11.6.1998 EN Official Journal of the European Communities L 166/45 DIRECTIVE 98/26/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 19 May 1998 on settlement finality in payment and securities settlement systems THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 100a thereof, Having regard to the proposal from the Commission (1), Having regard to the opinion of the European Monetary Institute (2), Having regard to the opinion of the Economic and Social Committee (3), Acting in accordance with the procedure laid down in Article 189b of the Treaty (4), (1) Whereas the Lamfalussy report of 1990 to the Governors of the central banks of the Group of Ten Countries demonstrated the important systemic risk inherent in payment systems which operate on the basis of several legal types of payment netting, in particular multilateral netting; whereas the reduction of legal risks associated with participation in real time gross settlement systems is of paramount importance, given the increasing development of these systems; (2) Whereas it is also of the utmost importance to reduce the risk associated with participation in securities settlement systems, in particular where there is a close connection between such systems and payment systems; (3) Whereas this Directive aims at contributing to the efficient and cost effective operation of cross-border payment and securities settlement arrangements in the Community, which reinforces the freedom of movement of capital in the internal market; whereas this Directive thereby follows up the progress made towards completion of the internal market, in particular towards the freedom to provide services and liberalisation of capital movements, with a view to the realisation of Economic and Monetary Union; (4) Whereas it is desirable that the laws of the Member States should aim to minimise the disruption to a system caused by insolvency proceedings against a participant in that system; (5) Whereas a proposal for a Directive on the reorganisation and winding-up of credit institutions submitted in 1985 and amended on 8 February 1988 is still pending before the Council; whereas the Convention on Insolvency Proceedings drawn up on 23 November 1995 by the Member States meeting within the Council explicitly excludes insurance undertakings, credit institutions and investment firms; (6) Whereas this Directive is intended to cover payment and securities settlement systems of a domestic as well as of a cross-border nature; whereas the Directive is applicable to Community systems and to collateral security constituted by their participants, be they Community or third country participants, in connection with participation in these systems; (7) Whereas Member States may apply the provisions of this Directive to their domestic institutions which participate directly in third country systems and to collateral security provided in connection with participation in such systems; (8) Whereas Member States should be allowed to designate as a system covered by this Directive a system whose main activity is the settlement of securities even if the system to a limited extent also deals with commodity derivatives; (9) Whereas the reduction of systemic risk requires in particular the finality of settlement and the enforceability of collateral security; whereas collateral security is meant to comprise all means provided by a participant to the other participants in the payment and/or securities settlement systems to secure rights and obligations in connection with that system, including repurchase agreements, statutory liens and fiduciary transfers; whereas regulation in national law of the kind of collateral security which can be used should not be affected by the definition of collateral security in this Directive; (10) Whereas this Directive, by covering collateral security provided in connection with operations of the central banks of the Member States functioning as central banks, including monetary policy operations, assists the European Monetary Institute in its task of promoting the efficiency of cross-border payments with a view to the preparation of the third stage of Economic and Monetary Union and thereby contributes to developing the necessary legal framework in which the future European central bank may develop its policy; (11) Whereas transfer orders and their netting should be legally enforceable under all Member States' jurisdictions and binding on third parties; (12) Whereas rules on finality of netting should not prevent systems testing, before the netting takes place, whether orders that have entered the system comply with the rules of that system and allow the settlement of that system to take place; (13) Whereas nothing in this Directive should prevent a participant or a third party from exercising any right or claim resulting from the underlying transaction which they may have in law to recovery or restitution in respect of a transfer order which has entered a system, e.g. in case of fraud or technical error, as long as this leads neither to the unwinding of netting nor to the revocation of the transfer order in the system; (14) Whereas it is necessary to ensure that transfer orders cannot be revoked after a moment defined by the rules of the system; (15) Whereas it is necessary that a Member State should immediately notify other Member States of the opening of insolvency proceedings against a participant in the system; (16) Whereas insolvency proceedings should not have a retroactive effect on the rights and obligations of participants in a system; (17) Whereas, in the event of insolvency proceedings against a participant in a system, this Directive furthermore aims at determining which insolvency law is applicable to the rights and obligations of that participant in connection with its participation in a system; (18) Whereas collateral security should be insulated from the effects of the insolvency law applicable to the insolvent participant; (19) Whereas the provisions of Article 9(2) should only apply to a register, account or centralized deposit system which evidences the existence of proprietary rights in or for the delivery or transfer of the securities concerned; (20) Whereas the provisions of Article 9(2) are intended to ensure that if the participant, the central bank of a Member State or the future European central bank has a valid and effective collateral security as determined under the law of the Member State where the relevant register, account or centralized deposit system is located, then the validity and enforceability of that collateral security as against that system (and the operator thereof) and against any other person claiming directly or indirectly through it, should be determined solely under the law of that Member State; (21) Whereas the provisions of Article 9(2) are not intended to prejudice the operation and effect of the law of the Member State under which the securities are constituted or of the law of the Member State where the securities may otherwise be located (including, without limitation, the law concerning the creation, ownership or transfer of such securities or of rights in such securities) and should not be interpreted to mean that any such collateral security will be directly enforceable