Our previous recommendations
11. In our 2005 report, we strongly endorsed
the previous version of the Directive. We believed it "important
for the European Union to be bold and resolute in its embrace
of the single market" (para 180) and we reached the conclusion
that, for the most part, the Directive provided the mechanism
through which this could be achieved. We also found most of the
concerns expressed by others to be unfounded.
12. We endorsed the horizontal nature of the
Directive, by which services were not defined exhaustively nor
categorised but rather the same framework should apply in an overarching
manner. This approach seemed preferable because a number of factors
are common to a range of services. It may be contrasted with sectoral
harmonisation: we saw "a clear danger in the sector-by-sector
harmonisation of regulations route [in] that negotiations will
become bogged down for many years". (para 182) We endorsed
mutual acceptance (of national standards), rather than mutual
recognition, so that for example if a plumber is viewed as qualified
in Poland, he is qualified to work in the United Kingdom, subject
to some safeguards.
13. We viewed the ability to provide services
on a temporary basis as an important freedom, and therefore asserted
that "Nothing should be done through the Directive
that diminishes in any way the existing legal freedom to provide
services. Rather, the aim should be to simplify and strengthen
that freedom." (para 186) We called for a clear set of guidelines
regarding the nature of "temporary" in order to provide
legal certainty. Some witnesses to our original inquiry were concerned
that "temporary" was only defined as the alternative
to established provision, without explicit criteria which make
an enterprise established. (para 60)
14. We strongly supported the Country of Origin
Principle (CoOP) as the underlying basis for the operation of
a business in another Member State. This is the principle that
if an enterprise complies with the rules applicable in its country
of origin, then it qualifies to provide services on a temporary
basis in another Member State, despite the differences there may
have been between the regimes. The alternative is a country of
destination principle, under which an enterprise is not allowed
to provide a service unless the legal and regulatory requirements
of the destination or host country are complied with. We felt
that the latter would put substantial demands upon the information
that businesses, especially SMEs, would require whenever they
wished to do business in another Member State on a temporary basis.
15. We were also of the view that certain health
and safety concerns had been exaggerated and doubted the need
for extensive derogations in this respect. Here it was clear that
some comfort should be offered to consumers as to the minimum
quality of service they should expect; indeed if none were offered
consumers might become reluctant to purchase the service. However,
the danger was that "health and safety" could provide
a back door through which onerous requirements could be placed
on providers from another Member State. (paras 196-200)
16. We took the view that many of the concerns
expressed about a "race to the bottom" in terms of employment
conditions would be met by the overriding application of the Posting
of Workers Directive (Directive 96/71/EC) to employees posted
to work in another Member State. The effect of this would be that
such employees would be covered by the laws and regulations relating
to employment in the host country.
17. We called for the Commission to rule out
"blanket derogation for all services of general economic
interest," (para 208) as distinct from services of general
non-economic interest. All services of general interest are provided
at low cost or free on demand, but those of general economic interest
are typically produced by private or public enterprise in return
for payment from the public purse.
18. Nevertheless, although we provided a strong
endorsement for the approach adopted by the Commission's drafters,
we acknowledged that the path to adoption of the Services Directive
was not smooth.
19. In particular, we were "doubtful that
the changes the United Kingdom may need to make in registering
or providing information on service businesses that wish to trade
in other Member States have been fully grasped" (para 206).
This was because the United Kingdom takes a rather relaxed approach
to the provision of many services. No registration process is
required in order to set up in business in many service occupations,
but this means that the first draft Directive's proposed mechanism
of home country supervision of an enterprise is more complex for
the UK than for other states which have a more formal approach
to many service activities. For example, a German hairdresser
is registered. Hence at some level of Government, information
on the enterprise is collected and can be verified. The same is
not true for a British hairdresser, who might not even be registered
for VAT purposes.
The Commission's revised draft
20. The initial draft Services Directive has
now been revised considerably.
21. Although the word "horizontal"
does not appear in the revised draft Directive, it is clear that
it remains horizontal in nature. That is, although there is a
list of indicative services covered (Recital 14), this is not
exhaustive and unless specifically excluded or derogated, the
draft Directive is intended to cover all services. However there
are significant exclusions and derogations which are dealt with
22. The revised draft Directive retains the right
to provide services in another Member State on a temporary basis
and it is clearly viewed as an important mechanism through which
trade in services between Member States can developthis
is set out the second paragraph on the aims of the Directive and
is discussed at several further points, for example in relation
to Article 16 discussed below. The concept of temporary has been
codified somewhat by reference to existing case law (Recital 36b).
23. The revised draft makes it clear in Article
3 that the Posting of Workers Directive prevails over the Services
Directive, where the two conflict. This was a matter that we viewed
as explicit already, but was the subject of some previous confusion
by certain parties in the earlier version of the Directive. The
same article also clarifies that the consumer protection law (and
more generally, any contractual or non-contractual relationship
resulting from the supply of services) is that of the state in
which the consumer resides, rather than that of the provider.
24. However the basis on which services may be
provided temporarily or occasionally without establishment in
another Member State has changed from a Country of Origin Principle
to a Country of Destination Principle. In the revised draft Directive
both the right to provide services on a temporary basis and the
legal and regulatory framework within which such operations may
take place are brought together in the single phrase "the
Freedom to Provide Services".
25. While the revised draft Directive places
the legal framework clearly within that of the Country of Destination,
it seeks to ensure that this does not become a major constraint
upon the provision of services on a temporary or occasional basis.
26. It seeks to achieve this in two ways. Firstly
Article 16 (1) limits the ways in which host country requirements
can be applied: "Member States shall not make access to or
exercise of a service activity in their territory subject to compliance
with any requirements which do not respect the following principles:
|Article 16 (1)
Freedom to Provide Services
Member States shall respect the right of service providers to provide services in a Member State other than that in which they are established.
The Member State in which the service is provided shall ensure free access to and free exercise of a service activity within its territory.
Member States shall not make access to or exercise of a service activity in their territory subject to compliance with any requirements which do not respect the following principles:
(a) non discrimination: the requirement may be neither directly nor indirectly discriminatory with regard to nationality or, in the case of legal persons, with regard to the Member State in which they are established,
(b) necessity: the requirement must be justified for reasons of public policy, public security, public health or the protection of the environment,
(c) proportionality: the requirement must be suitable for securing the attainment of the objective pursued, and must not go beyond what is necessary to attain that objective.
27. Secondly under Article 16 (2), there is a list of things,
such as authorization requirements to register and obligations
to possess identity documents relating to the activity, that cannot
be imposed upon service providers from another Member State.