The Services Directive aims to further the Single Market for services, which is one of the cornerstones of European Integration (Articles 3(1)(a), articles 49 and 56 of the Treaty on the Functioning of the European Union (FEU)). In view of the principles of freedom of establishment and freedom to provide services, enshrined respectively in Articles 49 and 56 of the FEU Treaty, the Services Directive intends to help realise the full potential of the services sector, by removing unjustified or disproportionate legal and administrative barriers to the setting-up of a business by a service provider or to its cross-border activities in the EU. It also aims at dismantling barriers affecting service recipients (whether consumers or businesses) wanting to have access to services from other Member States, as well as enhancing recipients' rights and the quality of services.
The Services Directive aims to maximise the advantages of the Single Market for services for the benefit of consumers and businesses. It obliges Member States to cut red-tape, increase transparency for undertakings and service recipients, and eliminate unjustified or disproportionate requirements. This is essential for unleashing the potential of the services sector in the EU.
The Services Directive will bring in particular the following advantages:
According to a study by the Netherlands Bureau for Economic Policy Analysis of November 2007, economic gains from the implementation of the Services Directive range between 60 and 140 billion Euros, representing a growth potential of 0.6-1.5% of GDP.
Because there is a need to unleash the potential of the EU Single Market for services and to develop it further.
Services are of great importance to the EU economy. They account for about 70% of economic activity in the 27 EU Member States. They are the foremost source of foreign direct investment (about 57% in 2008) and, crucially, services are today the source of all net job creation.
However, the European Single Market for services is still not fully developed and integrated. Tellingly, only about 20% of the services provided in the EU have a cross-border dimension. The foreclosure of the EU services market along national lines is accompanied by and linked to a reduced productivity. Whereas the Euro area has achieved productivity levels in the manufacturing sector comparable with those of the US, the productivity gap between the Euro area and the US in the services sector is about 30%.
Despite the principles of the freedom of establishment and the freedom to provide services laid down in Articles 49 and 56 of the FEU Treaty, numerous and varied barriers to these principles persist in all Member States. This is the case in spite of the recurrent infringement proceedings brought by the Commission and of national litigation by private parties challenging national barriers. This piecemeal approach based on single infringement proceedings and national cases has indeed proved insufficient to tackle all the persisting barriers. Moreover, it was deemed appropriate to develop the European Single Market for Services beyond what could be achieved by solely applying Articles 49 and 65 of the FEU Treaty, by marking a new and more developed stage of integration in the services sector in the EU. In order to cut red tape and to free the untapped potential of the services sector in the EU, the Services Directive provides the basis for a sweeping and comprehensive reform of national legislation and administrative practice.
Articles 53(2) and 62 of the TFEU are the legal basis for the Services Directive. Articles 53(1) and 62 provide that the EC legislator shall issue directives for the coordination of provisions laid down by law, regulation or administrative action in Member States concerning the taking-up and pursuit of activities as self-employed persons and their free provision of services. The Services Directive constitutes the "translation" into administrative and legislative detail of Articles 49 and 56 FEU Treaty which lay down respectively the principles of freedom of establishment and of freedom to provide services. The Services Directive sets up a comprehensive system which builds not only upon the existing Treaty fundamental freedoms but also the important body of Internal Market legislation applicable to the services sector. At the same time, in certain regards it further develops the principles set out in Articles 49 and 56 FEU Treaty.
The Services Directive does not limit itself to clarifying and systematizing the case law of the Court of Justice of the European Union about freedom of establishment and freedom to provide services, which as such would already have had added value. It also provides for a sweeping modernization reform of legislation and administration which the Member States are obliged to implement. This reform will in particular facilitate the life of service providers, notably SMEs, who want to set up new or expand existing businesses or provide their services in other Member States on a temporary basis. The most important aspects of this reform are as follows:
At the same time, the Services Directive also tackles the problem of "rogue" traders in the Single Market, by setting up:
Finally, the Services Directive improves the rights of service recipients, by providing inter alia for:
The Services Directive applies to services, defined as self-employed economic activities normally provided for remuneration. Thus, it applies neither to salaried workers, nor to the industrial production of goods, nor to activities which are directly connected with the exercise of official authority as set out in Article 51 FEU Treaty (e.g. police, administration of justice).
The Services Directive applies to all activities and sectors that are not expressly excluded from its scope of application. Relevant examples of activities and sectors covered by the Services Directive include:
The Services Directive does not apply to:
These exclusions do not of course make these sectors and services immune to the application of Articles 49 and 56 of the FEU Treaty. Thus, as long as they are services for the purposes of Article 57 FEU Treaty, they may be subject to the rules on freedom of establishment and freedom to provide services under Articles 49 and 56 FEU Treaty, as the case may be.
The Services Directive builds upon and applies in parallel to other secondary legislation that is relevant for the services sector. Since the Services Directive was drafted taking into account other Single Market legislation, conflicts between the former and the latter are unlikely to occur. However, in case a conflict arises between the Services Directive and a provision of another Community act governing specific aspects of access to or exercise of a service activity in specific sectors or for specific professions, the provision of the other Community act shall prevail and shall apply to those specific aspects.
