Provisional text
OPINION OF ADVOCATE GENERAL
CAMPOS SÁNCHEZ-BORDONA
delivered on 13 June 2024 (1)
Case C‑368/23 [Fautromb] (i)
Haut conseil du commissariat aux comptes
v
MO
(Request for a preliminary ruling from the formation restreinte du Haut conseil du commissariat aux comptes (High Council of Statutory Auditors, Restricted Composition, France))
(Preliminary-ruling proceedings – Article 267 TFEU – Definition of national court – Criteria – Freedom to provide services – Directive 2006/43/EC – Articles 22 and 52 – Regulation (EU) No 537/2014 – Article 5(1) and (2) – Directive 2006/123/EC – Article 25 – Multidisciplinary activities – National legislation prohibiting statutory auditors from engaging in commercial activities other than those ancillary to the profession of accountant – Relationship between Directive 2006/43 and Regulation No 537/2014 and Directive 2006/123 – Article 3 of Directive 2006/123 – Conflict with other provisions of EU law – Articles 49 and 56 TFEU – Overriding reasons in the public interest – Proportionality)
1. The Haut conseil du commissariat aux comptes (High Council of Statutory Auditors, France; ‘H3C’) was, at the material time for the purposes of this reference for a preliminary ruling, (2) the public supervisory authority for statutory auditors in France.
2. The H3C, restricted composition, must decide whether to impose a penalty fine and a prohibition on practising the profession on a statutory auditor who is alleged to have engaged in activities that, under national law, are incompatible with his status.
3. Before adopting its decision, the H3C, restricted composition, has referred to the Court questions concerning the compatibility with EU law of French legislation prohibiting statutory auditors from engaging in commercial activities, except where those activities are ancillary to the profession of accountant. For those purposes, the H3C, restricted composition, has requested the interpretation of Directive 2006/123/EC, (3) Directive 2006/43/EC (4) and Regulation (EC) No 537/2014. (5)
4. The request for a preliminary ruling will be admissible if the Court agrees that the H3C, restricted composition, acts in a judicial capacity for the purposes of Article 267 TFEU, which the French Government argues that it does not. For the reasons that I shall give below, I agree with the French Government that the Court should rule that the request is inadmissible.
I. Legal framework
A. European Union law
1. Directive 2006/123
5. In accordance with Article 3 (‘Relationship with other provisions of Community law’):
‘1. If the provisions of this Directive conflict with a provision of another Community act governing specific aspects of access to or exercise of a service activity in specific sectors or for specific professions, the provision of the other Community act shall prevail and shall apply to those specific sectors or professions …’
6. Article 25 (‘Multidisciplinary activities’) reads:
‘1. Member States shall ensure that providers are not made subject to requirements which oblige them to exercise a given specific activity exclusively or which restrict the exercise jointly or in partnership of different activities.
However, the following providers may be made subject to such requirements:
a) the regulated professions, in so far as is justified in order to guarantee compliance with the rules governing professional ethics and conduct, which vary according to the specific nature of each profession, and is necessary in order to ensure their independence and impartiality;
…’
2. Directive 2006/43
7. Article 22 (‘Independence and objectivity’) lays down the rules, which Member States must ensure are complied with, for ensuring that a statutory auditor or an audit firm is independent of the audited entity, has no financial interest in that entity or in entities associated with it, and avoids any conflicts of interest with such entities.
8. Pursuant to Article 52 (‘Minimum harmonisation’):
‘Member States requiring statutory audit may impose more stringent requirements, unless otherwise provided for by this Directive.’
3. Regulation No 537/2014
9. Article 5 (‘Prohibition of the provision of non-audit services’) provides:
‘1. A statutory auditor or an audit firm carrying out the statutory audit of a public-interest entity, or any member of the network to which the statutory auditor or the audit firm belongs, shall not directly or indirectly provide to the audited entity, to its parent undertaking or to its controlled undertakings within the Union any prohibited non-audit services in:
(a) the period between the beginning of the period audited and the issuing of the audit report; and
(b) the financial year immediately preceding the period referred to in point (a) in relation to the services listed in point (e) of the second subparagraph.