or be capable of being recognised in any such Member State otherwise than in accordance with the law of that Member State; (22) Whereas it is desirable that Member States endeavour to establish sufficient links between all the securities settlement systems covered by this Directive with a view towards promoting maximum transparency and legal certainty of transactions relating to securities; (23) Whereas the adoption of this Directive constitutes the most appropriate way of realising the above-mentioned objectives and does not go beyond what is necessary to achieve them, HAVE ADOPTED THIS DIRECTIVE: SECTION I SCOPE AND DEFINITIONS Article 1 The provisions of this Directive shall apply to: (a) any system as defined in Article 2(a), governed by the law of a Member State and operating in any currency, the ecu or in various currencies which the system converts one against another, (b) any participant in such a system; (c) collateral security provided in connection with: — participation in a system, or — operations of the central banks of the Member States in their functions as central banks. Article 2 For the purpose of this Directive: (a) ‘system’ shall mean a formal arrangement: — between three or more participants, without counting a possible settlement agent, a possible central counterparty, a possible clearing house or a possible indirect participant, with common rules and standardised arrangements for the execution of transfer orders between the participants, — governed by the law of a Member State chosen by the participants; the participants may, however, only choose the law of a Member State in which at least one of them has its head office, and — designated, without prejudice to other more stringent conditions of general application laid down by national law, as a system and notified to the Commission by the Member State whose law is applicable, after that Member State is satisfied as to the adequacy of the rules of the system. Subject to the conditions in the first subparagraph, a Member State may designate as a system such a formal arrangement whose business consists of the execution of transfer orders as defined in the second indent of (i) and which to a limited extent executes orders relating to other financial instruments, when that Member State considers that such a designation is warranted on grounds of systemic risk. A Member State may also on a case-by-case basis designate as a system such a formal arrangement between two participants, without counting a possible settlement agent, a possible central counterparty, a possible clearing house or a possible indirect participant, when that Member State considers that such a designation is warranted on grounds of systemic risk; (b) ‘institution’ shall mean: — a credit institution as defined in the first indent of Article 1 of Directive 77/780/EEC (5) including the institutions set out in the list in Article 2(2) thereof, or — an investment firm as defined in point 2 of Article 1 of Directive 93/22/EEC (6) excluding the institutions set out in the list in Article 2(2)(a) to (k) thereof, or — public authorities and publicly guaranteed undertakings, or — any undertaking whose head office is outside the Community and whose functions correspond to those of the Community credit institutions or investment firms as defined in the first and second indent, which participates in a system and which is responsible for discharging the financial obligations arising from transfer orders within that system. If a system is supervised in accordance with national legislation and only executes transfer orders as defined in the second indent of (i), as well as payments resulting from such orders, a Member State may decide that undertakings which participate in such a system and which have responsibility for discharging the financial obligations arising from transfer orders within this system, can be considered institutions, provided that at least three participants of this system are covered by the categories referred to in the first subparagraph and that such a decision is warranted on grounds of systemic risk; (c) ‘central counterparty’ shall mean an entity which is interposed between the institutions in a system and which acts as the exclusive counterparty of these institutions with regard to their transfer orders; (d) ‘settlement agent’ shall mean an entity providing to institutions and/or a central counterparty participating in systems, settlement accounts through which transfer orders within such systems are settled and, as the case may be, extending credit to those institutions and/or central counterparties for settlement purposes; (e) ‘clearing house’ shall mean an entity responsible for the calculation of the net positions of institutions, a possible central counterparty and/or a possible settlement agent; (f) ‘participant’ shall mean an institution, a central counterparty, a settlement agent or a clearing house. According to the rules of the system, the same participant may act as a central counterparty, a settlement agent or a clearing house or carry out part or all of these tasks. A Member State may decide that for the purposes of this Directive an indirect participant may be considered a participant if it is warranted on the grounds of systemic risk and on condition that the indirect participant is known to the system; (g) ‘indirect participant’ shall mean a credit institution as defined in the first indent of (b) with a contractual relationship with an institution participating in a system executing transfer orders as defined in the first indent of (i) which enables the abovementioned credit institution to pass transfer orders through the system; (h) ‘securities’ shall mean all instruments referred to in section B of the Annex to Directive 93/22/EEC; (i) ‘transfer order’ shall mean: — any instruction by a participant to place at the disposal of a recipient an amount of money by means of a book entry on the accounts of a credit institution, a central bank or a settlement agent, or any instruction which results in the assumption or discharge of a payment obligation as defined by the rules of the system, or — an instruction by a participant to transfer the title to, or interest in, a security or securities by means of a book entry on a register, or otherwise; (j) ‘insolvency proceedings’ shall mean any collective measure provided for in the law of a Member State, or a third country, either to wind up the participant or to reorganise it, where such measure involves the suspending of, or imposing limitations on, transfers or payments; (k) ‘netting’ shall mean the conversion into one net claim or one net obligation of claims and obligations resulting from transfer orders which a participant or participants either issue to, or receive from, one or more other participants with the result that only a net claim can be demanded or a net obligation be owed; (l) ‘settlement account’ shall mean an account at a central bank, a settlement agent or a central counterparty used to hold funds and securities and to settle transactions between participants in a system; (m) ‘collateral security’ shall mean all realisable assets provided under a pledge (including money provided under a pledge), a repurchase or similar agreement, or otherwise, for the purpose of securing rights and obligations potentially arising in connection with a system, or provided to central banks of the Member States or to the future European central bank. SECTION II NETTING AND TRANSFER ORDERS Article 3 1. Transfer orders and netting shall be legally enforceable and, even in the event of insolvency proceedings against a participant, shall be binding on third parties, provided that transfer orders were entered into a system before the moment of opening of such insolvency proceedings as defined in Article 6(1). Where, exceptionally, transfer orders are entered into a system after the moment of opening of insolvency proceedings and are carried out on the day of opening of such proceedings, they shall be legally enforceable and binding on third parties only if, after the time of settlement, the settlement agent, the central counterparty or the clearing house can prove that they were not aware, nor should have been aware, of the opening of such proceedings. 