Documents considered by the Committee on 28 November 2018 Contents

19Services Directive notification procedure

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny; update requested

Document details

Proposal for a Directive of the European Parliament and of the Council on the enforcement of the Directive 2006/123/EC on services in the internal market, laying down a notification procedure for authorisation schemes and requirements related to services, and amending Directive 2006/123/EC and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System

Legal base

Article 53(1), 62 and 114 TFEU, Ordinary legislative procedure, QMV

Department

Business, Energy and Industrial Strategy

Document Number

(38450), 5278/17 + ADDs 1–2, COM(17) 821

Summary and Committee’s conclusions

19.1On 13 January 2017 the European Commission published a proposed Directive121 which would strengthen the notifications procedure which forms part of the Services Directive (EC) 123/2006,122 in order to address concerns about the poor implementation of the Services Directive. In its Explanatory Memorandum,123 the Government indicated its broad support for the proposal, stating that it was a strong supporter of a liberalised EU services market, had called for better enforcement of the notifications procedure, and that the proposal addressed many essential areas for improvement.

19.2Following working groups within the Council, a General Approach was agreed at the Competitiveness Council on 29–30 May 2017. In it, the Member States reduced the scope of the proposal by excluding insurance schemes from the scope of the Directive and deleting a clause which would have meant that a breach of one of the elements of the procedure would have rendered it unenforceable vis-à-vis individuals. The Parliamentary Under Secretary of State at the Department of Business, Energy and Industrial Strategy (Lord Henley) provided a comprehensive overview of these changes in his letter of 12 December 2017.124

19.3The Committee welcomed the exhaustive information provided by the Minister regarding the general approach,125 and accepted that the proposal, which would continue the incremental liberalisation of the Single Market for Services, was beneficial to the UK. Even in the context of a non-negotiated EU exit, the UK would continue to benefit from the proposal in those cases where individual Member States’ services regulation does not discriminate between EU and third country nationals.

19.4On the implications of EU exit for those services covered by the Directive, the Committee concluded that the impact of a shift from EU membership to third country status would be uneven: UK access to the EU market in unregulated sectors (e.g. marketing, management consulting) was likely to be relatively unaffected, whereas service sectors for which more developed EU-level frameworks exist (e.g. legal services, accountancy, audit) would be more adversely impacted. The Committee noted the UK Trade Policy Observatory’s statement that the STRI shows that outside the Single Market, “it is in professional services sectors … where access for foreign providers is restricted”, and that UK lawyers and accountants looking to provide services in the EU would be up against “major restrictions”. 126

19.5The Government indicated its intention to preserve the Provision of Services Regulations 2009, which implements the EU Services Directive. However, the Committee noted that, even if the UK retained its regulations implementing the Services Directive in domestic law, the EU27 would no longer be required to reciprocate (as Union law would no longer apply to the UK), and EU Member States would therefore be permitted to discriminate against UK service providers, within the scope of their commitments in the context of the World Trade Organisation (WTO) General Agreement on Trade in Services (GATS).

19.6The Committee also sought further clarification from the Minister as to how the Government proposed to modify the Provision of Services Regulations 2009127 using the powers under the EU Withdrawal Act. In response,128 the Minister stated that these powers would be used to correct “technical deficiencies in the Provision of Services Regulations (PoSR) 2009”. The Minister did not give any indication of the policy approach that would be taken to these changes, stating only that “we seek to build a future economic partnership with the EU, which maintains current levels of services trade” and that further details of how the UK’s domestic services regime will operate will be set out by the Statutory Instruments.

19.7The Minister also updated the Committee regarding the progress of trilogue negotiations,129 indicating that the European Parliament’s amendments were generally more ambitious than those of the Member States and therefore in line with the UK’s objectives, given that the UK sought an ambitious approach in this area. The Minister stated that:

19.8On 20 November 2018 the Minister wrote further letter to the Committee131 to explain that, although the Government had intended to support the outcome of trilogue negotiations when he last wrote, progress in trilogues had subsequently stalled, for two reasons.

19.9First, the Visser Vastgoed ruling of the Court of Justice of the European Union (CJEU) (C-360/15 & C-31/16) clarified that the scope of the notification obligation of the Services Directive extends to urban land use / zoning plans, where those plans impose restrictions on service activities such as retail.132 The Minister reports that this has prompted concern from some Member States about the increase in the administrative and financial burden placed upon local authorities and led to suggestions that there should be an exemption included for spatial structure plans or urban land use plans at the local level. The Minister states that the UK position is that the compromise text should seek a balance between the need to avoid excessive administrative burden whilst ensuring that the exemption on urban land use plans is not used as a means of avoiding notification of measures that affect the ability to provide services.

19.10Secondly, the Minister states that concerns (which the UK does not share) have been expressed by some Member States regarding the legality of the decision power that allows the Commission to request Member States to refrain from adopting new measures which do not comply with the requirements of the Services Directive, and have been seeking not only to limit the Commission’s powers in respect of the additional measures that are brought in scope of the Notifications Directive, but also to limit its powers under the existing procedure contained within the Services Directive. The Minister states that the Council Legal Service have highlighted that the decision power in the amended notification procedure mirrors that of the decision power contained within the Services Directive, and considers that it does not contradict the principles of institutional balance and proportionality.

