Services as objects of international trade: bartering the legal profession.

• Author: Hill, Louise L.

ABSTRACT

The General Agreement on Trade in Service calls for members of the World Trade Organization (WTO) to further liberalize and expand opportunities for international trade in services. With legal services included in this mandate, requests for specific commitments and offers have been made by WTO Member States. While services as components of international trade is new to many of the WTO Member States, free movement of services has been addressed by the European Union (EU) since the inception of the European Economic Community. Thus EU directives, declarations, codes and case law serve as valuable resources to WTO Member States as they seek to liberalize the provision of legal services.

Within the EU, lawyers from EU Member States can work temporarily or permanently in another EU Member State by complying with the provisions of the Lawyers' Services Directive or the Lawyers' Establishment Directive. The EU, however, proposes handling cross-border practice with lawyers from non-EU Member states who are WTO members through Foreign Legal Consultant recognition, something considerably more restrictive than what is accorded lawyers from EU Member States. In that the EU is looked to as a leader in facilitating the provision of legal services, it seems the EU is missing an opportunity to shape the globabilization of the legal profession by further expanding liberalization opportunities for international trade in legal services.

TABLE OF CONTENTS I. INTRODUCTION II. GENERAL AGREEMENT ON TRADE IN SERVICES A. The Basic Agreement B. Horizontal Disciplines on Domestic Relations C. Doha Round of Negotiations III. EUROPEAN UNION A. Lawyers' Services Directive B. Declaration of Perugia C. CCBE Code D. Diploma Directive E. Lawyers' Establishment Directive F. Proposed Directive on Services in the Internal Market IV. GLOBALIZATION OF THE LEGAL PROFESSION A. Foreign Legal Consultants B. CCBE and the GATS C. Legal Services as Objects of International Trade V. CONCLUSION I. INTRODUCTION

Considering services as components of international trade is not a new concept to the Member States of the European Union (EU). Since the 1957 Treaty of Rome (EEC Treaty) that created the European Economic Community (EEC), the free movement of services has been addressed. (1) In the years that followed the EEC Treaty, the Member States specifically focused on individual service components, including the legal profession and lawyers' freedom to provide legal services. (2) While trade in services may not be a new concept to the EU, it is a relatively new concept to many of the 148 nations (3) that are members of the World Trade Organization (WTO), (4) an entity that was created as part of the 1994 Uruguay Round GATT Agreement. (5)

One of the agreements annexed to the Agreement Establishing the World Trade Organization is the General Agreement on Trade in Services (GATS). (6) The GATS is the first multilateral trade agreement that applies to services rather than goods. (7) For the first time, "the largely invisible services trade" (8) is a target for globalization and international regulation. The GATS has been referred to as "the most important single development in the multilateral trading system since the GATT itself came into effect in 1948." (9) As WTO Member States work toward eliminating barriers that deny market access or otherwise discriminate against foreign service providers, (10) they are likely to borrow concepts from the EU as they attempt to facilitate change in the provision of legal services. This situation presents the EU with a unique opportunity to help shape the globalization of the legal profession.

2. GENERAL AGREEMENT ON TRADE IN SERVICES

   The GATS is not considered the final word on international trade in services, rather it is considered only a beginning. We are cautioned that the rules are incomplete and untested because the GATS package contains a "promise that successive rounds of negotiations will be undertaken to continue opening up world trade in services." (11) The GATS presents a central set of rules, but the GATS obligations of each Member depend on the duties the Member has specifically undertaken. Under the agreement, a country is bound only to the extent that it has made concessions. (12) This unique aspect of GATS stands in direct contrast to obligations under GATT, which can be understood by reference to its general rules. (13)

   The underlying GATS agreement contains twenty-nine articles and six parts. (14) Part I sets the scope and defines the agreement. (15) Part II deals with general obligations and disciplines. (16) Part III contains rules governing specific commitments Member States have put in schedules. (17) Part IV concerns the schedules themselves and addresses future negotiations. The remaining parts cover institutional and final provisions. (18)