For the purposes of this Article, prohibited non-audit services shall mean:
…
2. Member States may prohibit services other than those listed in paragraph 1 where they consider that those services represent a threat to independence. …
…’
B. French law
1. Code de commerce (Commercial Code)
(a) Rules governing the H3C which are applicable ratione temporis
10. Paragraph I of Article L. 821-1 provides that the H3C performs, inter alia, the functions of the registration of auditors; the adoption of rules governing professional ethics, internal quality control and professional practice; the enforcement of auditors’ obligations in this area; and the imposition of penalties.
11. Paragraph II of Article L. 821-2 provides that decisions on penalties are to be given by the H3C sitting in a restricted composition.
12. In accordance with Article L. 821-3-1, the H3C has a department responsible for conducting investigations prior to the commencement of disciplinary proceedings. The department is headed by a rapporteur-general.
13. Article L. 824-4 provides that the president of the H3C must submit to the rapporteur-general any facts liable to justify the commencement of disciplinary proceedings. The rapporteur-general may also initiate proceedings on the basis of complaints that are sent to him or her.
(b) Incompatibilities for statutory auditors
14. Article L. 822-10, as worded prior to Law No 2019-486 of 22 May 2019, (6) provided that the functions of a statutory auditor are incompatible with:
‘1. Any activity or act capable of undermining his or her independence.
2. Any paid employment; however, a statutory auditor may deliver teaching associated with the practice of his or her profession or work in paid employment for a statutory auditor or an accountant.
3. Any commercial activity, whether carried out directly or through an intermediary.’
15. Law No 2019-486 introduced two exceptions to the third of those incompatibilities. Under that law, the functions of a statutory auditor have, since that time, been compatible with:
– commercial activities ancillary to the profession of accountant, which must be carried out in compliance with the rules governing professional ethics and conduct and the independence of statutory auditors, and in accordance with the conditions laid down in the third paragraph of Article 22 of Regulation No 45-2138 of 19 September 1945; (7) and
– ancillary commercial activities carried out by a multidisciplinary partnership in accordance with the conditions laid down in Article 31-5 of Law No 90-1258. (8)
2. Regulation No 45-2138
16. In accordance with Article 22:
‘The duties of an accountant are incompatible with any employment or act capable of undermining the independence of the person carrying it out, and in particular with:
…
Any commercial activity or act of agency other than those involved in the practice of the profession, unless it is carried out on an ancillary basis and is not likely to jeopardise the practice of the profession or the independence of partners who are accountants, or the latter’s compliance with the rules related to their status and their professional ethics …’.
II. Facts, dispute and questions referred for a preliminary ruling
17. MO has been an auditor since 1976. He has also been registered in the register of the Order of Accountants since 1967.
18. MO owns, directly or indirectly through the limited liability company Fiducial International, 99.9% of the capital of the non-trading company Fiducial (‘Fiducial SC’), of which he is the manager. That company is the parent company of the multidisciplinary Fiducial group, which MO established in 1970. (9)
19. On 3 January 2022, the president of the H3C notified the rapporteur-general of a number of acts liable to constitute the pursuit, by MO, of commercial activities incompatible with the duties of an auditor. On the same date, the rapporteur-general opened an investigation into the breach by MO of his obligations in relation to auditing practice.
20. On 13 October 2022, disciplinary proceedings were formally commenced against MO.
21. The H3C, restricted composition, must determine whether MO has, since 3 January 2016, been in breach of point 3 of Article L. 822-10 of the Commercial Code. It is alleged that MO committed that breach by engaging, directly or indirectly, through the companies Fiducial SC and Fiducial International, in commercial activities that are not ancillary to the profession of accountant and are, therefore, incompatible with the functions of a statutory auditor. (10)
22. At the hearing held on 13 April 2023, the rapporteur-general requested that MO be removed from the register of auditors, that he be fined the sum of EUR 250 000, and that an order be made for publication of the decision in an economic or financial newspaper at the expense of the person concerned.
23. At the same hearing, MO’s representative argued that MO should be exonerated, claiming that point 3 of Article L. 822-10 of the Commercial Code conflicted with EU law; more specifically, with Article 25 of Directive 2006/123.
