6 Functioning of Single Market for services
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COM(11) 20
| Commission Communication: Towards a better functioning Single Market for services — building on the results of the mutual evaluation process of the Services Directive
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| Legal base | —
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| Document originated | 27 January 2011
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| Deposited in Parliament | 2 February 2011
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 16 February 2011
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| Previous Committee Report | None, but see footnotes
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| To be discussed in Council | 10-11 March 2011
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
6.1 According to the Commission, services are the driving force
of the EU economy, with nine out of ten new jobs being created
in this sector. It notes that the structural reforms required
to create a genuine Single Market on the basis of the Services
Directive (2006/123/EC) are at the heart of the "Europe 2020"
strategy,[28] and that
its Communication "Towards a Single Market Act"[29]
stressed the need to further deepen the single market in this
area, and to build upon the results of the "mutual evaluation"
process provided for in that Directive. It has sought in this
Communication to present the main results of that evaluation,
and to suggest ways in which the benefits of the Directive can
be consolidated and complemented by a set of further actions.
The current document
6.2 The Commission says that the Single Market for services has
been one of the cornerstones of the European project as a means
of improving the life and daily welfare of its businesses and
citizens, and that it is today the main driver of the EU economy,
with services accounting for over two-thirds of EU GDP and the
source of all net job creation in recent years. However, it believes
that the sector is not yet delivering its full potential, since
services still represent only around one-fifth of total intra-EU
trade, and it notes that trade in services between the EU and
the rest of the world has been growing faster than that within
the Single Market. As result, it says that both the choice for
service users and Europe's potential for innovation have been
hampered, and that the EU economy therefore needs a more integrated,
deepened Single Market in this sector. In particular, it says
what, whilst the Services Directive has been a crucial milestone,
more needs to be done in this area, and in the process to complement
other action at EU level to improve the functioning of services
markets, notably as regards the retail market, the Europe 2020
flagship initiative on the digital agenda, and the Single Market
for e-commerce.
IMPLEMENTATION OF THE SERVICES DIRECTIVE
6.3 The Commission notes that services are very diverse and often
complex, as are the rules imposed on them by Member States, and
that they are more susceptible to barriers than goods, due to
such factors as their intangible nature and the importance of
the provider's know-how, with SME providers being hit harder than
larger firms. It also points out that many of these barriers are
common to a wide variety of services, and have a number of common
features, in that they often arise from administrative burdens,
the legal uncertainty associated with cross border activity, and
the lack of mutual trust between Member States.
6.4 It highlights the adoption of the Services Directive
in 2006, which it says covers activities representing about 40%
of EU GDP and employment, and that its implementation by the end
of 2009 required an unprecedented effort at all levels. It suggests
that, even though implementation is not yet completed in some
Member States, the Directive constitutes a major step in removing
barriers and simplifying legislation, with hundreds of requirements
having been abolished in sectors such as retail, the regulated
professions, construction, tourism and business services, and
with many Member States having set up specific mechanisms to prevent
new barriers emerging. However, it also observes that the full
potential of the Directive — which it suggests would involve
economic gains of up to €140
billion (or up to 1.5% of EU GDP) — will be realised only
when all Member States complete all the required legislative changes,
and that such changes represent only one strand, with major administrative
changes also playing a significant role.
MUTUAL EVALUATION PROCESS
6.5 The Commission goes on to highlight the role
of the mutual evaluation process provided for in the Directive,
which it describes as an innovative and evidence-based exercise
of "peer review", requiring Member States to carry out
a systematic and comprehensive review of their legislation and
to assess a number of legal requirements typically imposed on
service providers. It says that the overall assessment has been
very positive, in that it has put in place a structured dialogue
between Member States and enabled a detailed picture to be drawn
up, under which Member States have critically assessed their rules
and those existing in other Member States from a Single Market
perspective, and remaining obstacles have been identified.
6.6 The Commission says that part of the problem
appears to be that a number of EU rules adopted over the years
to help the functioning of the Single Market for services are
not being used to their full extent and are applied inconsistently.
It also notes that services are often subject to a number of different
EU instruments, some of which apply in a horizontal manner like
the Services Directive or the e-commerce Directive (2003/31/EC),
whilst others, such as the Directive on the Recognition of Professional
Qualifications (2005/36/EC), regulate issues of central relevance
to a large number of service activities, or have a significant
impact on the services sector (such as those regulating business-to-consumer
transactions or the protection of the environment). In addition,
it says there is sometimes a lack of clarity as to how these instruments
interact, leading to uncertainty as to which rules apply.