2. No law, regulation, rule or practice on the setting aside of contracts and transactions concluded before the moment of opening of insolvency proceedings, as defined in Article 6(1) shall lead to the unwinding of a netting. 3. The moment of entry of a transfer order into a system shall be defined by the rules of that system. If there are conditions laid down in the national law governing the system as to the moment of entry, the rules of that system must be in accordance with such conditions. Article 4 Member States may provide that the opening of insolvency proceedings against a participant shall not prevent funds or securities available on the settlement account of that participant from being used to fulfil that participant's obligations in the system on the day of the opening of the insolvency proceedings. Furthermore, Member States may also provide that such a participant's credit facility connected to the system be used against available, existing collateral security to fulfil that participant's obligations in the system. Article 5 A transfer order may not be revoked by a participant in a system, nor by a third party, from the moment defined by the rules of that system. SECTION III PROVISIONS CONCERNING INSOLVENCY PROCEEDINGS Article 6 1. For the purpose of this Directive, the moment of opening of insolvency proceedings shall be the moment when the relevant judicial or administrative authority handed down its decision. 2. When a decision has been taken in accordance with paragraph 1, the relevant judicial or administrative authority shall immediately notify that decision to the appropriate authority chosen by its Member State. 3. The Member State referred to in paragraph 2 shall immediately notify other Member States. Article 7 Insolvency proceedings shall not have retroactive effects on the rights and obligations of a participant arising from, or in connection with, its participation in a system earlier than the moment of opening of such proceedings as defined in Article 6(1). Article 8 In the event of insolvency proceedings being opened against a participant in a system, the rights and obligations arising from, or in connection with, the participation of that participant shall be determined by the law governing that system. SECTION IV INSULATION OF THE RIGHTS OF HOLDERS OF COLLATERAL SECURITY FROM THE EFFECTS OF THE INSOLVENCY OF THE PROVIDER Article 9 1. The rights of: — a participant to collateral security provided to it in connection with a system, and — central banks of the Member States or the future European central bank to collateral security provided to them, shall not be affected by insolvency proceedings against the participant or counterparty to central banks of the Member States or the future European central bank which provided the collateral security. Such collateral security may be realised for the satisfaction of these rights. 2. Where securities (including rights in securities) are provided as collateral security to participants and/or central banks of the Member States or the future European central bank as described in paragraph 1, and their right (or that of any nominee, agent or third party acting on their behalf) with respect to the securities is legally recorded on a register, account or centralised deposit system located in a Member State, the determination of the rights of such entities as holders of collateral security in relation to those securities shall be governed by the law of that Member State. SECTION V FINAL PROVISIONS Article 10 Member States shall specify the systems which are to be included in the scope of this Directive and shall notify them to the Commission and inform the Commission of the authorities they have chosen in accordance with Article 6(2). The system shall indicate to the Member State whose law is applicable the participants in the system, including any possible indirect participants, as well as any change in them. In addition to the indication provided for in the second subparagraph, Member States may impose supervision or authorisation requirements on systems which fall under their jurisdiction. Anyone with a legitimate interest may require an institution to inform him of the systems in which it participates and to provide information about the main rules governing the functioning of those systems. Article 11 1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive before 11 December 1999. They shall forthwith inform the Commission thereof. When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such a reference shall be laid down by the Member States. 2. Member States shall communicate to the Commission the text of the provisions of domestic law which they adopt in the field governed by this Directive. In this Communication, Member States shall provide a table of correspondence showing the national provisions which exist or are introduced in respect of each Article of this Directive. Article 12 No later than three years after the date mentioned in Article 11(1), the Commission shall present a report to the European Parliament and the Council on the application of this Directive, accompanied where appropriate by proposals for its revision. Article 13 This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities. Article 14 This Directive is addressed to the Member States. Done at Brussels, 19 May 1998. For the European Parliament The President J.M. GIL-ROBLES For the Council The President G. BROWN (1) OJ C 207, 18. 7. 1996, p. 13, and OJ C 259, 26. 8. 1997, p. 6. (2) Opinion delivered on 21 November 1996. (3) OJ C 56, 24. 2. 1997, p. 1. (4) Opinion of the European Parliament of 9 April 1997 (OJ C 132, 28. 4. 1997, p. 74), Council Common Position of 13 October 1997 (OJ C 375, 10. 12. 1997, p. 34) and Decision of the European Parliament of 29 January 1998 (OJ C 56, 23. 2. 1998). Council Decision of 27 April 1998. (5) First Council Directive 77/780/EEC of 12 December 1977 on the coordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions (OJ L 322, 17. 12. 1977, p. 30). Directive as last amended by Directive 96/13/EC (OJ L 66, 16. 3. 1996, p. 15). (6) Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ L 141, 11. 6. 1993, p. 27). Directive as last amended by Directive 97/9/EC (OJ L 84, 26. 3. 1997, p. 22).