The distinction between establishment and free provision of services is important because certain parts of the Services Directive apply only to one or the other.
The line between these two concepts must be drawn in view of all factual and legal circumstances. The temporary nature of the activity in question has to be determined not only in light of the duration of the provision of the service, but also in light of its regularity, periodicity or continuity. The fact that the provision of services is temporary does not mean that the provider of services within the meaning of the Treaty may not equip himself with some form of infrastructure in the host Member State (including an office, chambers or consulting rooms) in so far as such infrastructure is necessary for the purpose of performing the services in question.
Certain sections of the Services Directive apply only to cross-border situations (i.e. situations involving more than one Member State). Indeed, the cross-border element is a condition required under these sections. For example, the "freedom to provide services" clause under Article 16 Services Directive applies only when a service provider established in a Member State provides its services in a different Member State.
On the other hand, other provisions of the Services Directive apply not only to cross-border but also to domestic situations. For example, the entire Chapter II (Administrative Simplification) applies equally to foreign and domestic service providers wishing to set up a new or additional business in a Member State.
Under the Services Directive, national procedures and formalities applicable to access to or exercise of a service activity must be examined by Member States and, where not sufficiently simple, must be simplified. The program of administrative simplification and modernization by the Services Directive consists in particular of the following:
When they need to get information or to complete procedures relating to access to or exercise of a service activity, providers, instead of having to contact a whole series of administrations and public bodies, will only need to turn to one interlocutor, the so-called "Point of Single Contact". The Points of Single Contact are "one-stop shops" that fulfil essentially the two following functions: information dissemination and procedure management/processing. They must in particular:
The Points of Single Contact serve as an interface between the service providers and the competent authorities. Service providers retain the right to contact directly the competent authorities, should they wish to (in other words, they are not obliged to complete administrative formalities through the Points of Single Contact).
It is inherent in the very concept of Points of Single Contact that they provide an efficient and electronic "service" to the benefits of domestic as well as foreign service providers. This entails, in practice, that Points of Single Contact should be organised in a user-friendly and clear way, and provide reliable and up-to-date information. It also entails that the forms to be filled out are the correct ones, that the relevant information and forms are available in a language that is intelligible by the users, and that there is a hotline or help-desk in case of problems or questions. It finally comprises the setting up of electronic procedures.
There may be more than one Point of Single Contact in each Member State, but each of them must be a one-stop-shop for service providers.
In addition to streamlining authorisation procedures, the Services Directive, by relying on the case law of the Court of Justice of the European Union on freedom of establishment, lays down specific and detailed rules in the light of which Member States must revise their requirements regarding the establishment of a service provider:
To understand the freedom to provide services in the Services Directive it is essential to distinguish between.
The Services Directive lays down a "freedom to provide services" clause (Article 16(1)), whereby "Member States shall respect the right of providers to provide services in a Member State other than that in which they are established." This is not a complete novelty to the extent that the freedom to provide services is established in Article 56 of the FEU Treaty, which has direct effect and the scope of which has been developed in the extensive case law of the Court of Justice of the European Union.
The Services Directive, by building on the case law of the Court of Justice of the European Union, makes clear that certain restrictions that are particularly detrimental to the freedom to provide services should in principle not be imposed by the host Member State (e.g. obligation on the provider to have an establishment in the territory of the host Member State – see list in Article 16(2) of the Services Directive).
Moreover and most importantly, the Services Directive limits the possibility for the host Member State to impose requirements on incoming service providers: Article 16 of the Services Directive provides that Member States shall not make access to or exercise of a service activity in their territory subject to compliance with any requirement unless it is justified for reasons of: 1) public policy, 2) public security, 3) public health or 4) the protection of the environment.
The Services Directive also makes clear that requirements which may potentially be justified by one of the four above mentioned overriding reasons relating to the public interest may in any case be imposed only if they are non-discriminatory as regards nationality or place of establishment and proportionate (i.e. they are suitable to attain the public interest pursued, do not go beyond what is necessary and cannot be replaced by less restrictive means).
The provisions in the Services Directive about freedom to provide services do not apply to a number of services/matters expressly excluded, listed in Article 17 Services Directive.
The Services Directive introduces a system of administrative cooperation enabling the competent authorities of different Member States to more effectively supervise service providers across the EU. This will make it more difficult for "rogue" traders to avoid supervision or to circumvent applicable national rules. At the same time, administrative cooperation should help avoid the multiplication of checks on service providers.
Under the Services Directive, Member States will have to, inter alia:
All this will be done through an electronic system called "The Internal Market Information System" (IMI), which allows to quickly find the competent authorities responsible in other Member States and facilitates the rapid, direct, structured and multilingual exchange of information among competent authorities of different Member States through electronic means.
