ECJ ruling on the HOAI: End of fee law or do the supposedly dead live longer?

In its judgment of 4 July 2019, the European Court of Justice (ECJ) declared the binding fee law regarding the minimum and maximum rates of the Fee Structure for Architects and Engineers (HOAI) to be inadmissible.
KFR – Kanzlei für Real Estate explains the background, the consequences and what the ruling means for practice.

Background: Services Directive and fee law

Since 2006, Article 15 para. 2 g of the so-called “Services Directive” (2006/123/EC) has provided that the member states of the European Union must review national provisions regulating “compliance with fixed minimum and/or maximum prices by the service provider”. Such provisions are only permissible

• if they are justified by an “overriding reason in the public interest” and furthermore
• are also proportionate.

The background to this is to ensure the free movement of services within the Union, i.e. in particular, market entry through price competition should not be made more difficult for providers from other member states.

Action by the European Commission against Germany

The European Commission sees no overriding reason in the public interest for the binding minimum and maximum rates for architectural and engineering services and therefore brought an action against the Federal Republic of Germany before the ECJ.
In the outcome, the ECJ – as had the Advocate General before it – followed the position of the European Commission. The ECJ bases its ruling essentially on the following three arguments:

• the HOAI violates the freedom of establishment,
• the minimum fees are not suitable for ensuring quality and
• the maximum fees are disproportionate.

The Federal Republic of Germany now has one year to implement the ECJ’s ruling, i.e. to adopt new, effective fee law provisions.

What are the consequences of the ECJ’s ruling?

The ECJ has by no means – as has sometimes been incorrectly reported in the press – “buried” the HOAI. Only the binding fee framework in § 7 para. 1 HOAI in its current version was declared inadmissible and therefore invalid, which means it is no longer applicable with immediate effect. This has no influence, however, on the formal requirements in § 7 and the legal consequences in § 7 para. 5. Furthermore, the parties remain free to agree on the minimum and maximum rates set out in the HOAI.
The service profiles of the HOAI with reference to the corresponding annexes also continue to apply where agreed upon by contract. By contrast, in the context of a procurement procedure, tenders that fall below the minimum rates or exceed the maximum rates may no longer be excluded.

Implications for fee top-up claims

With regard to so-called “fee top-up claims” in cases of fee agreements below the minimum rates, since the courts are also no longer permitted to apply the binding fee law, these will in all likelihood be dismissed.
Otherwise, it remains to be seen how the legislature will respond to the ECJ’s ruling. Until then, with the exception of the minimum and maximum rates, the following applies: reports of death have been greatly exaggerated!