Transparency Directive adopted

The Directive on a transparency mechanism for Information Society services was adopted by the Council of Ministers on 29 June 1998 and by the European Parliament on 14 May 1998. The Directive, due to be implemented in one year's time, will require draft national rules that concern Information Society services to be notified to the Commission. After notification there will be an initial `standstill' period of 3 months to allow the Commission, Member States and interested parties to comment on the draft rules and if necessary propose amendments. The Directive's key aim is to ensure that the Single Market is not fragmented and that no new regulatory barriers appear. The Commission is now preparing a users guide concerning the scope of application and the functioning of the Directive.

Adoption of the Directive, identified as a priority in the 1997 Single Market Action Plan, brings a true frontier-free market for Information Society services in Europe a lot closer. It allows Member States to legislate at the national level in accordance with their own traditions and priorities, without the imposition of harmonised rules at the EU level. Member States will be encouraged by the notification procedure to exchange ideas, thereby reducing the risk of countries adopting diverging measures and avoiding inconsistencies which could otherwise undermine the effectiveness of national measures.

The new Directive will extend the scope of Directive 83/189 (which covers national rules affecting the free movement of goods) to include rules on Information Society services. The instrument will require that, before they are definitively adopted, all draft national rules directly affecting these services must be notified to the Commission and reviewed with the other Member States to ensure that they are compatible with the free movement of services and the country of origin control principle (i.e. the one stop regulatory shop whereby once a service offered in a Member State respects the laws of that Member State it can benefit from the legal certainty of circulating freely throughout the European Union irrespective of the laws of the other Member States). According to the case law of the Court of Justice (ruling of 30.4.96 in case C-194/94), if a Member State failed to notify such a national rule, the rule would not be binding on economic operators.

The Commission will be responsible for distributing new draft rules to all Member States' authorities, so that they can express their opinion within three months. If the Commission or a Member State doubts the compatibility of the draft rules with the freedom of establishment or free movement of services, this "standstill" period will be extended for one additional month.

Such a system of structured dialogue between national administrations and the Commission, founded on Single Market rules, has the advantage of making it possible to anticipate any problems arising from the development of on-line services and to provide immediate solutions. As the system will not be confidential, service providers themselves will have access to information about new draft rules and so be able to contribute to the drafting process in the light of their experience on the ground.

In accordance with the European Parliament's suggestion, the Commission will take particular care that economic operators are regularly and effectively involved in the future functioning of the Directive, notably by using the Internet and electronic mail.

The Directive recognises that Information Society services are neither broadcasting nor telecommunications services and so should not be subsumed into existing inappropriate telecommunications or broadcasting regulations. The instrument defines "Information Society services" as all existing or new types of services that will be provided at a distance, by electronic means and on the individualised request of a service receiver. This definition of "service" covers, for example, on-line professional services (e.g. solicitors, estate agents, stockbrokers, insurance, health care, travel agents), interactive entertainment (e.g. video on demand, on-line video-games, virtual visits to museums), on-line information (e.g. electronic libraries and newspapers, financial information), virtual shopping malls and distance learning services.

On the other hand, this definition does not cover (because they are either not offered at a distance, or not offered via electronic means, or not supplied on individual demand) television broadcasting services (including near video on demand services), radio broadcasting services, teletext, non-electronic direct marketing services (for example, mail order catalogues), automatic bank tellers, electronic games such as found in amusement arcades and voice telephony services (including via GSM).

Financial services offered at a distance or by electronic means will fall within the Directive's scope. However, draft laws concerning subjects already harmonised by EU legislation will not have to be notified. In the specific case of national rules on regulated markets (notably stock exchanges), legislation will not have to be notified prior to adoption but afterwards, so that there will not be a standstill period.

By ensuring that the Single Market framework is effectively applied, the mechanism offers consumers efficient protection. This is because the country of origin principle guarantees effective redress against fraudulent or misleading Information Society services by ensuring that complaints are dealt by the regulatory authorities and courts with the most effective power to sanction offenders i.e. the ones under whose jurisdiction the offending supplier falls.

The Commission will be seeking cooperate with its international partners to develop a complementary system of information and dialogue on future draft laws concerning on-line services at the international level, through a legal instrument complementary to this Transparency Directive.