24. The H3C, restricted composition, is unsure whether the prohibition banning statutory auditors from carrying out commercial activities is compatible with Article 25 of Directive 2006/123, in conjunction with other provisions of EU law.
25. The H3C, restricted composition, essentially takes the view that:
– That prohibition may prevent conflicts of interest and, consequently, limit the risk of a breach of the independence and impartiality of auditors.
– The prohibition may come within the power of the Member States to impose more stringent rules than those explicitly laid down in Directive 2006/43.
– The exceptions to that prohibition (which permit auditors to engage in commercial activities ancillary to the profession of accountant or commercial activities carried out in an ancillary capacity by a partnership formed for the collective exercise of certain liberal professions) limit the restriction of the freedom of auditors to diversify their activities. They also ensure that those permitted activities are subject to the ethical requirements imposed on accountants or other regulated professions. (11)
26. Against that background, the H3C, restricted composition, has referred the following questions to the Court for a preliminary ruling:
‘1. Must Article 25 of Directive [2006/123] be interpreted, having regard in particular to the provisions of Directive [2006/43] and of Regulation [No 537/2014], as precluding national legislation which prohibits statutory auditors and audit firms from carrying out any commercial activity, whether directly or through an intermediary?
2. If the first question is answered in the affirmative, does the same apply where that legislation excludes from the scope of that prohibition, by way of exception, on the one hand, commercial activities ancillary to the profession of accountant, carried out in compliance with the rules governing professional ethics and conduct and the independence of statutory auditors and in accordance with the conditions laid down in the third paragraph of Article 22 [of Legislative Decree No 45-2138] and, on the other hand, ancillary commercial activities engaged in by a multidisciplinary partnership in accordance with the conditions laid down in Article 31-5 of Law No 90-1258 of 3 December 1990?’
III. Procedure before the Court of Justice
27. The request for a preliminary ruling was received at the Registry of the Court on 12 June 2023.
28. Written observations were lodged by MO, the Belgian and French governments, and the European Commission. All those parties, apart from the Belgian Government, appeared at the hearing on 9 April 2024.
IV. Assessment
A. Admissibility of the reference for a preliminary ruling
29. The French Government argues that the reference for a preliminary ruling is inadmissible because the H3C, restricted composition, is not a court or tribunal that is entitled to refer questions to the Court of Justice for a preliminary ruling under Article 267 TFEU.
30. The French Government’s plea is based on the judgment in CityRail (12) and is essentially formulated as follows:
– The H3C is an independent administrative authority, a factor that, as the judgment in CityRail (paragraph 45) points out, is particularly important when it comes to determining whether its decisions are judicial in nature, quite apart from the traditional criteria (13) that the referring court mentions. The H3C ‘referred to the [Vaassen-Göbbels criteria] without examining why the decision to be rendered would be of a jurisdictional nature within the meaning of the case-law of the Court of Justice’. (14)
– In the public oversight system for auditing, the H3C complies with Directive 2006/43, Article 30d of which provides that its decisions must be subject to a right of appeal. In France, the Conseil d’État (Council of State) has full jurisdiction to hear, at first and last instance, appeals against decisions of the H3C. That factor is indicative of the administrative nature of those decisions (judgment in CityRail, paragraph 62).
– The penalties imposed by the H3C are administrative penalties that, by definition, are not imposed by courts. The H3C, restricted composition, does not review the legality of a previously adopted decision and instead it takes a position, for the first time, in the course of administrative penalty proceedings.
– The H3C’s internal organisational arrangements are derived from constitutional requirements, in so far as they separate the investigative and enquiry functions from the function of imposing a penalty. Those arrangements meet the objective of ensuring the rights of the defence and the inter partes nature of disciplinary proceedings. The decision adopted by the H3C, restricted composition, at the end of those proceedings is attributed to the H3C itself ‘as an institution’.
31. In my view, the French Government’s plea must be upheld. In support of my view, I must, of course, refer to the considerations I set out in my Opinion in CityRail (15) and to the judgment in that case.
1. References for a preliminary ruling and independent supervisory authorities
32. The examination of the Vaassen-Göbbels criteria is consistent with the methodology habitually used to determine whether a request for a preliminary ruling has come from a court or tribunal for the purposes of Article 267 TFEU.
