The Most Significant Transnational Cases in History affecting the Legal Status of the Notary
by Dr Eamonn G Hall, Notary Public
Since the inception of the European Community and until the 2011 decisions of the Court of Justice in the Notary Cases, the notary on the continent of Europe escaped the consequences of market integration (in effect competition) that applied to other professionals. The notary in continental Europe constantly maintained he or she was connected with “official authority” and, as a consequence, the provisions of the European Treaties did not apply to him or her. The Notary Cases (determined by the European Court of Justice) represent the most significant judicial decisions affecting the civil law and common law notaries of the European Union ever to come before a court.
Previously, in 1987, the Court of Justice had decided a case where a particular notary in the Netherlands had asserted he was not subject to any VAT obligations based on the exercise of his “official authority”. Article 49 and Article 51 of the Treaty on the Functioning of the European Union (TFEU) (ex Article 43 and ex-Article 43 of the Treaty establishing the European Community) provide for freedom of establishment and freedom to provide cross-border services but the TEFU states that these provisions are not to apply to those activities associated with “the exercise of official authority”. The Court of Justice held that the notary in the VAT case was exercising his functions in the form of an economic activity carried out in the exercise of a liberal profession and so was liable to VAT obligations, but this decision did not determine or decide the issue whether the notary exercised his functions in the context of “official authority”.
The European Commission prepares for battle
Civil law associations of notaries in Europe had long anticipated conflict with the European Commission in the latter’s determination to create more competition among notaries. They did so long before the conflict crystallised in what ultimately led to the 2011 decisions of the Court of Justice. Several essentially self-protective campaigns were mounted in national fora as well as within the European Parliament.
The notaries on the continent of Europe influenced the passing of resolutions in the European Parliament emphasising the importance of the profession of notary in Europe, but at the same time with constant references to the connection of the notary with State sovereignty – ‘the exercise of official authority’. For example, a resolution of the European Parliament in 1994 recited that the implementation of Community rules on freedom of establishment and the completion of the internal market had implications for the work of the notary, whose responsibilities were stated to be “the provision of advice and authentication activities”. The resolution further recited that:
“[O]ne feature of notarial work is the partial delegation of State sovereignty to carry out, in particular, the public service of drawing up, authenticating and legalising contracts and ensuring that they are enforceable and having evidentiary force, and providing preventive and impartial advice to interested parties so as to ease the burdens of the courts.”
The 1994 European Parliament resolution was expressed in the following terms:
“[The European Parliament] wishes to point out that, while being organised differently in the [then] 12 Member States of the Community and also within certain Member States, the profession of notary has a number of basic, virtually common, characteristics, the most important being: a partial delegation of state sovereignty to carry out a public service in respect of the authenticity of contracts and evidence; an independent public-service activity exercised within a liberal profession (except in Portugal, one German Land and in the particular system operated in the United Kingdom), but subject to supervision by [each relevant Member State] – or by the statutory body to which this responsibility is delegated by the public authorities – as regards compliance with requirements governing notarial acts; regulated scales of fees imposed in the interests of clients, access to the profession or the organisation thereof; a preventive role in relation to judicial proceedings, by eliminating or reducing the risk of litigation; an impartial advisory function.”
The European Parliament considered the existence of a partial delegation of the authority of each Member State as an element inherent in the exercise of the profession of notary and that this constituted valid grounds for stating that the activities of the notary were “connected, even occasionally, with the exercise of official authority”. However, the Parliament nevertheless called for the removal of the nationality requirement where most Member States confined the profession of notary to their own nationals.
Civil law notarial associations succeeded in having the European Parliament pass another resolution in 2006. This resolution was subsequently described by the Court of Justice in the Notary Cases as a “purely political act’ whose terms were ‘ambiguous”. As in the previous 1994 resolution, one can clearly discern the very direct influence of the civil law notaries, for example, in the following recital:
“[A]ny reform of the legal professions has far-reaching consequences going beyond competition law into the fields of freedom, security and justice, and, more broadly, into the protection of the rule of law in the European Union.”
