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Services Directive reaches final stage - EP position prevails

Free movement of services - 20-12-2006 - 13:33
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The services directive which aims to facilitate the provision of cross-border services by removing obstacles to the free movement of services in the internal market reached its final stage with the European Parliament approving the Council common position with minor changes. The final position adopted by Parliament broadly reflects the Parliament's first reading position achieving a balance between competition and social protection.

Member States have a maximum of three years to implement the provisions of the major directive.
 
Evelyne GEBHARDT (PES, DE) rapporteur said in the debate preceding the vote: "Social and consumer rights are protected and the main principles of the Services Directive have not been undermined."  Malcolm HARBOUR (EPP-ED, UK), shadow rapporteur, said: "This is an important day for European citizens, the Services Directive is about raising the standard of living of all citizens and about increasing economic growth and dynamism." 
 
At a press conference after the vote on the services directive, EP President Josep BORRELL hailed the vote as a "big success for Parliament as legislator". Mr Borrell underlined the importance of the decision taken by Parliament, which had been able "to come up with a largely consensual and balanced piece of legislation". 
 
Only three technical amendments on comitology tabled by the Internal Market Committee were adopted and these do not alter the substance of the directive.
 
Striking the balance between economic dynamism and workers' rights
 
MEPs voted in favour of this version of the draft directive primarily because they were the authors of the text. The directive now reflects fairly closely the consensus reached in February this year by the major political groups - at a time when many were predicting the imminent demise of what had originally been known as the "Bolkestein directive".  In fact, the compromise agreed within Parliament paved the way for an agreement between the three institutions. The Commission supported the Parliament text and the Council accepted it almost unchanged in its common position in July 2006.
 
Parliament's goal was to find a way of opening up the internal market in services to cross-border competition without eroding the European social model.  The directive is thus intended chiefly to boost growth and jobs but also to ensure that Member States do not lose control of the market in services of public interest and that workers' rights are protected.  This balance seems to have been achieved.
 
Red tape cut but safeguards guaranteed
 
The new legislation should make it much easier for service providers to set up shop and conduct business in another Member State. For example, a company wishing to manage a hotel or leisure centre in another state will no longer have to deal with several different authorities at national, regional and local level but with a single authority through a "one-stop shop" which will deal with all the formalities. 
 
Discriminatory bureaucratic restrictions will be banned. It will also be simpler than in the past to provide services temporarily in another EU country.  The directive clearly outlaws certain practices used until now by some states to restrict the provision of services.  For example, it will no longer be possible to require mountain guides to have a fixed residence in the territory of the country where they wish to do the job temporarily. 
 
However, even if they are only providing the service temporarily, service providers must comply with the labour and social legislation of the Member State where they work.  Any employees sent temporarily by a company to another state will have the same rights as their local counterparts.  This applies to rules on safety and hygiene, working hours and conditions and the minimum wage. The directive is completely neutral as regards labour law, as the Commission confirmed in a special declaration ahead of the vote.
 
Parliament's first reading position largely adopted
 
The crucial "country of origin principle" has been dropped from the key article. In its place MEPs have put a clause with the title "freedom to provide services".  Parliament also voted to limit the scope of the directive.  It now covers fewer services than the original text.  MEPs expanded the list of reasons allowing Member States to restrict the freedom of a service provider from another Member State to provide services on their territory. The text also now clearly says that the directive does not affect labour law in the Member States. 
 
In the key article of the text adopted by Parliament, devoted to the freedom to provide services, neither the country of origin nor the host country are now specifically mentioned.
 
The rule of the freedom to provide services replaces the country of origin principle.  It requires the Member States to respect the right of the service provider to supply services and to guarantee the provider "free access to and free exercise of a service activity within its territory".  This guarantee is underpinned by a ban on a number of obstacles to the free movement of services.  For example, in general it will no longer be possible to require a service provider to open an office in the country where he/she is temporarily providing a service nor to prevent him/her from setting up "certain infrastructure" in that country.  The provider must not be forced to register with a professional body nor be banned from using his normal equipment at work.  In addition, Member States must not apply "contractual arrangements between the provider and the recipient which prevent or restrict service provision by the self-employed". 
 
Thus, on the one hand, the text bans the Member States from erecting obstacles to the free movement of services.  But, at the same time, it stipulates grounds which would allow Member States to limit this freedom through national rules.  These grounds are public policy, public security, environmental protection and public health. 
 
Member States will also continue to apply their own rules on conditions of employment, including those laid down through collective bargaining agreements.  Nevertheless the requirements imposed on cross-border service providers by the Member States using the above justifications must comply with the principles of the Treaty: non-discrimination (for example on grounds of nationality), necessity (public policy, public security or protection of health or the environment) and proportionality (the requirements must be appropriate for achieving the objective).
 
