Monday, 19 November 2018

AG Opinion on Kirschstein (C-393/17): UCPD is not to interfere with high quality of education

On 15th November 2018, AG Bobek delivered his opinion on Case C-393/17 Openbaar Ministerie v Kirschstein (Hereafter: Kirchstein). The case revolved around the application of the Unfair Commercial Practices and the Services Directive on the sector of higher education. As the AG succinctly points out, the underlying issue of this case is whether higher education programmes can be classified as 'services', and if so, what kind of services?


Facts of the case

Under Belgian law, and more specifically under Flemish law, only higher education establishments that have obtained an accreditation may award certain degrees. Doing so without that accreditation may lead to criminal prosecution resulting in a prison sentence and/or a fine.

Mr Freddy Kirschstein and Mr Thierry Kirschstein are involved in United International Business Schools of Belgium BVBA (‘UIBS Belgium’), a higher education institution that is not accredited by Flemish authorities. UIBS Belgium is affiliated with other education services companies from Switzerland (GES Switzerland) and Spain (GES Spain). UIBS Belgium, supports the courses of GES Switzerland in Belgium by providing courses in their Belgium campuses, with programmes that when completed, diplomas have 'master' in the title.

The Kirschsteins were fined on two occasions for breaking Belgian law by offering Master courses.

Questions referred

The following three questions were referred by the Belgian court to the ECJ, focusing on whether the Belgian law requiring that only accredited institutions contravenes the UCPD and the Services Directive, as being disproportionate.

(1)      Must Directive 2005/29/EC (the Unfair Commercial Practices Directive) be interpreted as precluding the provision in Article II.75(6) of the Codex of Higher Education of 11 October 2013 which imposes a general prohibition on non-accredited educational institutions using the designation “master” on the diplomas they award, where that prohibition is aimed at safeguarding a matter in the general interest, namely, the need to ensure a high standard of education whereby it must be possible to check whether the predefined quality requirements have effectively been met? 

(2)      Must Directive 2006/123 (Services Directive) be interpreted as precluding the provision in Article II.75(6) of the Codex of Higher Education of 11 October 2013, which imposes a general prohibition on non-accredited educational institutions using the designation “master” on the diplomas they award, where that prohibition is aimed at safeguarding a matter in the general interest, namely the protection of recipients of services?

(3)      Does the criminal provision applicable to educational institutions not recognised by the Flemish Government which award “master’s” diplomas pass the proportionality test in Articles 9(1)(c) and 10(2)(c) of [Directive 2006/123?’

AG Opinion

In an unusual turn of events, for preliminary references and AG opinions, there was need for a number of clarifications both in relation to the facts, as well as in relation to the applicable law.

In particular, an issue that is disputed also in the main proceedings was which entity awarded the 'master' diplomas in question. With the caveat that the facts are ultimately for the national court to decide, the AG makes certain assumptions:
1) there is a complex business structure between UIBS Belgium, GES Spain and GES Switzerland but it would appear that the teaching activities are carried out by UIBS Belgium, while the diplomas are administered first by GES Spain followed by GES Switzerland (para 32).
2) These three companies have never received accreditation for their study programmes, neither in Flanders, nor in any other country where they operate (para 33).
3) The study programmes in question did not receive any public funding and were entirely private (para 34).

Another disputed issue was the subject matter of the case; on the one hand it was argued that the questions referred to the ECJ centre around criminal sanctions, and criminal law is outside the scope of the EU law in question. On the other hand, it was suggested that the Court should limit itself to examining the sanctions and not the underlying issue of the accreditation process.

The AG chose a more measured approach admitting that even though the accreditation process and its compatibility with EU law is not the main focus of this case, nevertheless it is not possible to not address the accreditation issue indirectly in order to answer the referred questions (para 44).

The key element of the higher education services provided is the teaching and education activities provided by UIBS Belgium, rather than the issuance of certificates provided by the GES Switzerland (para 51). This is an important remark in terms of scope, as Switzerland falls outside the scope of the Services Directive.

Services Directive

The AG devotes a great part of his opinion in this case to discuss whether higher education qualifies as a service under EU law. One way to do so is using the test established by the Humbel case.
The Humbel case, which referred to secondary education, drew the distinction between publicly and privately funded education, arguing that courses funded entirely or mainly by public funds cannot constitute services, while, on the other hand privately funded education establishments can be classified as services, as their activities are for profit (para 58).
However, the AG points out that criteria of the Humbel test are not well suited for today's higher education which spreads over a range of different activities, blurring the lines of that public-private education distinction.