33. However, when applying the categories in Article 267 TFEU to independent regulatory and supervisory authorities, the Vaassen-Göbbels criteria (notably, the criterion relating to the independence of the body concerned) are of secondary importance. It is not sufficient that those criteria are satisfied in order for those authorities to be classified as a court or tribunal. (16)
34. The important point, for those purposes, is to establish whether, in view of the specific nature of their functions in a specified context, those independent authorities give rulings in proceedings that conclude with a decision of a judicial nature. (17)
35. The Court has ruled to that effect: ‘This is particularly important in the case of administrative authorities whose independence is a direct consequence of the requirements arising under EU law which confers on them powers of scrutiny in the sector and powers to supervise markets. Although those authorities may satisfy the [Vaassen-Göbbels] criteria …, the activity of regulating the sector and supervising the markets is essentially administrative in nature …, inasmuch as it involves the exercise of powers which are unrelated to those conferred on the courts.’ (18)
36. Article L. 821-1 of the Commercial Code defines the H3C as an independent public authority. After stating that that independence is a direct consequence of the requirements of EU law, (19) the French Government stresses the administrative, and not judicial, nature of the H3C’s powers.
2. Sanctioning functions of independent authorities
37. Article 32(4) of Directive 2006/43 refers to a wide range of functions of national regulators in relation to auditing. It is a range of typically administrative tasks that form the specific context in which those regulators exercise their powers. (20)
38. Of note, for the present purposes, is the function that Directive 2006/43 assigns to national regulatory authorities in Chapter VI (‘Investigations and sanctions’). Article 30a grants national authorities sanctioning powers, while emphasising that this relates to ‘administrative sanctions’, as reiterated in Article 30c.
39. The H3C has the power to impose administrative penalties in relation to auditing. That feature, at the outset, ‘indicates that … it is … administrative and not judicial in nature’. (21)
40. There was some debate at the hearing regarding whether the case-law from the judgment in CityRail should be considered to apply only to the regulatory functions of independent authorities or to apply also to their punitive functions. (22) In my view, there are no grounds for limiting the scope of that judgment, especially since the conferral of sanctioning powers on independent authorities is, in many cases, a key tool for the performance of their tasks.
3. Disciplinary proceedings
41. ‘The power to initiate infringement proceedings ex officio … and the power to impose, also ex officio, penalties in matters within its jurisdiction’ (23) are also an indication that the body in question exercises not judicial but administrative functions.
42. In situations such as that in the present case, the H3C acts ex officio, without a prior complaint having been made, (24) after the president of the H3C has ordered the commencement of proceedings. The final stage of the disciplinary proceedings is certainly dealt with by a restricted composition but that composition is still one of the bodies that form the H3C. As the French Government has pointed out, the decisions of its internal bodies are attributed to the H3C itself. Therefore, the HC3 is not an authority that has the status of third party vis-à-vis its restricted composition, or vice-versa.
43. The rapporteur-general is responsible for the conduct of the proceedings. However, although the final decision is not adopted by the person who conducts the proceedings, the H3C is, in short, responsible for all the functions, albeit on a separate or split basis, performed by the different units of its organic structure.
44. The architecture of the administrative proceedings brought in this case shows that, strictly speaking, it is not an inter partes ‘dispute’ but rather an investigative procedure conducted against MO. The H3C, restricted composition, does not perform a review of an earlier decision and instead adopts a position and rules at first instance in the exercise of the power to impose penalties. (25)
45. As regards the separation of the investigative and decision-making roles in the field of penalties, it is logical that the body required to give a ruling should be separate from the body responsible for investigating the facts and making the complaint. The French Government points out, as I have already noted, that that separation reflects constitutional requirements. (26)
46. Accordingly, the separation of the investigative and decision-making roles, in the context of the main proceedings, is not evidence of the exercise of judicial functions.
47. The decision adopted by the H3C, restricted composition, at the end of the proceedings does not, under any circumstances, have the force of res judicata, unlike the judgment of a court.
48. At the hearing, the French Government stated that, as an exception to the general rule, a body that imposes a penalty may subsequently revoke the measure adopted, a right that is not associated with judgments. (27) However, MO’s defence disputed that right.