The notary, as a public official with authentic act functions, was emphasised by the European Parliament:
“[C]ivil law notaries are appointed by Member States as public officials whose tasks include the drawing up of official documents with special value as evidence and immediate enforceability.”
This 2006 European Parliament resolution sought to equate the self-employed notary with a judge or civil servant:
“[C]ivil law notaries take on extensive investigation and scrutiny work on behalf of the State in matters relating to non-judicial legal protection, particularly in connection with company law – under Community law in some cases – and as part of this work they are subject to disciplinary supervision by the relevant Member State that is comparable to that applicable to judges and civil servants.”
The further association of the notary with the authority of the state itself was made abundantly clear:
“[T]he partial delegation of the authority of the State is an original element inherent in the exercise of the profession of civil law notary; and whereas it is currently exercised on a regular basis and represents a major part of the activities of the civil law notary.”
Overall, the resolution sought to remind the European Commission that:
“[A]rticle 45 of the Treaty (then containing the derogation in the context of freedom of establishment for ‘activities’ connected with ‘the exercise of official authority’ and now Article 51 of the Treaty on the Functioning of the European Union) must be fully applied to the profession of civil law notary, as such.”
The European Commission institutes proceedings against Member States
By the time this 2006 resolution was passed by the European Parliament, the European Commission had instituted proceedings against several Member States on the grounds that they had failed to fulfil obligations under the Treaty in relation to freedom of establishment by imposing through the enactment of national legislation a requirement that only a national of the particular Member State could be appointed as a notary and that the relevant Member State had failed to transpose (in relation to the profession of notary) the relevant Directive on the recognition of higher education qualifications. These cases are considered below.
When the cases reached the Court of Justice the leading case was Re Nationality of Notaries: European Commission v. Germany, decided by the Court of Justice in 2011 and as there were other related cases they are cited here together as the Notary Cases.
The decisions of the Court of Justice in the Notary Cases are of considerable significance in the legal order concerning the legal status and standing of the notary. The Court of Justice (having examined in detail the role and function of the notary in several Member States and not having made any distinction between the civil law notary and the lawyer-notary of the common law) clarified the status in law of the notary within the European Union by (in effect) applying the freedom of establishment provisions of the European Union Treaties to the profession of notary.
In most litigation, there are at least two adversarial parties. In the Notary Cases, on one side was the European Commission with one Member State intervening, the United Kingdom. On the other side, either as direct defendants or intervening parties were Germany, France, Austria, Belgium, Hungary, Poland, Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Slovenia, Slovak Republic, Luxembourg and Greece.
This litigation related, in part, to the claim by the European Commission that the requirement in the various Member States that reserved the profession of notary to their own nationals constituted a form of discrimination. The Commission further claimed that the Member States in question failed to transpose into their domestic law the Directive on the mutual recognition of professional qualifications. Arguably, these issues were only peripheral to the one core issue of the utmost significance – whether the civil law notary was so connected with the State that he or she exercised ‘official authority’ and thus would be exempt from the Treaty provisions on freedom of establishment and freedom to provide services outside his or her domestic jurisdiction and across the European Union. Advocate General Cruz Villalón stated that the cases brought before the Court of Justice what was possibly “the most sensitive issue’ concerning the interpretation of the significant expression of the Treaty – ‘the exercise of official authority’”.
The European Commission had not been persuaded by the arguments of Member States that the notary was connected with ‘official authority’ and therefore exempt from the provisions on freedom of establishment and services. The legal process by the European Commission commenced c.2000 and reasoned opinions were sent c.2006 to the relevant Member States. The Opinion of Advocate General Cruz Villalón was delivered on 14 December 2010 with the combined judgments of the Court of Justice delivered on 24 May 2011. Advocate General Cruz Villalón agreed with the submission that ‘authentication’ by notaries was an “activity” connected directly and specifically with the ‘exercise of official authority’ but, critically, the Court of Justice (“the Court”) took a contrary view.
