The German government could be hauled before the European Court of Justice to defend restrictions preventing foreign exchange postgraduates from using their academic titles.
The European Commission has warned Berlin that such restrictions break treaty commitments on the mutual recognition of European qualifications within member states.
The government has until April 9 to inform Brussels how it intends to rectify the problem, or it may be brought before the ECJ. The court has the power to order the German government to comply or to face the payment of recurring fines, which can reach €100,000 (£64,000) a day.
Meeting this deadline is likely to be difficult, however, as the restrictions have been imposed by Germany's independent-minded regional states, the Länder , and the federal government will have to persuade them to change their rules.
The commission complained that the restrictions imposed by some Länder on the use of titles acquired under foreign exchange agreements required that:
* The higher education establishment concerned should be "comparable" to a German institution
* The title must result from the completion of three years' study, at least one of which must have been undertaken in the awarding establishment
* The holder of an MBA awarded in Britain or Ireland must have completed four years' full-time study in one of those member states.
The commission said such restrictions broke EU law requiring member states to accept postgraduate titles acquired elsewhere in the EU if they were "rightfully awarded by a competent higher education establishment". If there were doubts, it added, "the German authorities are of course entitled to seek clarification... but they cannot refuse the right to use a title".