6.7 The Commission goes on to identify certain other
difficulties revealed by the mutual evaluation. These include:
- Member States reserving certain
service activities for certain operators (for example those with
specific qualifications), particularly in the case of cross-border
services, this being cited most frequently as a barrier to the
Single Market;
- requirements on legal form[30]
and capital ownership;[31]
- the imposition of insurance on cross-border service
providers, even where the provider is adequately insured in its
place of establishment.
The Commission says that there is a need to make
the Single Market a concrete reality, and this requires more dialogue
between Member States, and between them and service providers;
greater transparency; and increased enforcement at the national
level.
THE WAY FORWARD
6.8 In the light of this evaluation, the Commission
proposes to take a number of further steps, as follows:
- it will, as a matter of priority,
seek to achieve a complete and correct transposition and implementation
of the Services Directive in all Member States, and will hold
in the first half of 2011 bilateral meetings with those where
that process is currently incomplete;
- it will carry out in parallel a first economic
assessment of the actual implementation of the Directive and of
its impact on the functioning of services.
- it will also carry out in 2011 a "performance
check" on how different pieces of EU legislation are applied
and how they work on the ground, taking into account those beyond
the Services Directive, and based on concrete sectors and activities
(though it suggests that the cross-cutting nature of many barriers
will make it possible to identify horizontal issues as well):
it says that, on the basis of the mutual evaluation, the construction,
tourism and business services sectors are likely to be good candidates
for such a check, and that it will, if required, propose further
measures by the end of 2012.
6.9 In addition, the Commission proposes a number
of targeted actions relating to specific issues which merit examination
on more detail. These include the reservation of activities to
service providers with specific qualifications; the effects of
restrictions imposed on the legal form and capital ownership of
such providers; and the difficulties posed by cross-border insurance
obligations. It will also seek to consolidate the system under
the Services Directive which obliges Member States to notify new
requirements affecting the free movement of services, and to help
service providers, in particular small and medium-sized enterprises,
to enforce their rights in the Single Market.
The Government's view
6.10 In his Explanatory Memorandum of 16 February
2011, the Minister for Employment Relations, Consumer and Postal
Affairs at the Department for Business, Innovation and Skills
(Mr Edward Davey) says the
Services Directive is a wide-reaching and complex piece of legislation,
and that, when fully implemented across the EU27 and 3 EEA members,
should bring an estimated increased growth to the UK of £4-6
billion per annum. He adds that, in order to realise the contribution
which the Directive can make to economic growth, all Member States
will need to meet their commitments, and that the mutual evaluation
process has proved to be a good means of shedding light on how
services are regulated across Member States, and on the impact
of the Directive on those regimes.
6.11 He says that the Government therefore welcomes
this document, and its proposals for further action, in particular
the proposed scrutiny of Member State implementation and an assessment
of the impact of remaining barriers, commenting that, whilst some
restrictions are clearly justified for reasons of public policy,
there is merit in scrutinising further some of the other requirements.
6.12 The Minister goes on to point out that the mutual
evaluation has shown that Member States have retained nearly 3,000
regulatory requirements for services, including those for shareholding,
specific legal forms, tariffs and restrictions on multi-disciplinary
activities, and that these requirements are mainly in the area
of regulated professions in the private sector, such as accounting,
surveyors, architects etc, with over 800 'regulated professions'
in Europe, many for historic reasons. He welcomes the fact that
the Communication addresses those issues, and adds that assessing
the notification requirements of the Directive, and so ensuring
transparency, the proposal to work with the insurance industry
and others to identify difficulties for business wishing to operate
cross borders, and the proposal to assess the redress available
to service providers, in particular SMEs, who find their single
market rights infringed, will also enlighten the debate on how
best to develop the Single Market in services.
Conclusion
6.13 Although this Communication provides a useful
summary of the action taken in the (relatively short) period since
the Services Directive come into effect, and of the further steps
which the Commission proposes to pursue in 2011 in this area,
it does not appear to us to raise any issues requiring further
consideration. Consequently, whilst we are drawing the document
to the attention of the House, we are content to clear it.
28 (31373) 7110/10: see HC 5-xiv (2009-10), chapter
1 (17 March 2010). Back
29
(32132) 13977/10: see HC 428-x (2010-11), chapter 11 (8 December
2010). Back
30
For example, a prohibition on providers of craft services being
limited liability companies. Back
31
For example, that shareholders in companies offering tax advice
services should themselves be qualified advisers. Back
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