3 An internal market for services
| (27409)
8413/06
COM(06) 160
| Amended draft Directive on services in the internal market
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| Legal base | Articles 47(2), 55, 71 and 80(2) EC; co-decision; QMV
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| Document originated | 4 April 2006
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| Deposited in Parliament | 7 April 2006
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| Department | Trade and Industry
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| Basis of consideration | EM of 21 April 2006
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Standing Committee
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Background
3.1 In January 2004 the Commission published a draft framework
Directive intended to make it easier for service providers to
exercise the freedom of establishment in Member States and to
facilitate the free movement of services across the EU, offering
service providers and recipients the legal certainty they need
in relation to these two freedoms.
3.2 The scope of the draft Directive was broad, applying
to all economic services (except for some exceptions or derogations)
supplied for remuneration by providers established in a Member
State. The draft Directive did not include services provided by
public authorities not for remuneration. Nor did it apply to certain
services covered by specific initiatives already in place to complete
the internal market or for which there are other reasons for the
exclusion. These were financial services, electronic communications
services and networks in so far as they are already covered in
relevant legislation, transport services to the extent that they
are already covered in relevant legislation, the field of taxation
and activities which are connected, even occasionally, with the
exercise of official authority.
3.3 To eliminate the obstacles to the freedom of
establishment the draft Directive would have provided for:
- administrative simplification,
particularly involving the establishment of "single points
of contact", at which service providers could complete procedures
necessary for access to and exercise of their service activities;
- principles, including proportionality and objective
public interest justification, which authorisation schemes applicable
to service activities must respect;
- prohibition of certain particularly restrictive
legal requirements; and
- an obligation to assess the compatibility of
certain other legal requirements, particularly as regards proportionality.
3.4 To abolish barriers to the free movement of services
the draft Directive would have provided for:
- application of a country of
origin principle whereby, generally, a service provider would
be subject only to the requirements for access to, and exercise
of, its service activity of the country in which it is established.
Member States would not be able to restrict services from a provider
established in another Member State;
- the right of recipients to use services from
other Member States without being hindered by restrictive measures
imposed by their country or by discriminatory behaviour on the
part of public authorities or private operators;
- consumer protection assistance to those using
a service provided by an operator established in another Member
State; and
- allocation of tasks between the Member State
of origin and the Member State of destination and the supervision
procedures applicable related to the posting of workers in the
context of the provision of services.
3.5 The draft Directive would also have provided
for:
- harmonisation of legislation
in order to guarantee equivalent protection, such as consumer
protection;
- stronger mutual assistance between national authorities
to ensure effective supervision of service activities;
- promotion of the quality of services, such as
voluntary certification of activities or co-operation between
chambers of commerce; and
- encouragement of Community-level codes of conduct.
3.6 The previous Committee considered this document
in March 2004 and January 2005 and recommended it for debate in
European Standing Committee. We confirmed this recommendation
in July 2005.[6] This draft
Directive has proved highly controversial, especially in the European
Parliament but also in the Council and amongst interested parties,
and for some time the Commission has said that it would table
a revised proposal once the European Parliament had concluded
its first reading of the proposal. For this reason we have concurred
in the Government's suggestions, as publication of a new text
has from time to time been postponed, that the time was not yet
ripe for the debate.
The document
3.7 In this revised draft Directive the Commission
has incorporated most of the amendments adopted by the European
Parliament when it concluded its first reading of the original
proposal on 16 February 2006. The main differences between this
present proposal and the original one are:
- the country of origin principle
has been replaced by a different mechanism to facilitate free
movement of services; and
- a number of additional services are excluded
from the scope of the proposal.
3.8 So the revised Directive would apply to service
providers established in Member States and covers all economic
service activities, except those for which specific exclusions
or derogations are provided, that is:
- all financial services;
- electronic communications and networks (to the
extent that they are covered by the Community telecommunications
legislation package);
- all transport services and transport-related
services falling under Title V of the Treaty and including port
services;
- healthcare services;
- services of temporary work agencies;
- audiovisual services;
- gambling activities;
- activities connected with the exercise of official
authority;
- social services relating to social housing, childcare
and support of families and persons in need;
- private security services; and
- taxation, labour law and criminal law.
3.9 In order to eliminate obstacles to the freedom
of establishment, the revised Directive would provide for:
- administrative simplification,
particularly "single points of contact", through which
service providers could complete the procedures necessary to their
activities in a Member State and the obligation to make it possible
to complete such procedures at a distance and by electronic means;
- authorisation schemes applicable to service activities
to respect certain principles, notably non-discrimination, necessity
— justified by an overriding reason of public interest —
and proportionality;
- prohibition of certain particularly restrictive
legal requirements, for example nationality or resident requirements
on staff, or prohibitions on being established in more than one
Member State); and
- an obligation to assess the compatibility of
certain specified national legal requirements with the conditions
laid down in the Directive.