4. Judicial remedies against the decisions of an independent authority
49. The Court has described as ‘administrative’ the activities of regulatory bodies whose task is not to review the legality of a decision but to adopt a position for the first time on a complaint lodged by a person, against whose decisions there is a judicial remedy. (28)
50. The Court has also stated that:
– The fact that Member States must ensure ‘that decisions taken by the regulatory body are open to judicial review … is indicative of the administrative nature of such decisions’. (29)
– The ‘participation by the Authority in review proceedings, calling into question its own decision, is evidence that, where it adopts that decision, the Authority does not have the status of a third party in relation to the interests involved’. (30)
51. The referring court disregards, in its request for a preliminary ruling, the importance of the system of judicial remedies against its decisions. The French Government’s observations make clear, however, that, in harmony with Article 30d of Directive 2006/43, (31) a decision of the H3C, restricted composition, may be the subject of an appeal before the Conseil d’État (Council of State).
52. When it rules on that appeal, the Conseil d’État (Council of State) has full jurisdiction and performs a complete review of the facts and the law in connection with the decision adopted by the H3C, restricted composition, which the French Government describes as an ‘administrative authority’. (32)
53. The fact that the decision of the H3C to impose a penalty is subject to judicial review means that that decision ‘is not capable of acquiring the attributes of a judicial decision, in particular the force of res judicata’. (33) On the other hand, that decision may lead to judicial proceedings in which the H3C is the respondent. (34) Once again, that factor ‘is evidence that, where it adopts that decision, the Authority does not have the status of a third party in relation to the interests involved’. (35)
54. Where a real court (the Conseil d’État (Council of State)) subsequently becomes involved in the proceedings, that court may, if it deems it necessary, make a reference to the Court of Justice in order to set out its uncertainties regarding the interpretation of EU law. (36)
55. Therefore, there is no risk of a ‘vacuum’ as regards that interpretation. From the perspective of the uniform interpretation of EU law, ‘the existence of those judicial appeals ensures the effectiveness of the mechanism of the request for a preliminary ruling provided for in Article 267 TFEU’. (37)
5. Intermediate conclusion
56. All the factors that I have just set out show that the H3C, restricted composition, does not act in a judicial capacity when it imposes an administrative penalty on an auditor. By the same token, the H3C, restricted composition, is not entitled to use the mechanism laid down in Article 267 TFEU. Its request for a preliminary ruling is therefore inadmissible.
57. In case the Court does not take that view, I shall examine, in any event, the substance of the request for a preliminary ruling.
B. The substance
1. Preliminary matters
58. The first question refers to national legislation prohibiting statutory auditors and audit firms from carrying out any commercial activities. The referring court asks whether that legislation is contrary to Article 25 of Directive 2006/123, ‘having regard in particular to the provisions of Directive [2006/43] … and of Regulation [No 537/2014]’, which it does not specify.
59. The second question is referred in the event that the first question is answered in the affirmative. In that case, the referring court asks whether the tenor of the reply would change where the national legislation allows certain exceptions to the incompatibility (commercial activities that are ancillary to the profession of accountant or are performed by a multidisciplinary partnership).
60. First, it is necessary to clarify the time sequence of the national provisions, in view of the fact that the acts attributed to MO were carried out between 3 January 2016 and 3 January 2022, the date on which the investigation commenced. During that period, there were two different, successive legal regimes under point 3 of Article L. 822-10 of the Commercial Code:
– From 3 January 2016 until the entry into force of Law No 2019-486, there was an absolute prohibition on auditors carrying out any commercial activity, by themselves or through an intermediary.
– With effect from the entry into force of Law No 2019-486, that prohibition was modified and the two exceptions that I transcribed above are now permitted. (38)
61. Each question corresponds to the respective legislative references applicable in those subperiods.
62. From a different perspective, and as far as the second question is concerned, the reason for including in the dispute the exception relating to ‘ancillary commercial activities engaged in by a multidisciplinary partnership in accordance with the conditions laid down in Article 31-5 of Law No 90-1258 …’ is unclear. I agree with the French Government (39) that, in the light of the acts alleged to have been carried out by MO, that exception may not be relevant to the present case.