The Services Directive further complicates the, seemingly clear-cut distinction of the Humbel case with the introduction of the category of non-economic services of general interest in art. 2(2), as an exception from the scope of the Directive.

The meaning of 'non-economic categories of general interest' is unclear as it seems to be another category of non-services (which would be excluded from the scope of the Services Directive in any case). The AG refutes the argument that higher education should fit in this category as that would amount to another block exemption, similar to the one in place for healthcare services, and maintains that the Humbel test would apply to determine whether a higher education programme qualifies as a service or not (para 71).

In the case in question, as UIBS Belgium is entirely privately funded, if the Humbel test were to apply, the courses offered would be considered as 'services' (para 89). The AG takes care to clarify that education has its specificities that can and should be retained, similar to healthcare, and is not in any way a regular service. In a highly polarised issue, such as education, he clarifies that considering some education programmes as services would also infer certain rights to them, such as the right to freedom of establishment, something that could be beneficial (para 99).

The next issue is whether the Services Directive is applicable in this case. The AG answers that in the positive, as the defining element of the service is the teaching, which is conducted in Belgium and according to the Xandvisser judgement there is no need for a cross-border element to engage the services directive in terms of freedom of establishment (para 106). That being said, it can be argued that the case is not purely of internal interest (para 107).

Since the Services Directive is applicable in this case, the substance of the question rests on whether the accreditation system of the Flemish government is consistent with the criteria laid down by art 9 and 10 of the Services Directive on accreditation systems.

According to art. 9(1) of the Services Directive the authorisation scheme need to be non-discriminatory, justified by an overriding reason relating to the public interest, and proportionate. The AG argues that the Flemish scheme in question fulfils all the above criteria and is fully justifiable and consistent with EU law (para 113). There has been no indication the system is discriminatory and ensuring a high level of university education is a legitimate public interest. Furthermore, the relatively low penalties for breach of the Flemish law were found to be proportionate.

Therefore, the answer to the second question must be that 'Directive 2006/123 must be interpreted as not precluding a national provision, which imposes a general prohibition on non-accredited educational institutions using the designation ‘master’s degree’ on the diplomas they award, as long as the accreditation procedure meets the conditions laid down in Article 9(1) of that directive' (para 119).

UCPD

The first question referred to the Court asks whether the accreditation system for higher education in Flanders is compatible with the UCPD.

The Belgian and Norwegian governments argued that the UCPD does not apply to education because the Flemish government is not a trader and because education is not consistent with the main objective of the UCPD as protecting economic interests of consumers (para 131).

However, the AG is clear that higher education does fall within the scope of the UCPD for a number of reasons, even though that may make governments uneasy.

Firstly, it is recognised, as seen above, that higher education programmes may constitute a service, as they have an economic dimension. Therefore it would be difficult to argue that suddenly that economic dimension disappears in the case of applying the UCPD (para 134). The AG argues that for engaging the UCPD the crucial point is whether the regulation in question affects the business-consumer relationship by limiting certain commercial practices (para 137). It is not important whether the primary aim of the regulation is in the public interest or not.

In the case in question, there is also a level of dispute as to which is the practice in question. It seems to focus on the advertisement of UIBS Belgium that they provide Master degrees.

The AG finds the prohibition of such a practice by the Flemish government consistent with the Directive and its aims, as it protects consumers from an unfair practice that is likely to distort their economic behaviour. Furthermore, the practice in question can be caught by Annex I of UCPD and more specifically, by points 2 and 4 on displaying  a quality mark without authorisation and claiming that a product has been authorised by a public body when it hasn't.

Conclusion
 
This case revolved around the controversial topic of higher education and a lot of the opinion was devoted to establishing whether higher education can and does fall within the scope of the Services Directive and the UCPD. This is to be expected as Member States are highly protective of higher education and its special aims. In an eloquent opinion, AG Bobek explains that it is not an all or nothing situation, but there should be a measured approach in deciding when to apply these Directives, and when it is appropriate to consider higher education institutions as service providers engaging in commercial practices. While the objective of maintaining a high level of university education is a noble and necessary one, it is important to recognise that higher education is a sector that is transforming and that EU law will need to catch up with that.

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