3.10 In connection with eliminating obstacles to
the free movement of services the revised Directive would provide
for:
- allowing Member States to make
temporary or remote service providers subject to requirements
only that respect the principles of non-discrimination, necessity
— defined here as "justified for reasons of public
policy, public security, public health or the protection of the
environment" — and proportionality;
- prohibition of certain particularly
restrictive requirements — for example a requirement to
set up an office or to register with a professional body in the
host Member State;
- derogations to exclude some services of general
economic interest sectors,[7]
matters covered by specific legislation — including posting
of workers, personal data protection, services provided by lawyers,
recognition of professional qualifications and coordination of
social security systems and case-by-case derogations, in exceptional
circumstances, relating to the safety of services;
- the right of recipients to use services from
other Member States, without being hindered by restrictive measures
imposed by their Member State or by discriminatory behaviour on
the part of public authorities or private operators;
- a mechanism to provide assistance to recipients
who use a service provided by an operator established in another
Member State, by obliging Member States to supply information
about, for example, their consumer protection law; and
- removal of total prohibitions on commercial communications
by the regulated professions (as defined in the legislation on
recognition of professional qualifications) and an obligation
on Member States to ensure that professional rules on commercial
communications are non-discriminatory.
3.11 In relation to quality of services the revised
Directive would provide for:
- harmonisation of legislation,
particularly as regards service providers' obligations on provision
of information about their services and any after-sales guarantees
and Member State rules covering multi-disciplinary activities
and exchange of information on the quality of the service provider,
and settlement of disputes; and
- measures for promoting the quality of services,
such as voluntary certification of activities, quality charters
or co-operation between the chambers of commerce and of crafts.
3.12 Finally, in the interests of administrative
co-operation the revised Directive would provide for
- stronger mutual assistance
between national authorities to enable effective supervision of
service activities. The Commission would provide an electronic
co-operation system to facilitate communication between Member
States' competent authorities; and
- encouragement of Community level codes of conduct,
particularly for professional bodies and associations, aimed at
facilitating the provision of services or establishment of a provider
in another Member State.
The Government's view
3.13 The Minister of State for Trade, Investment
and Foreign Affairs, Department of Trade and Industry (Ian Pearson)
comments on the revised proposal in terms very similar to those
used by the Government to our predecessors about the original
draft Directive (in an Explanatory Memorandum of 3 March 2004).[8]
He says the Government strongly supports the objective of opening
up the market for services in Europe because:
- successful liberalisation of
this sector is likely to be of significant benefit to UK businesses
and consumers and would make a major contribution to the Lisbon
Strategy targets for growth, competitiveness and employment; and
- the removal of red tape is in keeping with its
support for better regulation.
3.14 The Minister adds that, although many of the
Government's aims have been met by the revised proposal, there
are some further changes that it needs to see in order to ensure
that it can uphold UK standards in health and safety and sensitive
policy areas.
3.15 On the financial implications of the proposal
the Minister asserts that costs to service providers could be
expected to be negligible because the proposals mainly provide
for removing red tape and lowering the costs to business of complying
with regulation. More significant costs are expected to fall on
the Government and regulators because, for example, of:
- the requirement to set up "single
points of contact" for service providers to facilitate their
establishment in the UK;
- simplification of administrative requirements;
- screening of existing legislation for prohibited
requirements; and
- increased levels of mutual assistance and co-operation
with competent authorities in other Member States.
Customers are expected to benefit from more choice
and lower prices.
3.16 The Minister says that overall costs are expected
to be of a lower order of magnitude than benefits. (But given
the inherent uncertainties the Government would wish the Commission
to review the policy three years after implementation of the proposed
Directive.) Possible costs and benefits are discussed in a revised
partial Regulatory Impact Assessment the Minister attaches to
his Explanatory Memorandum. The assessment considers three options:
rejecting the revised proposal outright, accepting it as it stands
or supporting the revised proposal but seeking further amendments.
The main changes to be sought are:
- single points of contact to
be points for information about procedures rather than points
for completion of procedures; and
- to ensure the Government is not prevented from
upholding UK standards on health and safety and sensitive issues,
for example environmental standards.
The assessment recommends pursuing the third option.
It summarises the administrative costs to Government of the second
and third options as £92 million (noting that a single point
of completion would be both expensive and, from an implementation
point of view, risky of failure) and £2 million annually,
the administrative benefit to business as £210 million and
£3 million annually and the economic policy benefit (welfare
gains for service providers, the Government and regulators, consumers
and employees) of £8,100 million annually for either option.
Conclusion
3.17 As our predecessors noted, a Directive to
promote a single market in services could have a significant benefit
for UK consumers and businesses. We therefore recommend that this
new document be debated in European Standing Committee. And, although
it is now overtaken, we think it useful to maintain the debate
recommendation on the original proposal, since Members may find
it helpful to compare the advantages and disadvantages of the
two proposals. Amongst matters which might be considered are:
- the scope of the proposed
framework Directive;
- to what extent the further amendments the
Government is seeking are vital; and
- the need, given the uncertainties as to some
of the possible effects of the proposal, for a Commission policy
review after three years' experience of the legislation.
6 See (25354) 6174/04: HC 42-xii (2003-04), para 4
(10 March 2004), HC 38-iii (2004-05), para 1 (12 January 2005)
and HC 34-i (2005-06), para 1 (4 July 2005). Back
7
Services of general interest, including services of general economic
interest (SGEI), are services provided by the public or private
sector and subject to public service obligations. SGEI can range
from network industries such as energy supply or telecommunications
to services as diverse as waste collection, port services and
carcase rendering. Non-economic services of general interest can
include services such as education or health provision. But the
boundary between SGEI and non-economic services of general interest
is imprecise and shifting. A common justification for the imposition
of public service obligations is the promotion of territorial
and social cohesion. Typically public service obligations include
universal provision at a standard price. Back
8
See (25354) 6174/04: HC 42-xii (2003-04), para 4 (10 March 2004). Back
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