Court seeks to demystify the functions of the notary
In the Notary Cases, the Court could be stated to have “demystified” the nature of the legal functions of the civil law notary.
In relation to Belgian notaries, in relation to the authentication of documents and agreements, the notary “merely” (the precise word used by the Commission and repeated by the Court) attests the wishes of the parties, after advising them and giving legal effect to their wishes. The Commission had submitted that, in carrying out that activity, the notary has no decision-making powers with respect to the parties. Thus, authentication by a notary “merely” confirms an agreement previously entered into by the parties. The Commission submitted that the fact that authentication was mandatory for certain acts was not relevant since numerous procedures are mandatory without being manifestations of “the exercise of official authority”. The Court agreed.
In relation to German notaries, the Court stated that the overriding consideration was that the notary had no decision-making powers with respect to the parties in the context of the authentication activity. So even if the authentication activity of the notary was to be regarded as belonging to the “preventive administration of justice” that would not alter the position. In this context also, the German notary was not connected with “the exercise of official authority” because he or she did not have the power to impose sanctions.
The Court in the German Notary Case further found that, in the context of “the exercise of official authority”, the fact that particular features of the rules of evidence apply regarding notarial acts is not relevant since similar “probative force” is also enjoyed by other documents that do not fall within ‘the exercise of official authority’.
In the context of the enforceability of notarial acts in Belgium, the Commission had submitted and the Court so held that the endorsement of a document with the authority to enforce was not proof of “the exercise of official authority” because, inter alia, any dispute that might arise would be decided not by the notary but by a court.
In relation to the issue of the attachment of immovable property in the Belgian Notary Case, the Court held that it is the court responsible for the attachment proceedings which appoints the notary and entrusts him or her with carrying out relevant functions. If a dispute arises, the decision is for the relevant court to take, the notary being obliged to draw up a statement of objections, suspend all actions and refer the question to the court.
Further, in the Belgian Notary Case, the notary’s part in drawing up the inventory of a deceased person’s estate or of property in joint ownership had been submitted by the Commission as “limited to preparing that inventory under the supervision of the court” and that the notary’s involvement in the ‘judicial division of estates’ was also “circumscribed by decisions of the court”. The Court agreed with that submission and so held.
In relation to other Notary-related matters in Belgium, such as legal transactions pertaining to gifts, marriage contracts, statutory cohabitation agreements, wills, company law and the law of associations, the Commission’s submission had been that “the notary does no more than endorse the wishes of the parties in accordance with law”. The Court agreed and so held.
Conclusions of the European Court of Justice
Overall, the Court concluded that the activities of notaries in the Belgian and German legal systems (and, in effect, the activities of the civil law notary across the whole of the European Union) are not connected with “the exercise of official authority” – the reservation set out in the European Treaties. Without so directly deciding, the Court had thus opened the door for there to be freedom of establishment and freedom for a notary in one domestic jurisdiction to provide services in other jurisdictions within the European Union.
However, although the decisions of the Court of Justice in the Notary Cases, referred to above, represented a significant legal development on the status of the notary within the European Union, the European Parliament and the Council of Ministers were prevailed upon to amend a European Union Directive on the mutual recognition of qualifications by providing that the Directive was not to apply to notaries who are appointed by “an official act of government”. The justification for the exclusion of notaries from the Directive on mutual recognition of their qualifications as a notary within the European Union being “in view of the specific and differing regimes applicable to [notaries] in individual Member States”. This justification lacks credibility because taken to its logical conclusion such a justification would prevent the European Union from making progress on many matters because of the understandable differing legal regimes in the individual Member States. The justification was a “fudge”. It appears to the present writer that it is open to a notary to challenge this exclusion of a notary from one Member State practising in another Member State without the obligation of re-qualifying as a notary in the intended (second) Member State.