'Country of origin' principle vs. 'Freedom to provide services'
In the Commission's initial 2004 draft, service providers would, temporarily, have been subject to the laws of their country of origin rather than those of the country where the service is provided. They could thus test a new market without having to register with the authorities. This principle was the most controversial part of the proposal as many of Europe's older member states worried that cheaper workers from the eastern EU countries would flock massively to the West, pulling down social standards.
Instead, the article was renamed 'freedom to provide services' and holds that member states must "ensure free access to and free exercise of a service activity within [their] territory," while allowing them to continue applying their own rules on conditions of employment, including those laid down through collective bargaining agreements.
Concretely, this means that service providers will not need to be established in the territory in which they are seeking to work before they can obtain authorisation, register with a professional body or association, or be banned from setting up a certain type of infrastructure which they may need to supply the services in question.
Only requirements concerning public policy, public security, public health or the protection of the environment may be imposed on a service provider, so long as they are "non-discriminatory, necessary and proportional".
A wide ranging scope of services
The directive applies to both private professionals and businesses. These include:
- Services of general economic interest. Member states can define which services belong to this category. Typically, the definition includes postal services, water supply, electricity and waste treatment, but in fact, only some of the provisions of the directive apply to these services. The provisions labeled as 'freedom to provide services' do not apply, whereas the rules relating to establishment in another member state do.
- Business services such as management consultancies, certification and testing, facilities management (including office maintenance and security), advertising, recruiting, services of intellectual property rights and services of commercial agents.
- Services provided both to businesses and to consumers like legal or fiscal advice, real-estate services, construction (including architects), distributive trades, the organisation of trade fairs, car rental and travel agencies.
- Consumer services like tourism, leisure services, sports centres and amusement parks.
The excluded services are:
- Non-economic services of general interest (SGIs);
- Public and private healthcare and social services, such as social housing, childcare and family services;
- Industries already covered by sector-specific legislation, such as financial services, electronic communications and transport (including port services);
- Audiovisual services;
- Gambling and lotteries, and;
- Professions and activities linked to the exercise of public authority (e.g. notaries) and tax services.
The directive does not affect:
- Labour law;
- criminal law;
- posting of workers, or;
- social services.
The Commission agreed to give assistance to member states for the proper implementation of the Services Directive, but by doing so officials said they would neither provide legally-binding interpretation nor amend the provisions of the directive.
The EU executive also promised to consider further harmonisation within the services sector.
How does the directive benefit the consumer?
According to the Commission, the Services Directive brings consumers a variety of benefits, such as:
- Abolition of national requirements restricting the use of a service supplied by a provider established in another member state (e.g. the obligation for service recipients to obtain a specific authorisation to receive services provided from another member state are prohibited).
- Service providers are not allowed to discriminate, in their general conditions of access to a service, between recipients on the basis of their nationality or place of residence; this is particularly relevant in an e-commerce context.
- Establishing a network of assistance bodies which upon request will give people thinking of using service providers from other member states general information about the requirements applicable in that other member state, a means of redress and contact details of associations or organisations from which providers or recipients may get practical assistance.
- Service providers will have to make easily available to recipients key information about themselves and their services, so that service recipients, in particular consumers, are clearly informed about who they are dealing with, what services are being offered and under what conditions and prices. Service providers must make available to recipients a whole range of information, including the name of the register in which the provider is enrolled and the professional rules applicable (for regulated professions). In this way, consumers and businesses will benefit from being able to make informed decisions when using services in other member states.
Member states: Deadline disaster or slight delay?
While the provisions in the current directive remain the subject of great debate in Europe, the bigger question at the moment is when EU member states will finally complete the process of bringing the directive into their national law systems.
When the 29 December 2009 deadline expired, a clear majority of EU countries had failed to implement the directive (EurActiv 29/01/10).
A February 2009 report by Eurochambres, the European assotiation of chambers of commerce, found that only nine of the 27 member states had complied fully with the deadline: the Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, the Netherlands, Sweden and the United Kingdom.
Eurochambres representatives did not mince their words in describing this “unfinished job” as “unacceptable” and “extremely patchy”.
Member states, they argued, have failed to live up to their obligations and did not make implementation of the directive a priority. Greece, Ireland, Italy and Slovenia were “named and shamed” as being particularly far behind.
The Commission must now live up to its legal obligations and immediately begin infringement procedures against the offending countries, they said.
British Conservative MEP Malcolm Harbour, who heads the European Parliament’s internal market committee, said that real political engagement from these members was now key to closing this chapter.
Commission says summer 2010 deal is possible
Responding to these calls for action, Commission officials said that they would not “shy away” from taking member states to court. However, they were quick to stress that their goal was not to punish member states, but rather to “get them to deliver”. In other words, they will begin infringement proceedings, but only as a means to push EU countries towards final implementation.
The vast majority of countries are in a position to finish the job before summer 2010, they claimed. Indeed, the Commission is putting its faith in the current arrangement, whereby member states are meeting in “clusters” to assist each other in moving forward – they “definitely are taking the initiative,” officials said.
Eurochambres, too, expects this ‘mutual evaluation’ phase to represent a “key peer pressure exercise among member states”.
The directive, which some claim will cover up to 40% of EU jobs, is the single most important and powerful piece of legislation for completing the single market of the past decade, according to Harbour.