Summary: Settlement finality in payment and securities settlement systems Settlement finality in payment and securities settlement systems Transfers and payments of financial products must be regulated to avoid major risks, especially those linked to the insolvency of participants - in the transaction. This EU law lays down rules to minimise such risks. ACT Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems. SUMMARY WHAT DOES THIS DIRECTIVE DO? It guarantees that financial product transfer and payment orders can be finalised, mainly by mitigating problems arising from a participant’s insolvency. These participants may be: financial institutions, e.g. banks; systems operators, such as central securities depositories. KEY POINTS Transfer orders are irrevocable Transfer orders of financial products are contractually enforceable. This is also applicable to any associated payment netting, situations where debt and claims are offset between participants. The rules apply even when a participant is subject to insolvency proceedings, as long as the transfer order was underway before the proceedings started. The rules may also apply up to 24 hours afterwards to cover situations where transactions are entered into at times when relevant records are unavailable, for instance overnight. Uniform rules The directive seeks to ensure that uniform rules are applied where multiple settlement and payment systems are in operation from the moment the transactions are entered into in order to avoid difficulties arising from incompatible regulations. Guarantees in insolvency situations The existence of insolvency proceedings against a participant does not retroactively affect the rights and obligations of other participants nor their access to the normal financial guarantees inherent in a transaction. WHEN DOES THE DIRECTIVE APPLY? It originally took effect in 1998, since when it has been amended several times. For more information, see the financial services and capital markets union page of the European Commission’s website. REFERENCES Act Entry into force Deadline for transposition in the Member States Official Journal Directive 98/26/EC 11.6.1998 11.12.1999 OJ L 166 of 11.6.1998, pp. 45-50 Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal Directive 2009/44/EC 30.6.2009 30.12.2010 OJ L 146 of 10.6.2009, pp. 37-43 Directive 2010/78/EU 4.1.2011 31.12.2011 OJ L 331 of 15.12.2010, pp. 120-161 Regulation (EU) No 648/2012 16.8.2012 - OJ L 201 of 27.7.2012, pp. 1-59 Regulation (EU) No 909/2014 17.9.2014 - OJ L 257 of 28.8.2014, pp. 1-72 Successive amendments and corrections to Directive 98/26/EC have been incorporated in the basic text. This consolidated version is for reference purposes only. last update 03.12.2014


EUR-Lex - 31998L0005 - EN Avis juridique important | 31998L0005 Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained Official Journal L 077 , 14/03/1998 P. 0036 - 0043 DIRECTIVE 98/5/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community, and in particular Article 49, Article 57(1) and the first and third sentences of Article 57(2) thereof,Having regard to the proposal from the Commission (1),Having regard to the Opinion of the Economic and Social Committee (2),Acting in accordance with the procedure laid down in Article 189b of the Treaty (3),(1) Whereas, pursuant to Article 7a of the Treaty, the internal market is to comprise an area without internal frontiers; whereas, pursuant to Article 3(c) of the Treaty, the abolition, as between Member States, of obstacles to freedom of movement for persons and services constitutes one of the objectives of the Community; whereas, for nationals of the Member States, this means among other things the possibility of practising a profession, whether in a self-employed or a salaried capacity, in a Member State other than that in which they obtained their professional qualifications;(2) Whereas, pursuant to Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration (4), a lawyer who is fully qualified in one Member State may already ask to have his diploma recognised with a view to establishing himself in another Member State in order to practise the profession of lawyer there under the professional title used in that State; whereas the objective of Directive 89/48/EEC is to ensure that a lawyer is integrated into the profession in the host Member State, and the Directive seeks neither to modify the rules regulating the profession in that State nor to remove such a lawyer from the ambit of those rules;(3) Whereas while some lawyers may become quickly integrated into the profession in the host Member State, inter alia by passing an aptitude test as provided for in Directive 89/48/EEC, other fully qualified lawyers should be able to achieve such integration after a certain period of professional practice in the host Member State under their home-country professional titles or else continue to practise under their home-country professional titles;(4) Whereas at the end of that period the lawyer should be able to integrate into the profession in the host Member States after verification that the possesses professional experience in that Member State;(5) Whereas action along these lines is justified at Community level not only because, compared with the general system for the recognition of diplomas, it provides lawyers with an easier means whereby they can integrate into the profession in a host Member State, but also because, by enabling lawyers to practise under their home-country professional titles on a permanent basis in a host Member State, it meets the needs of consumers of legal services who, owing to the increasing trade flows resulting, in particular, from the internal market, seek advice when carrying out cross-border transactions in which international law, Community law and domestic laws often overlap;(6) Whereas action is also justified at Community level because only a few Member States already permit in their territory the pursuit of activities of lawyers, otherwise than by way of provision of services, by lawyers from other Member States practising under their home-country professional titles; whereas, however, in the Member States where this possibility exists, the practical details concerning, for example, the area of activity and the obligation to register with the competent authorities differ considerably; whereas such a diversity of situations leads to inequalities and distortions in competition between lawyers from the Member States and constitutes an obstacle to freedom of movement; whereas only a directive laying down the conditions governing practice of the profession, otherwise than by way of provision of services, by lawyers practising under their home-country professional titles is capable of resolving these difficulties and of affording the same opportunities to lawyers and consumers of legal services in all Member States;(7) Whereas, in keeping with its objective, this Directive does not lay down any rules concerning purely domestic situations, and where it does affect national rules regulating the legal profession it does so no more than is necessary to achieve its purpose effectively; whereas it is without prejudice in particular to national legislation governing access to and practice of the profession of lawyer under the professional title used in the host Member State;(8) Whereas lawyers covered by the Directive should be required to register with the competent authority in the host Member State in order that that authority may ensure that they comply with the rules of professional conduct in force in that State; whereas the effect of