No transferability of the ECJ judgment on the admissibility of the prohibition of the participation of financial investors in law firms to medical care centres

The ECJ confirmed (in its judgment of 19 December 2024 – C-295/23) in a (not uncontroversial) decision that investments by pure financial investors in law firms are prohibited. In doing so, the court relied on the grounds that the prohibition of third-party ownership by lawyers was compatible with European fundamental freedoms. In its decision, the ECJ did not address other liberal professions. However, the ruling is the trigger for a renewed discussion about the stronger regulation of financial investors' access to the health sector. Specifically, it is about the question of the participation of financial investors in medical care centers (MVZ), usually also referred to as investor-supported medical care centers (iMVZ).

Facts of the case

The ECJ's decision was based on a request for a preliminary ruling from a lawyers' court. A lawyer had assigned the majority of his shares in a law firm to a non-lawyer company. As a result, the competent bar association revoked the law firm's licence to practise as a lawyer, since under German law only lawyers or members of certain professions may be shareholders of a law firm (so-called prohibition of third-party participation for law firms). The law firm in question sued against the revocation, arguing that the German regulations violated EU law.

Decision of the ECJ

The CJEU has ruled (remarkably, in deviation from the Opinion of the Advocate General, who had noted several contradictions) that the national legislation was in line with EU law. Although the national prohibition on third-party participation restricts the free movement of capital and the freedom of establishment, those restrictions are justified in that they serve a legitimate aim, namely to ensure the independence and integrity of the legal profession, and are appropriate, necessary and proportionate in order to achieve the objective of the sound administration of justice and the protection of the independence of lawyers. Overriding reasons in the public interest justify the restriction of the free movement of capital and the freedom of establishment. It could legitimately be considered that lawyers would not be in a position to practise their profession independently and in compliance with the professional and professional obligations incumbent on them if they belonged to a company whose shareholders are financial investors who might be tempted to work towards cost reductions in order to make their investments profitable.

The ECJ ruling thus confirms that Member States have the right to prohibit the participation of pure financial investors in law firms in order to protect the independence of the legal profession.

Classification and significance for practice in the context of MVZ

This decision has far-reaching implications for the discussion about the liberalisation of the lawyers' market and the participation of investors in other regulated professions that are subject to comparable prohibitions on third-party participation, whereby the ECJ has expressly addressed only lawyers.

Especially in the case of doctors, the independence of the practice of the profession is in the foreground, which is why the legal debate about the participation of investors in medical care centers is similar to the discussion about law firms. In contrast to medical practices, the prohibition of third-party participation in MVZs as medically managed facilities that can be founded by different service providers and participate in statutory health care has already been softened. According to current law, hospitals, among others, whose shareholders can indisputably be investors, are also allowed to set up MVZs, so that an indirect participation of pure financial investors in MVZs is possible. As is well known, the permissibility of such iMVZ has been viewed critically for some time. The present ECJ decision is likely to give new impetus to this discussion about demands for a ban on iMVZ. However, according to this view, the ECJ ruling cannot be transferred to medical care centres. This is due to significant differences between the profession of lawyer or law firm and the profession of doctor or medical care center:

A major difference is the regulatory framework for the practice of the profession of lawyer on the one hand and the practice of the profession of panel physician on the other. Both the legal requirements and the objectives of the regulations differ considerably. The health care system and the rights and duties of doctors are particularly regulated. In addition, various regulations ensure medical freedom of decision, especially with regard to MVZs.

Not only do different framework conditions apply to the actors, but also the individual legal interests (administration of justice on the one hand and public health on the other) differ, just as the remuneration systems and service processing have very significant differences. In statutory health care, in which MVZs participate as service providers, economic aspects play a central role.

In addition, the different market structure must be taken into account. The healthcare market is more fragmented and has a greater diversity of actors, which makes it difficult to transfer jurisdiction. In particular, the unequal treatment of the outpatient and inpatient sectors constitutes a contradiction that precludes the ECJ decision from being transferable to medical care centres: As already stated, there is no prohibition of third-party ownership in the inpatient sector and thus no exclusion of pure financial investors. With the Hospital Care Improvement Act (KHVVG), which recently came into force, the legislator has further exacerbated the unequal treatment between the sectors, because hospitals are now also allowed to provide outpatient services. This leaves hardly any room for the legitimation of encroachments on fundamental rights that would be associated with a ban on iMVZ.

Finally, medical progress and the strong demand for medical services with associated cost increases in the healthcare sector must be taken into account: A restriction of the group of shareholders of medical care centers in the sense of the ban on iMVZ represents an obstacle to innovation and investment. For the health sector, the challenge remains to find a balance between economic interests and ensuring high-quality and independent medical care.

Conclusion

Both legal and structural peculiarities thus ultimately prohibit equal treatment of law firms and medical care centers and thus also a transfer of the ECJ decision to medical care centers. Thus, even after the ECJ ruling, it continues to apply that financial investors can be or become shareholders of an MVZ. However, financial investors who intend to acquire a stake in an MVZ should closely follow developments in the area of regulation. The same applies to doctors who are considering selling their practice.