19.11Setting out the UK position in advance of the final trilogue meeting and anticipated subsequent adoption of the final text in Council, the Minister observes that the UK’s primary interest of securing a proportionality assessment for notifications has been retained within the compromise text, and that the UK is pleased that the scope of the requirement to make a notification is to be broadened. He indicates that, should the Austrian Presidency succeed in securing a balanced compromise on urban land use plans and is attempting to address Member State concerns regarding the Commission’s decision powers and achieve an agreement with the European Parliament which continues to meet the Government’s negotiating objectives, the Government would wish to vote in favour in any subsequent Council meeting.

19.12Officials have indicated that, if such a mandate is agreed, it is likely to be accepted by the European Parliament on 15 November, with the final text going to Council for adoption at one of the three remaining Council meetings in 2018: ECYS Council (26–27 November), Competition Council (29–30 November), or EPSCO council (6–7 December).

19.13We thank the Minister for his thorough updates regarding the General Approach agreed by Council and the progress of trilogue negotiations. The Government is content that the UK has secured its primary interests in the negotiations of securing a proportionality assessment for notifications and ensuring that the scope of the requirement to make a notification is to be broadened. On this basis, the Minister requests that the Committee clear the file from scrutiny, so that the Government can support the anticipated adoption of the final text in November/December 2018.

19.14The proposal is beneficial for the UK as having a more effective notification mechanism of this kind will make it more difficult for Member States to introduce protectionist domestic regulations that restrict the right of establishment and the freedom to provide services, where these are not non-discriminatory, proportionate and justified by public interest objectives. This will continue to benefit the UK when it ceases to be a Member State in those instances where individual Member States’ services regulation does not discriminate between EU and third country nationals. We have previously considered the wider implications of EU exit for service providers covered by the Services Directive133 and do not repeat that analysis here.

19.15In response to the Committee’s questions about how the Government will treat services covered by the Services Directive, the Minister states that the Government intends to preserve the Provision of Services Regulations 2009, and will use the powers conferred on it by the EU Withdrawal Act to correct “technical deficiencies” which will arise as a result of EU exit. The Minister does not clarify whether this means that the Government will remove the preferential arrangements which currently apply with respect to EEA providers, stating only that “we seek to build a future economic partnership with the EU, which maintains current levels of services trade” and that further details of how the UK’s domestic services regime will operate will be set out by the Statutory Instruments. We infer that, because the reciprocal provisions in the Services Directive which provide reciprocal preferential market access for EU Member States will no longer apply to the UK, even if they are retained in UK law, the Statutory Instrument will proposed to delete the preferential arrangements for EU providers from the Provision of Services Regulations. Further, we note that, because the UK has a less restrictive approach to regulating some service sectors than other EU Member States, it is probable that, in this scenario, EU service providers will retain a superior degree of access to UK services markets than vice-versa, and the UK’s WTO GATS commitments and MFN rules will limit the Government’s ability to address this imbalance by applying a more restrictive approach to EU service providers specifically.

19.16To provide greater clarity on this point, we request that the Minister provide us with further clarification on how the proposed statutory instrument will treat EU service providers, to be shared with the Committee no later than when the relevant statutory instrument is published (and in addition to the relevant explanatory memorandum). We request that this update specify the principal effects that the SI will have on access to the UK market, broken down by type of service provider, in the event of a non-negotiated exit. As this question does not relate to the substance of the legislative proposal under scrutiny we are content to pursue the issue through correspondence.

19.17We now clear the proposal from scrutiny in advance of its anticipated adoption at one of the forthcoming meetings of the Council of Ministers.

Full details of the documents:

Proposal for a Directive of the European Parliament and of the Council on the enforcement of the Directive 2006/123/EC on services in the internal market, laying down a notification procedure for authorisation schemes and requirements related to services, and amending Directive 2006/123/EC and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System: (38450), 5278/17 + ADDs 1–2, COM(17) 821.

Previous Committee Reports

Eleventh Report HC 301–xi (2017–19), chapter 1 (24 January 2018); Second Report HC 71-xxxi (2017–19) chapter 9 (22 November 2017); Thirty-Third Report HC 71–xxxi (2016–17), chapter 2 (1 March 2017).


121 Proposal for a Directive of the European Parliament and of the Council on the enforcement of the Directive 2006/123/EC on services in the internal market, laying down a notification procedure for authorisation schemes and requirements related to services COM(16) 821 final.

122 Directive (EC) 2006/123 of the European Parliament and of the Council of 12 December 2006 on services in the internal market.

123 Explanatory Memorandum from the Minister, BEIS, to the Chairman of the European Scrutiny Committee (30 January 2017).

124 Letter from the Minister, BEIS, to the Chairman of the European Scrutiny Committee (12 December 2017).

125 Eleventh Report HC 301–xi (2017—2019), chapter 1 (24 January 2018).

126 Written evidence to the House of Lords EU Internal Market Sub-Committee from the UK Trade Policy Observatory (TAS0085).

128 Letter from the Minister to the Chair of the European Scrutiny Committee (21 February 2018).

129 Letter from the Minister to the Chair of the European Scrutiny Committee (12 April 2018).

130 European Scrutiny Committee, Eleventh Report, chapter 1 (24th January 2018).

131 Letter from the Minister to the Chair of the European Scrutiny Committee (20 November 2018).

132 Judgement of the Court of Justice of the European Union, Visser Vastgoed (C-360/15 & C-31/16) (30 January 2018).

133 Eleventh Report HC 301–xi (2017—2019), chapter 1 (24 January 2018).




Published: 4 December 2018