such registration as regards the jurisdictions in which, and the levels and types of court before which, lawyers may practise is determined by the law applicable to lawyers in the host Member State;(9) Whereas lawyers who are not integrated into the profession in the host Member State should practise in that State under their home-country professional titles so as to ensure that consumers are properly informed and to distinguish between such lawyers and lawyers from the host Member State practising under the professional title used there;(10) Whereas lawyers covered by this Directive should be permitted to give legal advice in particular on the law of their home Member States, on Community law, on international law and on the law of the host Member State; whereas this is already allowed as regards the provision of services under Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective excercise by lawyers of freedom to provide services (5); whereas, however, provision should be made, as in Directive 77/249/EEC, for the option of excluding from the activities of lawyers practising under their home-country professional titles in the United Kingdom and Ireland the preparation of certain formal documents in the conveyancing and probate spheres; whereas this Directive in no way affects the provisions under which, in every Member State, certain activities are reserved for professions other than the legal profession; whereas the provision in Directive 77/249/EEC concerning the possibility of the host Member State to require a lawyer practising under his home-country professional title to work in conjunction with a local lawyer when representing or defending a client in legal proceedings should also be incorporated in this Directive; whereas that requirement must be interpreted in the light of the case law of the Court of Justice of the European Communities, in particular its judgment of 25 February 1988 in Case 427/85, Commission v. Germany (6);(11) Whereas to ensure the smooth operation of the justice system Member States should be allowed, by means of specific rules, to reserve access to their highest courts to specialist lawyers, without hindering the integration of Member States' lawyers fulfilling the necessary requirements;(12) Whereas a lawyer registered under his home-country professional title in the host Member State must remain registered with the competent authority in his home Member State if he is to retain his status of lawyer and be covered by this Directive; whereas for that reason close collaboration between the competent authorities is indispensable, in particular in connection with any disciplinary proceedings;(13) Whereas lawyers covered by this Directive, whether salaried or self-employed in their home Member States, may practise as salaried lawyers in the host Member State, where that Member State offers that possibility to its own lawyers;(14) Whereas the purpose pursued by this Directive in enabling lawyers to practise in another Member State under their home-country professional titles is also to make it easier for them to obtain the professional title of that host Member State; whereas under Articles 48 and 52 of the Treaty as interpreted by the Court of Justice the host Member State must take into consideration any professional experience gained in its territory; whereas after effectively and regularly pursuing in the host Member State an activity in the law of that State including Community law for a period of three years, a lawyer may reasonably be assumed to have gained the aptitude necessary to become fully integrated into the legal profession there; whereas at the end of that period the lawyer who can, subject to verification, furnish evidence of his professional competence in the host Member State should be able to obtain the professional title of that Member State; whereas if the period of effective and regular professional activity of at least three years includes a shorter period of practice in the law of the host Member State, the authority shall also take into consideration any other knowledge of that State's law, which it may verify during an interview; whereas if evidence of fulfilment of these conditions is not provided, the decision taken by the competent authority of the host State not to grant the State's professional title under the facilitation arrangements linked to those conditions must be substantiated and subject to appeal under national law;(15) Whereas, for economic and professional reasons, the growing tendency for lawyers in the Community to practise jointly, including in the form of associations, has become a reality; whereas the fact that lawyers belong to a grouping in their home Member State should not be used as a pretext to prevent or deter them from establishing themselves in the host Member State; whereas Member States should be allowed, however, to take appropriate measures with the legitimate aim of safeguarding the profession's independence; whereas certain guarantees should be provided in those Member States which permit joint practice,HAVE ADOPTED THIS DIRECTIVE:Article 1 Object, scope and definitions 1. The purpose of this Directive is to facilitate practice of the profession of lawyer on a permanent basis in a self-employed or salaried capacity in a Member State other than that in which the professional qualification was obtained.2. For the purposes of this Directive:(a) 'lawyer` means any person who is a national of a Member State and who is authorised to pursue his professional activities under one of the following professional titles:>TABLE>(b) 'home Member State` means the Member State in which a lawyer acquired the right to use one of the professional titles referred to in (a) before practising the profession of lawyer in another Member State;(c) 'host Member State` means the Member State in which a lawyer practises pursuant to this Directive;(d) 'home-country professional title` means the professional title used in the Member State in which a lawyer acquired the right to use that title before practising the profession of lawyer in the host Member State;(e) 'grouping` means any entity, with or without legal personality, formed under the law of a Member State, within which lawyers pursue their professional activities jointly under a joint name;(f) 'relevant professional title` or 'relevant profession` means the professional title or profession governed by the competent authority with whom a lawyer has registered under Article 3, and 'competent authority` means that authority.3. This Directive shall apply both to lawyers practising in a self-employed capacity and to lawyers practising in a salarial capacity in the home Member State and, subject to Article 8, in the host Member State.4. Practice of the profession of lawyer within the meaning of this Directive shall not include the provision of services, which is covered by Directive 77/249/EEC.Article 2 Right to practise under the home-country professional title Any lawyer shall be entitled to pursue on a permanent basis, in any other Member State under his home-country professional title, the activities specified in Article 5.Integration into the profession of lawyer in the host Member State shall be subject to Article 10.Article 3 Registration with the competent authority 1. A lawyer who wishes to practise in a Member State other than that in which he obtained his professional qualification shall register with the competent authority in that State.2. The competent authority in the host Member State shall register the lawyer upon presentation of a certificate attesting to his registration with the