63. The issue here is not whether an audit firm may incorporate other professionals and carry out at the same time activities other than those associated with auditing. (40) The issue raised in this dispute is simply whether an auditor who is a natural person may, through companies whose capital he owns or in which he has a holding, carry out other commercial activities.
64. Thus, as concerns the second question, I shall focus attention on the exception relating to ‘commercial activities ancillary to the profession of accountant, carried out in compliance with the rules governing professional ethics and the independence of statutory auditors, and in accordance with the conditions laid down in the third paragraph of Article 22 [of Legislative Decree No 45-2138]’.
2. Applicable provisions of EU law
65. The referring court’s uncertainties point towards the interpretation of Article 25 of Directive 2006/123, in the light of Directive 2006/43 (which regulates the activities of statutory auditors in the European Union) and Regulation No 537/2014 (which governs only the statutory audit of public-interest entities). (41)
66. In accordance with Article 3(1) of Directive 2006/123, (42) if the provisions of that directive ‘conflict’ with Directive 2006/43 or Regulation No 537/2014, the latter directive and regulation will prevail, in other words the lex specialis will apply in preference to the lex generalis.
67. Article 25 of Directive 2006/123, on the subject of multidisciplinary activities, lays down a general principle which is tempered by a number of exceptions:
– The general principle (first subparagraph of paragraph 1) is that ‘providers are not made subject to requirements which oblige them to exercise a given specific activity exclusively’ or ‘which restrict the exercise jointly or in partnership of different activities.’
– The exception (second subparagraph of paragraph 1) that is important for the present purposes is that which relates to regulated professions, including that of statutory auditor. The rules applicable to the regulated professions may diverge from the general principle, that is, from the freedom to carry out multidisciplinary activities, if: (a) it is justified in order to guarantee compliance with the rules governing professional ethics and conduct associated with the specific nature of each profession; and (b) it is necessary in order to ensure the independence and impartiality of those practising the profession concerned. (43)
68. As regards Directive 2006/43 (particularly following its amendment by Directive 2014/56) and Regulation No 537/2014, both instruments seek to ensure that statutory auditors comply with high ethical standards, specifically with regard to their integrity, independence and objectivity. (44) The aim of Directive 2014/56 was ‘to strengthen, through further harmonisation, in particular, the independence of statutory auditors in the performance of their duties.’ (45)
69. In accordance with Article 52 of Directive 2006/43, ‘Member States requiring statutory audit may impose more stringent requirements, unless otherwise provided for by this Directive.’ In the same vein, under Article 5(2) of Regulation No 537/2014, Member States may prohibit auditors who audit public-interest entities from carrying out other non-audit services (provided to the audited entity) where those services represent a threat to independence.
70. Article 25 of Directive 2006/123 has a point of intersection with Article 22 (‘Independence and objectivity’) of Directive 2006/43 and Article 5 (‘Prohibition of the provision of non-audit services’) of Regulation No 537/2014 in guaranteeing protection of the independence of auditors, for which purpose those provisions lay down incompatibilities and prohibitions.
71. I, like the Commission, (46) do not believe that, in this case, there is a conflict in the strict sense between the application of any of those provisions of EU law, which would supersede Directive 2006/123 pursuant to the speciality rule laid down in Article 3(1) thereof. There is, rather, a complementary relationship.
72. It is, therefore, a question of determining whether the French legislation, in so far as it prohibits auditors from carrying out commercial activities, is compatible with the exception laid down in point (a) of the second subparagraph of Article 25(1) of Directive 2006/123 while also complying with the provisions laid down by Directive 2006/43 and Regulation No 537/2014 for the purpose of guaranteeing the independence and impartiality of members of that profession.
3. Joint reply to the two questions referred for a preliminary ruling
73. Article 52 of Directive 2006/43 and Article 5(2) of Regulation No 537/2014 authorise the Member States to go further than the limitations laid down in Article 22 of Directive 2006/43 and Article 5(1) of Regulation No 537/2014.
74. Therefore, Member States may impose more stringent statutory restrictions on auditors. That is the case of French law.
