The draft Services Directive:

• Implements the “country of origin” principle, so that service providers operating legally in one Member State can market services in others without having to comply with further rules in "host" Member States;
• Removes “unnecessary” restrictions etc relating to cross-border services or service providers;
• Obliges national authorities to exchange information and work more closely together, e.g. through interoperability of information systems, and have “business-friendly” procedures (single contact points, electronic procedures, requirement to justify authorisation systems, no obligation to translate documents);
• Establishes some common rules in order to increase trust and confidence in cross-border services (appropriate professional indemnity insurance for services giving rise to particular risks, information to consumers, codes of conduct).

It is difficult to have a clear understanding of the objectives and implications of the draft Directive. Unclear wording compounds this difficulty. In particular:

1) What is meant by “services”?

In the Directive the Commission says that the term “service” means any “economic activity, as provided by Article 50 of the Treaty, consisting of the provision of a service against consideration.” “Non-economic activities or activities performed by the state for no consideration as part of its social, cultural, education and judicial functions where there is no element of remuneration” are not covered by the scope of the directive (p20 and recital 16). It is difficult however to find public services which do not require remuneration in one form or another, especially in a context of deregulation of key services. This exemption should in any case appear in the core text of the Directive and not just in a recital. The Commission says that the Directive does not affect the rights of Member States to define what they consider to be services of general interest and to determine how they should function, nor will it put pressure on Member States to open up these services to competition. This argumentation is unconvincing. Promoting competition in public services (only) in those Member States that have opened them to competition will distort the development of these services both in these countries and in the European Union as a whole.

And 2) what is meant by “barriers”?

The Commission defines such barriers as “... any measure that is liable to prohibit, impede, render more costly or onerous or otherwise render less advantageous service provision between Member States.” As well as removing “red-tape” type requirements, the Directive would call into question collective agreements, especially those concluded at the sectoral level, or provisions of labour codes. It would also interfere with the capacity of social partners and/or government to set up obligatory training or pension funds. It would also call into question an endless number of other legitimate restrictions, e.g, on direct advertising of pharmaceutical products.

The draft Directive justifies its far-reaching scope by reference to “red-tape” restrictions but it goes far beyond what is necessary to remove these. EPSU supports measures to improve the functioning of the Internal Market and deal with practical problems, and considers that many of the issues dealt with in the Services Directive would be better addressed through systems such as SOLVIT, or in the Commission’s Action Plan on improving business-related services in the European Union.

Specific points on Articles

Scope (Article 2)

The Directive should say explicitly that it does not cover services of general interest, and in particular the following sectors of activity; healthcare, social services, water, water treatment, waste, education, culture, social security... (The list provided in annex (b) of the public procurement directive could be used as a basis.)

Definitions (Article 4)

Article 4 (7) includes “collective rules of professional associations” under “requirements”. Does this include collective agreements? Rather than seeing agreements as obstacles, the Directive should acknowledge that worker and trade union rights, social dialogue and collective agreements are necessary components of a well-functioning internal market .

Article 4 (5) on “establishment” should make it clear that a service provider operating in any Member State is bound by the rules of that State (thereby limiting the country of origin principle), and that it is not possible to have “letter-box” companies, nor “temporary” arrangements which allow companies to circumvent the rules.

“Country of origin principle” (Article 16)

The Directive must not lead to service providers moving their headquarters to the EU Member States with the lowest tax rates and social and environmental requirements. The Commission says this is not possible under the ECJ case law on the right of establishment, but the text is not clear. Not is it clear what “temporary” arrangements will be possible.

Article 16 (4) (e) prescribes that Member States may not impose “an obligation on the provider to comply with requirements, relating to the exercise of a service activity, applicable in their territory”. This must not include labour law and collective agreements.

Enhanced cooperation between national administrations (articles 35- 37)

The existing coexistence of national and European rules will be gradually replaced by a system of peer review and exchange of information. The directive provides for member states to set up single contact points to help service providers secure authorisations and other formalities. Shared responsibility and reinforced mutual assistance and cooperation between national administrations can be positive but practical difficulties need addressing. The host country must be able to carry out supervisory tasks. These cannot be left to the country of origin. It is not possible to directly or indirectly monitor and oversee providers of cross-border services from their country of origin. In the absence of a well-developed and efficient European network of labour inspectorates, the country of origin principle is not realistic and premature.

Further the directive does not mention the importance of strengthening cooperation between departments charged with service quality and employment and labour legislation. Nor does it make it compulsory for single contact points to provide information relating to labour law and trade union rights in the host. country. Last the Commission foresees the possibility for single contact points to be set up by a private operator, which is clearly problematic (recital 25).

Further it is difficult to foresee how administrative cooperation will be stepped up among 25 Member States if requirements for certified translations cannot be imposed except where objectively justified.

Last, the Commission recognises that the establishment and running of information exchange systems, mutual assistance and development of e.government would initially require additional resources. However accompanying financial measures are not foreseen. In a context of budgetary constraints, this omission poses serious implementation problems. There is no impact assessment on the effects the directive will have on employment in national administrations.

Derogations (Article 17) and excluded sectors

Labour law and collective agreements should not be considered as an obstacle to the free circulation of services.

Posting of workers (articles 24, 25)

Either temporary work and the posting of workers should be excluded from the scope of the directive, or the text should be amended so that it improves protection for these workers. Consumer protection (Article 22)

It is not clear if only European minimum standards are applied or also higher national quality standards. The country of origin principle should not apply to consumer protection to avoid any race to the bottom of quality standards. Article 22 only asks Member States to ensure that recipients can obtain information about consumer protection.