that, even now, notaries can qualify in more than one country. All they need to do is gain an extra nationality and qualify from the beginning in the usual way. So there is no absolute bar in theory to free movement, just an insurmountable one in practice, and one due to refusal to submit to EU law and the application of Directives to implement it, such as the one you are considering.now.

I suggest that those who wish to exempt themselves from the application of EU law need to put forward much better arguments and reasons than notaries have got, and that this amendment be rejected, leaving all notaries and their governments the right to challenge that inclusion in the forthcoming Court of Justice case.

I succeeded in convincing the U.K. government that Directive 89/48 applied to notaries in England and have helped a non U.K.notary qualify in the U.K.  Now, any EU notary, subject to compliance with Directive 89/48, can work in the U.K.  I support an EU wide profession which can serve EU citizens fully.

Thank you for your time in reading this, and feel free to contact me for any clarification you wish or to raise any points. I will be copying this to all members of the Committee, since I am happy to have my arguments made public. I wonder if the same will apply to other notaries? Will they publish their arguments in full, for all to see, and welcome an open debate? I beg leave to doubt it.

Mark Kober­Smith Email: notary@notarypublicinlondon.com

Kober­Smith & Associates 6 Carlos Place London W1K 3AP

Telephone : 00 44 (0) 207 499 2605
Website: www.notarypublicinlondon.com