At present around 50% of all economic activity in the EU takes the form of services that will be affected by the proposals. It is hoped that by encouraging cross-border services the proposed Directive would boost competition, lower prices and increase innovation within the EU. These are being stifled by the current regulations dealing with services, according to a Commission Report on the State of the Internal Market in Services, published in July 2002.
The proposals take the form of a general legal framework that aims to remove as many barriers to freedom of services as possible within a short timescale. A sector by sector approach has been ruled out, with the Commission concerned that this would take far too long, and would be too restrictive.
Scope
The Directive is intended to cover all services provided to consumers and businesses except free services provided directly by public authorities, or services that are already covered by specific EU law - such as financial services, telecommunications and transport.
Accordingly, retail, construction, leisure, employment, marketing and security services are covered, as well as those services provided by regulated professions – such as medicine and legal and fiscal advice, to which access is limited to people with specific professional qualifications.
Services are covered whether they are provided in person or at a distance, including via the internet; whether the service provider is located temporarily or permanently in the Member State; and whether the customer travels to the State in which the service is to be provided (to a hotel, or theme park, for example).
Making it easier to establish a service business in another Member State
Under the proposed Directive, Member States would commit themselves to removing a large number of unnecessary barriers, which prevent or discourage operators from other Member States from setting up on their territory. These barriers include:
discriminatory requirements based on nationality or on the place of a registered office;
economic needs tests; and
complex, lengthy and costly authorisation and licensing procedures.
On a practical level the Directive seeks to simplify the process of providing a service in another Member State by limiting the number of documents required, and by establishing electronic procedures.
The Directive aims to ensure that businesses can obtain all necessary information and complete all formalities through single points of contact instead of having to deal with a multitude of different authorities. It also proposes that national authorities would have to respond to enquiries or applications for authorisations within the shortest possible deadlines.
The proposed Directive would also set up a major screening exercise by the Member States, together with the Commission, to identify and eliminate other restrictions to establishment, where the Commission has serious doubts as to their compatibility with EU law. These include quotas or other restrictions on the number of companies allowed to operate.
Making it easier to provide services across borders
The Commission is proposing to boost cross-border provision of services in four main ways:
The implementation of the country of origin principle, whereby once a service provider is operating legally in one Member State, it can market its services in others without having to comply with further rules in those "host" Member States.
By ensuring that national authorities exchange information and work much more closely together, thus replacing the current duplication of national regulations and controls with a much more coherent and business-friendly system. This would increase Member States' confidence that service providers from elsewhere are adequately supervised in their home country. A clear division of supervisory roles between the Member State of origin and the host Member State would be necessary, together with easier access for national authorities to each other's information on services and providers.
The cutting of red tape linked to the "posting" of workers in other words, where a company in one Member State sends workers temporarily to another Member State to provide a service. Service providers would, however, continue to have to respect the law of the destination country in terms of minimum wages and other working conditions, in compliance with an earlier Directive.
The establishment of basic common rules applicable throughout the EU, in order to increase trust and confidence in cross-border services. This would require, for example:
- Appropriate professional indemnity insurance for services giving rise to particular risks.
- European codes of conduct for regulated professions.
- For certain sensitive areas - cash in transit, gambling services and access to the activity of judicial recovery of debts, the proposed Directive would provide for the possible development of specific rules, by 2010 (or possibly beyond in the case of gambling services).
Rights of service users
Consumers and business users of services have, in the Internal Market, the right to use services offered in Member States other than their own. The proposed Directive would therefore make clear that those rights prevent Member States from imposing restrictions such as requiring authorisation to use services (for example architects or builders) from other Member States, or discriminatory tax rules making services from other EU countries more costly.
The proposed Directive would also clarify the rights of patients by setting out, based on European Court of Justice case law, the conditions under which national social security systems must reimburse the costs of medical care received in other Member States. A comprehensive strategy for addressing patient mobility and healthcare developments in Europe is due to be outlined in a Communication to be issued by the Commission in Spring 2004.
According to Internal Market Commissioner Frits Bolkestein:
"This Directive is potentially the biggest boost to the Internal Market since its launch in 1993. We need to set our service businesses free, so that they can grow and create the sustainable jobs Europe needs. We cannot expect European businesses to set the global competitiveness standard or to give their customers the quality and choice they deserve while they still have their hands tied behind their backs by national red tape."
He continued:
"The proposed Directive would involve Member States jointly screening and modernising their regulatory regimes so that a spirit of cooperation and mutual trust is built. That is the best way to ensure that service providers no longer have to jump over unnecessary regulatory hurdles. So we need it adopted, written into national law and implemented as quickly as possible."
The Advertising Association (AA) welcomed the new proposals. According to Andrew Brown, Director-General of the AA:
"The Directive being proposed should serve to cut through a swathe of bureaucratic red tape, which currently hinders the ability of the UK advertising industry and those of other Member States to operate across each other's borders."
The Commission proposes an implementation deadline of 2007. The proposal now goes forward for approval by the European Parliament and the Council of Ministers.