75. However, that right is not unconditional. The Member States must comply with the provisions of the FEU Treaty on freedom of establishment and freedom to provide services, laid down in Articles 49 and 56 TFEU respectively. (47)
76. Pursuant to recitals 2 and 5 of Directive 2006/123, the aim of the directive is specifically to remove restrictions on the freedom of establishment and the free movement of services between Member States. In so far as those aims, which are the basis for the rules laid down by Directive 2006/123, coincide with those of Articles 49 and 56 TFEU, there is no need to refer to primary law and the provisions of that directive suffice.
77. Although there is no cross-border element to this case, the requirements laid down by the legislation at issue could discourage auditors from other Member States from establishing themselves or providing services in France. (48) A provision of a Member State prohibiting auditors from pursuing any other commercial activity is, in itself, capable of adversely affecting the freedom of movement of auditors from other Member States. (49)
78. Restrictions of the fundamental freedoms may be regarded as justified if they are based on overriding reasons relating to the public interest and, where that is the case, if they do not go beyond what is necessary to achieve the objectives pursued. (50)
79. That justification and that need are referred to in point (a) of the second subparagraph of Article 25(1) of Directive 2006/123, which authorises the Member States to impose, in respect of regulated professions, requirements limiting the pursuit of multidisciplinary activities. Although the wording is different, it must also be taken implicitly to underlie Article 52 of Directive 2006/43 and Article 5(2) of Regulation No 537/2014.
(a) Subject matter of the restriction
80. It is particularly important to determine the scope of the restriction. It is not for the Court of Justice to interpret national law, but it can be inferred from the order for reference and the parties’ observations that the prohibition on the pursuit of any commercial activity is almost absolute.
81. Since the adoption of Law No 2019-486, auditors may carry out commercial activities ancillary to the profession of accountant (51) (which are permitted under certain conditions) (52) and ancillary commercial activities pursued by a ‘multidisciplinary partnership’, subject to the conditions laid down by Article 31-5 of Law No. 90-1258. Those exceptions are very limited in scope, however, which does not succeed in concealing the virtually all-encompassing nature of the prohibition itself.
(b) Justification of the restriction
82. The French Government submits that the corollary of the requirement that statutory auditors, who are entrusted with a task in the general interest, must be independent is the incompatibility with the taking-up and pursuit of commercial activities by such auditors. The French Government argues that the restriction of the pursuit of those activities is justified on the following grounds:
– The national legislation is aimed at preventing statutory auditors from becoming ordinary economic actors. The way in which different sectors (banking, economic and financial) overlap creates the potential for interference that is liable to generate suspicion. The prohibition on carrying out multiple activities provides a guarantee for an objective, reasonable and informed third party that a statutory auditor is not an ordinary economic operator who is able to interact directly or indirectly with audited entities.
– The incompatibility is also explained by the special requirement of professional competence to which auditors are subject. The pursuit of a commercial activity other than that of auditing could reduce auditors’ involvement and undermine their professional competence.
– EU law and national law grant the profession a monopoly on statutory auditing, which is a regulated activity in the public interest. It appears legitimate to expect that auditors should actually be dedicated to that particular role.
83. The French Government therefore emphasises the monopoly on statutory auditing, which it connects with the external dimension of auditors’ independence: the public must perceive statutory auditors as trustworthy professionals, at arms’ length from ordinary economic life.
84. In my view, the public interest grounds put forward by the French Government are justification for making auditors subject to certain restrictions on the carrying out of commercial activities other than auditing. The independence of statutory auditors (and audit firms or members of their networks) may be compromised by the provision of certain services other than statutory audit to audited entities. (53)
85. If, which is very unlikely, it were accepted that that risk to independence could arise as a result of the provision to the general public of non-audit services by statutory auditors, (54) the issue would not be the justification, in the abstract, of a restrictive regime, but rather the specific content of the prohibitions imposed, which may go beyond what is necessary to attain their objective.
(c) Proportionality
86. The French Government submits that the legislation at issue is proportionate: auditors are not obliged exercise that specific activity exclusively, since they are also entitled to work as accountants, as referred to in the two exceptions incorporated by Law No 2019-486. (55)
87. The French Government completes its arguments by denying that other less onerous measures would be capable of attaining the same objective. That would be the case of the establishment of a system of prior authorisation; the creation of a list of prohibited activities; or a mandatory mechanism for publication of audit reports. The French Government argues that none of those measures satisfies the need for third parties to perceive that auditors are independent.