   1. The Basic Agreement

      The scope of the basic GATS agreement specifically addresses services in the following components: services supplied from the territory of one party to the territory of another; services supplied in the territory of one party to the consumers of any other; services provided through the presence of service-providing entities of one party in the territory of any other; and services provided by nationals of one party in the territory of any other. (19) Jonathan Goldsmith, Secretary General of the Council of the Bars and Law Societies of the European Union (CCBE), (20) has described these four modes of supply in terms of the legal profession as follows:

      (1) the service crosses the border (Mode 1)

      (2) the client crosses the border (Mode 2)

      (3) the lawyer's office crosses the border and a branch is opened (Mode 3)

      (4) the lawyer personally crosses a border (Mode 4). (21)

      The agreement applies to measures taken by central, regional, or local governments and authorities. (22) This is particularly relevant for lawyers since in a number of countries, including the United States, the legal profession is regulated by regional entities. (23)

      The central component of the second part of the GATS, which sets out general obligations and disciplines, is the most-favored-nation clause (MFN). Considered the cornerstone of the agreement, (24) each member "shall accord immediately and unconditionally to services and service suppliers of any other Member, treatment no less favorable than that it accords to like services and service suppliers of any other country." (25) Under the MFN doctrine, a GATS Member must treat service providers from other GATS Members similarly. There are provisions for exemptions, (26) however, as well as what some have considered "caveats." (27) While few Members have invoked MFN exemptions in legal services, (28) the caveats may be significant to the legal profession. For instance, given the differences between the legal professions in various countries, (29) it may be difficult to discern what constitutes "like services." (30) Also, since WTO Members may favor regional trading arrangements or economically integrated areas (31) and grant "advantages to adjacent countries in order to facilitate exchanges limited to contiguous frontier zones of services that are both locally produced and consumed," (32) it is unclear whether foreign service providers will be treated equally. Part II of the GATS also calls for transparency of measures of general application that affect the operation of the agreement so that service providers will know what laws and regulations they face. (33) Members are additionally urged to recognize the education or other qualifications of service suppliers of Member States. (34) Incident to such mutual recognition of qualifications, however, is the requirement that other Members with comparable standards be given an opportunity to participate on the same basis. (35)

      Part III of the GATS provides rules that shape each WTO Member State's individual commitment to admit foreign suppliers of services to its market. (36) Part III's two main articles address market access and national treatment; which are provisions applicable to scheduled sectors. (37) These are not general obligations but apply only to commitments made in national schedules. (38) Regarding market access, each Member is to give no less favorable treatment to the services and service suppliers of Members than is provided in its schedule of commitments. (39) Regarding national treatment, treatment of foreign services and service suppliers must be no less favorable than that which a Member gives its own services and suppliers. (40) In essence, the minimum, or worst treatment that may be given, is set. (41) Market access is considered the "entry ticket" or "entry restriction," while national treatment is an "operating restriction." (42) The rationale behind tying the latter to underlying commitments--rather than making it generally applicable--is that free access to the market will result since any regulatory advantage enjoyed by the domestic service supplier will be removed. (43)

      The fifth and sixth parts of the GATS contain institutional and final provisions, which differ little from the provisions of other agreements in the Uruguay Round. (44) Part IV of the GATS, however, implements liberalization. Two of its articles are technical: they set out the rules for specific commitments on services (45) and provide rules for modifying or withdrawing commitments. (46) The most important section of Part IV, Article XIX, calls for WTO Member States to enter into "successive rounds of negotiations ... with a view to achieving a progressively higher level of liberalization." (47) In committing governments to repetitive efforts to expand opportunities for international trade in services, it guarantees that the GATS agreement is only the beginning of a continuing enterprise. (48)

      Each WTO Member State completed a Schedule of Specific Commitments by December 1993. (49) The Schedules contain two types of promises: those that apply horizontally to all...