In Focus: European Parliament adopts report on proposed Services Directive, February 2006

The freedom to provide services anywhere in the European Union (free movement of services) is enshrined in the Treaty of Rome, which entered into force almost 50 years ago. However, unlike the trade in goods, providing services across the EU's internal borders is in practice still hampered by a large number of barriers posed by differences in national regulations, effectively discriminating against businesses from other Member States in many ways.

Under the responsibility of the then European Commissioner for the Internal Market, Frits Bolkestein, the European Commission presented a proposal in early 2004 for a Directive to implement the free movement of services [COM(2004) 2], also referred to as the 'Bolkestein Directive'. The draft, and especially its use of the country-of-origin principle, provoked fierce criticism from some Member State Governments and many stakeholder groups. According to the country-of-origin principle providers of services are able to adhere to their own country's rules even if providing services in another Member State. Supporters of this approach say that the rule would boost employment in the EU's service sectors by making them more competitive. Opponents fear that it would undermine labour, safety, environment and other standards.

Against the backdrop of two years of a highly controversial debate across the EU the European Parliament eliminated the country-of-origin principle from the European Commission's proposal in its legislative opinion adopted on 16 February 2006. It was replaced with an article on 'freedom to provide services', a clause which would oblige a Member State to grant service providers 'free access to and free exercise of a service activity within its territory', simultaneously banning certain obstacles.

Parliament also narrowed the scope of the directive, exempting a list of fields including 'services of general interest' (e.g. compulsory education, social security), services which are already covered by specific legislation (e.g. financial services, transport and electronic communications) and a number of other sectors (e.g. healthcare, legal services, audiovisual services and tax services).

Further amendments were inserted to stress that the Directive would not alter workers' social rights and that the rights of workers posted to another Member State are already covered by the Posting of Workers Directive (96/71/EC).

As for the freedom of establishment, Member States would be given the right, according to the European Parliament's amendments, to make the authorisation of establishment subject to certain requirements, such as obligatory registration and the proof that an 'economic need or demand' exists for the service in question. Furthermore it would allow authorities to deny establishment of a business for a number of 'overriding reasons relating to the public interest'.

Charlie McCreevy, the present European Commissioner for Internal Market and Services, welcomed the European Parliament's vote, speaking of a 'solid basis for going forward'. Addressing the plenary before the vote he said that the Commission was planning to present a revised proposal on the basis of Parliament's amendments 'with a view to facilitating a Common Position as soon as possible, hopefully before end of April'.

Meeting on 13 March 2006 the Competitiveness Council took notice of the European Parliament's amendments and agreed to resume its deliberations once the Commission had presented its revised proposal.

Thomas Pritzkow
Deputy Editor, European Sources Online
February 2006

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European Commission: PreLex: COM(2004)2: Proposal for a Directive of the European Parliament and of the Council on Services in the Internal Market http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2002:002:FIN

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