88. On the other hand, the Commission submits that the prohibition appears disproportionate in relation to its objective. That objective is already served by other provisions of French law, to which the referring court refers, (56) without explaining properly why they need to be supplemented by the prohibition. In particular, point 1 of Article L. 822-10 of the Commercial Code precludes any activities liable to undermine the independence of auditors.
89. It is for the referring court (if its jurisdiction to make requests for a preliminary ruling is accepted) to examine the proportionality of the provisions at issue. However, the Court may provide it with guidance, such as that which I shall set out below.
90. Firstly, I do not agree with the French Government’s position on the interpretation of Article 25(1) of Directive 2006/123 as regards the adverb ‘exclusively’. My view, which coincides with that of the Commission, is that the obligation ‘to exercise a given specific activity exclusively’ exists where national legislation allows another ancillary activity of lesser importance to be added to that activity, prohibiting the simultaneous exercise of all other commercial activities, as occurs in this case. Were the French Government’s argument to be accepted, a Member State would be able, by means of minimal concessions, to circumvent easily the objectives pursued by the provision.
91. Secondly, and from the same perspective, the almost total prohibition on the exercise of commercial activities by auditors (as I have already indicated, the two permitted exceptions are very limited in scope) reflects an ‘inversion of the logic laid down by Article 25 of Directive 2006/123’. (57) Since, in accordance with that provision, the freedom to carry out multidisciplinary activities must be the rule for all service providers, the French legislation adopts the contrary principle in respect of statutory auditors.
92. Thirdly, as the Commission points out, the independence of statutory auditors is already guaranteed by other provisions of French law, not to mention the fact that the code of ethics of that profession also contains provisions for the avoidance of conflicts of interest.
93. Fourthly, the two permitted exceptions, relating to certain ancillary commercial activities, are not sufficient to demonstrate the proportionality of the general prohibition. It should be recalled that ‘point (a) of the second subparagraph of Article 25(1) of Directive 2006/123 does not provide for the possibility of making the exercise of a regulated profession in conjunction with another activity subject to the condition that the latter be ancillary.’ (58)
94. Fifthly, the French legislature could identify, by means of a catalogue or list similar to that in Article 5 of Regulation No 537/2014, the non-audit services which statutory auditors are specifically prohibited from providing in order to protect their independence or the image that the general public has of that independence. Contrary to the French Government’s contention, that technique has a less onerous outcome than the (almost) general prohibition laid down by the law at issue, while also fulfilling the objective of maintaining auditors’ independence.
95. If that solution were adopted, the legislature would have to demonstrate: a) why a list applicable, in accordance with Regulation No 537/2014, only to the statutory audit of a public-interest entity applies to the audit of entities which do not have that status; and b) why a list applicable only to certain services (other than auditing) provided to the audited entity is expanded to include other commercial activities which an auditor may offer to persons or entities not audited by that auditor.
96. Therefore, the general prohibition of commercial activities unrelated to auditing appears, at first sight, to be disproportionately strict and goes beyond the objective of protecting the independence and objectivity of statutory auditors. By the same token, it is not compatible with Article 25(1) of Directive 2006/123, Article 52 of Directive 2006/43 and Article 5(2) of Regulation No 537/2014.
V. Conclusion
97. In the light of the foregoing considerations, I propose that the Court should rule that the request for a preliminary ruling is inadmissible.
In the alternative, I propose that the reply to the request for a preliminary ruling should be as follows:
‘Article 25 of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, in conjunction with Articles 22 and 52 of Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, and with Articles 5(1) and (2) of Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities,
must be interpreted as precluding, in principle, national legislation prohibiting statutory auditors from carrying out any commercial activity, whether directly or through an intermediary, with the exception of commercial activities ancillary to the profession of accountant. It is for the referring court to determine whether that legislation is based on reasons relating to the public interest which justify the prohibition and whether that prohibition is necessary in order to protect the independence and objectivity of statutory auditors.’