competent authority in the home Member State. It may require that, when presented by the competent authority of the home Member State, the certificate be not more than three months old. It shall inform the competent authority in the home Member State of the registration.3. For the purpose of applying paragraph 1:- in the United Kingdom and Ireland, lawyers practising under a professional title other than those used in the United Kingdom or Ireland shall register either with the authority responsible for the profession of barrister or advocate or with the authority responsible for the profession of solicitor,- in the United Kingdom, the authority responsible for a barrister from Ireland shall be that responsible for the profession of barrister or advocate, and the authority responsible for a solicitor from Ireland shall be that responsible for the profession of solicitor,- in Ireland, the authority responsible for a barrister or an advocate from the United Kingdom shall be that responsible for the profession of barrister, and the authority responsible for a solicitor from the United Kingdom shall be that responsible for the profession of solicitor.4. Where the relevant competent authority in a host Member State publishes the names of lawyers registered with it, it shall also publish the names of lawyers registered pursuant to this Directive.Article 4 Practice under the home-country professional title 1. A lawyer practising in a host Member State under his home-country professional title shall do so under that title, which must be expressed in the official language or one of the official languages of his home Member State, in an intelligible manner and in such a way as to avoid confusion with the professional title of the host Member State.2. For the purpose of applying paragraph 1, a host Member State may require a lawyer practising under his home-country professional title to indicate the professional body of which he is a member in his home Member State or the judicial authority before which he is entitled to practise pursuant to the laws of his home Member State. A host Member State may also require a lawyer practising under his home-country professional title to include a reference to his registration with the competent authority in that State.Article 5 Area of activity 1. Subject to paragraphs 2 and 3, a lawyer practising under his home-country professional title carries on the same professional activities as a lawyer practising under the relevant professional title used in the host Member State and may, inter alia, give advice on the law of his home Member State, on Community law, on international law and on the law of the host Member State. He shall in any event comply with the rules of procedure applicable in the national courts.2. Member States which authorise in their territory a prescribed category of lawyers to prepare deeds for obtaining title to administer estates of deceased persons and for creating or transferring interests in land which, in other Member States, are reserved for professions other than that of lawyer may exclude from such activities lawyers practising under a home-country professional title conferred in one of the latter Member States.3. For the pursuit of activities relating to the representation or defence of a client in legal proceedings and insofar as the law of the host Member State reserves such activities to lawyers practising under the professional title of that State, the latter may require lawyers practising under their home-country professional titles to work in conjunction with a lawyer who practises before the judicial authority in question and who would, where necessary, be answerable to that authority or with an 'avoué` practising before it.Nevertheless, in order to ensure the smooth operation of the justice system, Member States may lay down specific rules for access to supreme courts, such as the use of specialist lawyers.Article 6 Rules of professional conduct applicable 1. Irrespective of the rules of professional conduct to which he is subject in his home Member State, a lawyer practising under his home-country professional title shall be subject to the same rules of professional conduct as lawyers practising under the relevant professional title of the host Member State in respect of all the activities he pursues in its territory.2. Lawyers practising under their home-country professional titles shall be granted appropriate representation in the professional associations of the host Member State. Such representation shall involve at least the right to vote in elections to those associations' governing bodies.3. The host Member State may require a lawyer practising under his home-country professional title either to take out professional indemnity insurance or to become a member of a professional guarantee fund in accordance with the rules which that State lays down for professional activities pursued in its territory. Nevertheless, a lawyer practising under his home-country professional title shall be exempted from that requirement if he can prove that he is covered by insurance taken out or a guarantee provided in accordance with the rules of his home Member State, insofar as such insurance or guarantee is equivalent in terms of the conditions and extent of cover. Where the equivalence is only partial, the competent authority in the host Member State may require that additional insurance or an additional guarantee be contracted to cover the elements which are not already covered by the insurance or guarantee contracted in accordance with the rules of the home Member State.Article 7 Disciplinary proceedings 1. In the event of failure by a lawyer practising under his home-country professional title to fulfil the obligations in force in the host Member State, the rules of procedure, penalties and remedies provided for in the host Member State shall apply.2. Before initiating disciplinary proceedings against a lawyer practising under his home-country professional title, the competent authority in the host Member State shall inform the competent authority in the home Member State as soon as possible, furnishing it with all the relevant details.The first subparagraph shall apply mutatis mutandis where disciplinary proceedings are initiated by the competent authority of the home Member State, which shall inform the competent authority of the host Member State(s) accordingly.3. Without prejudice to the decision-making power of the competent authority in the host Member State, that authority shall cooperate throughout the disciplinary proceedings with the competent authority in the home Member State. In particular, the host Member State shall take the measures necessary to ensure that the competent authority in the home Member State can make submissions to the bodies responsible for hearing any appeal.4. The competent authority in the home Member State shall decide what action to take, under its own procedural and substantive rules, in the light of a decision of the competent authority in the host Member State concerning a lawyer practising under his home-country professional title.5. Although it is not a prerequisite for the decision of the competent authority in the host Member State, the temporary or permanent withdrawal by the competent authority in the home Member State of the authorisation to practise the profession shall automatically lead to the lawyer concerned being temporarily or permanently prohibited from practising under his home-country professional title in the host Member State.Article 8 Salaried practice A lawyer registered in a host Member State under