National public authorities will thus be able to have trust and confidence in each other through a clear set of precise rules regarding administrative co-operation, information exchange and assistance in the European Single Market, so that consumers or the public interests concerned are properly and effectively protected in the case of cross-border service activities in the EU.
The Services Directive neither leads to social dumping nor facilitates it. To start with, the core rules relating to labour conditions such as rules on minimum wages, maximum work and minimum rest periods, annual leave, health, safety and hygiene at work, protection of women who have recently given birth and of young people, are governed by the law of the host Member State in the case of salaried workers posted from another Member State, as defined in Article 3(1) of Directive 96/71 of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services. Thus, the undertaking posting workers must comply with the host Member State's rules about the terms and conditions of employment concerning the matters referred to above.
Moreover, important aspects of social law have been the object of EC legislation (for ex., the directives about the organisation of working time; protection of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses; protection of employees in the event of the insolvency of their employer).
Under Article 1(6) of the Services Directive, this Directive does not affect labour law, that is any legal or contractual provision concerning employment conditions, working conditions, including health and safety at work and the relationship between employers and workers, which Member States apply in accordance with national law which respects Community law. Equally, this Directive does not affect the social security legislation of the Member States.
Needless to say, when applying their legislation, including in the social field, Member States must comply with the FEU Treaty (in particular Articles 49 and 56 FEU Treaty) as well as EC secondary legislation (for ex., Directive 96/71). This means inter alia that, as the case law of the Court of Justice of the European Union indicates, national labour law may not discriminate on the basis of nationality/residence or disproportionately restrict the freedom of establishment or to provide services enshrined respectively in Articles 49 or 56 of the FEU Treaty.
The Services Directive provides for a number of advantageous novelties for service recipients, including in particular consumers, such as:
The Services Directive provides for the removal of total bans on commercial communications by the regulated professions. At the same time, in the interest of recipients of services, such commercial communications must respect professional rules aiming to ensure the independence, dignity and integrity of the profession and professional secrecy. In any event, national rules in this field must comply with EC law, in particular the principle of proportionality. This means inter alia that, where they limit or regulate commercial communications, rules aiming at ensuring the independence, dignity and integrity of a regulated profession must not go beyond what is necessary.
Under the Services Directive, service providers shall not be made subject to prohibitions of multidisciplinary activities unless:
in so far as is justified in order to ensure their independence and impartiality.
28 December 2009 was the deadline for implementation of the Services Directive by the Member States. By this date, Member States (central, regional or municipal or other public institutions, as the case may be) had to adopt and put in place all legislative, administrative and practical measures to fully comply with all the obligations ensuing from the Services Directive.
The implementation of the Services Directive required Member States to take both legal and practical measures. As to legal measures, it was essential that the national legislation effectively ensures that the directive is fully applied, that the legal position under national law is sufficiently precise and clear and that the content of the rights and obligations ensuing from the directive is clear both for individuals and for public administration. As to practical measures (for example, setting up Points of Single Contact), Member States had to deliver concrete results.
Member States were also subject to two sets of obligations prior to the expiry of the transposition deadline. First, they were not allowed to introduce any of the requirements related to the establishment of service providers that are listed in Article 15 of the Services Directive, unless it was non-discriminatory, necessary and proportionate and it is notified to the Commission. Second, Member States were not allowed to take any measure liable to seriously compromise the achievement of the results set out by the Services Directive.
The Court of Justice of the European Union has already issued some important first judgments on the interpretation of the Services Directive. The judgments concern the exclusion of 'healthcare services' and 'social services' from the scope of application of the Directive; the scope of the requirement for Member States to remove all total prohibitions on commercial communications by regulated professions; and the application of the freedom to provide services to services provided by collective management societies:
In the Case C-57/12 Femarbel, after recalling at the outset the principle that the Directive shall apply to all services and sectors that are not expressly excluded from its scope of application, the Court of Justice dealt with the exceptions of 'healthcare services' and 'social services', referred to in Article 2(2)(f) and Article 2(2)(j).
In the Case C-119/09 Société fiduciaire nationale d'expertise comptable, the Court of Justice interpreted the obligation to remove all total prohibitions on commercial communications by the regulated professions under Article 24.
It stated that the Article must be interpreted as precluding national legislation which totally prohibits the members of a regulated profession, such as the profession of qualified accountant, from engaging in canvassing.
In the Case C-351/12 OSA, the Court of Justice stated that Article 17(11) must be interpreted as excluding the service provided by collective management societies to the users of copyright protected work from the scope of Article 16.
The 2012 Commission study on the impact of the Services Directive has shown that the measures adopted by Member States to implement the Services Directive are bringing an additional 0.8% of EU GDP over time, with the majority of the effect materializing during the 5-10 years following implementation. Service providers however still face obstacles when they want to operate cross-border. Economic analysis has shown that if Member States were to abolish almost all the remaining restrictions, additional gains of up to 1.8% of GDP could be achieved leading to a total economic gain of about 2.6% of GDP.