his home-country professional title may practise as a salaried lawyer in the employ of another lawyer, an association or firm of lawyers, or a public or private enterprise to the extent that the host Member State so permits for lawyers registered under the professional title used in that State.Article 9 Statement of reasons and remedies Decisions not to effect the registration referred to in Article 3 or to cancel such registration and decisions imposing disciplinary measures shall state the reasons on which they are based.A remedy shall be available against such decisions before a court or tribunal in accordance with the provisions of domestic law.Article 10 Like treatment as a lawyer of the host Member State 1. A lawyer practising under his home-country professional title who has effectively and regularly pursued for a period of at least three years an activity in the host Member State in the law of that State including Community law shall, with a view to gaining admission to the profession of lawyer in the host Member State, be exempted from the conditions set out in Article 4(1)(b) of Directive 89/48/EEC, 'Effective and regular pursuit` means actual exercise of the activity without any interruption other than that resulting from the events of everyday life.It shall be for the lawyer concerned to furnish the competent authority in the host Member State with proof of such effective regular pursuit for a period of at least three years of an activity in the law of the host Member State. To that end:(a) the lawyer shall provide the competent authority in the host Member State with any relevant information and documentation, notably on the number of matters he has dealt with and their nature;(b) the competent authority of the host Member State may verify the effective and regular nature of the activity pursued and may, if need be, request the lawyer to provide, orally or in writing, clarification of or further details on the information and documentation mentioned in point (a).Reasons shall be given for a decision by the competent authority in the host Member State not to grant an exemption where proof is not provided that the requirements laid down in the first subparagraph have been fulfilled, and the decision shall be subject to appeal under domestic law.2. A lawyer practising under his home-country professional title in a host Member State may, at any time, apply to have his diploma recognised in accordance with Directive 89/48/EEC with a view to gaining admission to the profession of lawyer in the host Member State and practising it under the professional title corresponding to the profession in that Member State.3. A lawyer practising under his home-country professional title who has effectively and regularly pursued a professional activity in the host Member State for a period of at least three years but for a lesser period in the law of that Member State may obtain from the competent authority of that State admission to the profession of lawyer in the host Member State and the right to practise it under the professional title corresponding to the profession in that Member State, without having to meet the conditions referred to in Article 4(1)(b) of Directive 89/48/EEC, under the conditions and in accordance with the procedures set out below:(a) The competent authority of the host Member State shall take into account the effective and regular professional activity pursued during the abovementioned period and any knowledge and professional experience of the law of the host Member State, and any attendance at lectures or seminars on the law of the host Member State, including the rules regulating professional practice and conduct.(b) The lawyer shall provide the competent authority of the host Member State with any relevant information and documentation, in particular on the matters he has dealt with. Assessment of the lawyer's effective and regular activity in the host Member State and assessment of his capacity to continue the activity he has pursued there shall be carried out by means of an interview with the competent authority of the host Member State in order to verify the regular and effective nature of the activity pursued.Reasons shall be given for a decision by the competent authority in the host Member State not to grant authorisation where proof is not provided that the requirements laid down in the first subparagraph have been fulfilled, and the decision shall be subject to appeal under domestic law.4. The competent authority of the host Member State may, by reasoned decision subject to appeal under domestic law, refuse to allow the lawyer the benefit of the provisions of this Article if it considers that this would be against public policy, in a particular because of disciplinary proceedings, complaints or incidents of any kind.5. The representatives of the competent authority entrusted with consideration of the application shall preserve the confidentiality of any information received.6. A lawyer who gains admission to the profession of lawyer in the host Member State in accordance with paragraphs 1, 2 and 3 shall be entitled to use his home-country professional title, expressed in the official language or one of the official languages of his home Member State, alongside the professional title corresponding to the profession of lawyer in the host Member State.Article 11 Joint practice Where joint practise is authorised in respect of lawyers carrying on their activities under the relevant professional title in the host Member State, the following provisions shall apply in respect of lawyers wishing to carry on activities under that title or registering with the competent authority:(1) One or more lawyers who belong to the same grouping in their home Member State and who practise under their home-country professional title in a host Member State may pursue their professional activities in a branch or agency of their grouping in the host Member State. However, where the fundamental rules governing that grouping in the home Member State are incompatible with the fundamental rules laid down by law, regulation or administrative action in the host Member State, the latter rules shall prevail insofar as compliance therewith is justified by the public interest in protecting clients and third parties.(2) Each Member State shall afford two or more lawyers from the same grouping or the same home Member State who practise in its territory under their home-country professional titles access to a form of joint practice. If the host Member State gives its lawyers a choice between several forms of joint practice, those same forms shall also be made available to the aforementioned lawyers. The manner in which such lawyers practise jointly in the host Member State shall be governed by the laws, regulations and administrative provisions of that State.(3) The host Member State shall take the measures necessary to permit joint practice also between:(a) several lawyers from different Member States practising under their home-country professional titles;(b) one or more lawyers covered by point (a) and one or more lawyers from the host Member State.The manner in which such lawyers practice jointly in the host Member State shall be governed by the laws, regulations and administrative provisions of that State.(4) A lawyer who wishes to practise under his home-country professional title shall inform the competent authority in the host Member State of the fact that he is a member of a grouping in his home Member State and furnish any relevant information on that grouping.(5) Notwithstanding points 1 to 4, a host Member State, insofar as it prohibits lawyers practising under its own relevant professional title from practising the profession of lawyer within a grouping in which some persons are not members of the profession, may refuse to allow a lawyer registered under his home-country professional title to practice in its territory in his capacity as a member of his grouping. The grouping is deemed to include persons who are not members of the profession if- the capital of the grouping is held entirely or partly, or- the name under which it practises is used, or- the decision-making power in that grouping is exercised, de facto or de jure,by persons who do not have the status of lawyer within the meaning of Article 1(2).Where the fundamental rules governing a grouping of lawyers in the home Member State are incompatible with the rules in force in the host Member State or with the provisions of the first subparagraph, the host Member State may oppose the opening of a branch or agency within its territory without the restrictions laid down in point (1).Article 12 Name of the grouping Whatever the manner in which lawyers practise under their home-country professional titles in the host Member State, they may employ the name of any grouping to which they belong in their home Member State.The host Member State may require that, in addition to the name referred to in the first subparagraph, mention be made of the legal form of the grouping in the home Member State and/or of the names of any members of the grouping practising in the host Member State.Article 13 Cooperation between the competent authorities in the home and host Member States and confidentiality In order to facilitate the application of this Directive and to prevent its provisions from being misapplied for the sole purpose of circumventing the rules applicable in the host Member State, the competent authority in the host Member State and the competent authority in the home Member State shall collaborate closely and afford each other mutual assistance.They shall preserve the confidentiality of the information they exchange.Article 14 Designation of the competent authorities Member States shall designate the competent authorities empowered to receive the applications and to take the decisions referred to in this Directive by 14 March 2000. They shall communicate this information to the other Member States and to the Commission.Article 15 Report by the Commission Ten years at the latest from the entry into force of this Directive, the Commission shall report to the European Parliament and to the Council on progress in the implementation of the Directive.After having held all the necessary consultations, it shall on that occasion present its conclusions and any amendments which could be made to the existing system.Article 16 Implementation 1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 14 March 2000. They shall forthwith inform the Commission thereof.When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be adopted by Member States.2. Member States shall communicate to the Commission the texts of the main provisions of domestic law which they adopt in the field covered by this Directive.Article 17 This Directive shall enter into force on the date of its publication in the Official Journal of the European Communities.Article 18 Addressees This Directive is addressed to the Member States.Done at Brussels, 16 February 1998.For the European ParliamentThe PresidentJ. M. GIL-ROBLESFor the CouncilThe PresidentJ. CUNNINGHAM(1) OJ C 128, 24. 5. 1995, p. 6 and OJ C 355, 25. 11. 1996, p. 19.(2) OJ C 256, 2. 10. 1995, p. 14.(3) Opinion of the European Parliament of 19 June 1996 (OJ C 198, 8. 7. 1996, p. 85), Council Common Position of 24 July 1997 (OJ C 297, 29. 9. 1997, p. 6), Decision of the European Parliament of 19 November 1997 (Council Decision of 15 December 1997).(4) OJ L 19, 24. 1. 1989, p. 16.(5) OJ L 78, 26. 3. 1977, p. 17. Directive as last amended by the 1994 Act of Accession.(6) [1988] ECR 1123.

Summary: Lawyers practising abroad on a permanent basis — EU rules Lawyers practising abroad on a permanent basis — EU rules SUMMARY OF: Directive 98/5/EC — practice as a lawyer on a permanent basis in an EU country other than that of qualification SUMMARY WHAT DOES THIS DIRECTIVE DO? The directive enables lawyers who qualify in one EU country to practise on a permanent basis in another under their home country professional title. The directive applies to EU nationals authorised to practise under the professional title of ‘lawyer’ , but the system also extends to all nationals of European Economic Area countries and Switzerland. KEY POINTS Right to practise Lawyers may pursue their profession on a permanent basis in another EU country under the professional title acquired in their home EU country. Those wishing to do so must register with the competent authorities of the host EU country. Fields of activity Lawyers practising under their home country professional title can carry on the same professional activities as host country lawyers, with certain exceptions. They may give advice on the law of both home and host EU country, as well as on EU and international law. For activities relating to the representation or defence of a client in legal proceedings, lawyers who have qualified outside of the country in question may be required to work in conjunction with a local lawyer. Equal standing Lawyers from other EU countries may also obtain the professional title of the host EU country under certain conditions. They must be active effectively and regularly for a period of 3 years in the host country and must have had sufficient practice in host country law during that period. If the activity in host country law is not sufficient, lawyers who have qualified outside the host country may still obtain the professional title of the host country by demonstrating to the competent authorities that they have acquired the necessary knowledge by other means (e.g. by attending relevant lectures or seminars). Joint practice Where a host EU country allows joint practices, one or more lawyers belonging to a grouping in their home country may pursue their activities as members of their grouping in the host country. Professional conduct Lawyers practising on a permanent basis in another EU country should observe the professional conduct rules of the host country, even if they remain subject to the deontology of their home country. Disciplinary procedures Lawyers practising under their home country professional title are subject to the disciplinary procedures of the host EU country. WHEN DOES THE DIRECTIVE ENTER INTO FORCE? On 14 March 1998. EU countries had to transpose it into their national legislation by 14 March 2000. BACKGROUND Other EU legal instruments also apply to the legal profession. These relate to: the possibility to provide services on a temporary or occasional basis (Directive 77/249/EEC); the recognition of the professional qualification, so as to gain immediate integration to the profession in the host EU country (Directive 2005/36/EC); professions falling under specific legislation ACT Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained (OJ L 77, 14.3.1998, pp. 36-43) Successive amendments to Directive 98/5/EC have been incorporated into the basic text. This consolidated version is for reference only. RELATED ACTS Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services (OJ L 78, 26.3.1977, pp. 17-18). See consolidated version. Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications (OJ L 255, 30.9.2005, pp. 22-142). See consolidated version. last update 28.10.2015