In certain provisions of the text adopted by Parliament, the reference is made to "overriding reasons relating to the public interest" which allow the Member State to limit, on its territory, the freedom to provide services both by the way of permanent or temporary establishment.
 
Lastly, the text adopted by the Parliament opens up the prospect of harmonisation of national legislation on the provision of services five years after the directive enters into force.
 
New elements on the freedom of establishment for providers
 
In a new element, the Council  decided to include a provision whereby Member States may require additional insurance and financial guarantees from service providers – regardless of whether or not such a requirement exists in the State of establishment. A further addition includes a  new measure, whereby authorisations are deemed to have been granted in the absence of a response from the competent authorities. Member States will, however, be allowed to extend the deadline for the reply when this is justified by the complexity of the issue and provided that the applicant is duly informed of the extension and the reasons thereof. The Common Position also includes rules on “tacit rejection” which can be used by a Member State in cases of overriding reasons relating to the public interest. In introducing these measures the Council believes that it has struck the right balance between the needs of the economic operator on the one hand and the needs of the Member State on the other.
 
Changes have also been made to the evaluation process regarding “services of general interest” (SGEI) and the obligation to notify them. These modifications make it clear that the evaluation process should not obstruct the performance of tasks assigned to services of general economic interest. The Council has done this in a bid to address Parliamentary concerns that the evaluation process should not effect the evaluation of SGEI.
 
Services covered by the directive (not exclusive)
 
The services covered by this Directive concern a wide variety of ever-changing activities, including business services such as management consultancy, certification and testing; facilities management, including office maintenance; advertising; recruitment services; and the services of commercial agents. The services covered are also services provided both to businesses and to consumers, such as legal or fiscal advice; real estate services such as estate agencies; construction, including the services of architects; distributive trades; the organisation of trade fairs; car rental; and travel agencies. Consumer services are also covered, such as those in the field of tourism, including tour guides; leisure services, sports centres and amusement parks; and, to the extent that they are not excluded from the scope of application of the Directive, household support services, such as help for the elderly. Those activities may involve services requiring the proximity of provider and recipient, services requiring travel by the recipient or the provider and services which may be provided at a distance, including via the Internet.
 
Services not covered
 
The Directive does not apply to the following activities:
 
(a) non-economic services of general interest; (b) financial services, such as banking, credit, insurance and re-insurance, occupational or personal pensions, securities, investment funds, payment and investment advice, including the services listed in Annex I to Directive 2006/48/EC; (c) electronic communications services and networks, and associated facilities and services (d) services in the field of transport, including port services, falling within the scope of Title V of the Treaty; (e) services of temporary work agencies; (f) healthcare services whether or not they are provided via healthcare facilities, and regardless of the ways in which they are organised and financed at national level or whether they are public or private; (g) audiovisual services, including cinematographic services, whatever their mode of production, distribution and transmission, and radio broadcasting; (h) gambling activities which involve wagering a stake with pecuniary value in games of chance, including lotteries, gambling in casinos and betting transactions; (i) activities which are connected with the exercise of official authority as set out in Article 45 of the Treaty; (j) social services relating to social housing, childcare and support of families and persons permanently or temporarily in need which are provided by the State, by providers mandated by the State or by charities recognised as such by the State; (k) private security services; (l) services provided by notaries and bailiffs, who are appointed by an official act of government.
 
The directive does not apply to the field of taxation.
 
Labour law and social security unaffected
 
The Council common position says: "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."
 
Entry into force and transposition by Member States
 
This Directive enters into force on the day following that of its publication in the Official Journal of the European Union.  Member States must bring into force the laws, regulations and administrative provisions necessary to comply with this Directive at the latest three years after the entry into force of this Directive.  This would then result in the earliest possible implementation date of December 2009.
 
It is clear from the current text that there will be at least three major tasks:
 
Screening, which requires us to review all laws and practices and removing unjustified barriers to trade.  Constructing the Point of Single Contact – a website through which service providers can complete all necessary formalities in order to access markets. Preparing for communication and cooperation between Member States, known as Mutual assistance.
 
 
Debate preceding the vote - Wednesday 15 November 2006
 
In the debate in plenary on the Services Directive held earlier today prior to the vote,   MEPs from the largest political groups broadly welcomed the Council's decision to follow Parliament's position on this major directive which opens up and removes obstacles to the provision of cross-border services.
The rapporteur Evelyne GEBHARDT (PES, DE)  said that "we are now at the end of the debate, after more than two years of discussion".  She singled out Malcolm HARBOUR (UK), the shadow rapporteur from the EPP-ED group, for his excellent co-operation.  "The European Parliament was not divisive," she said. Ms Gebhardt stressed it was important to put people at the forefront of the debate on the economic questions.  She said: "Social and consumer rights are protected and the main principles of the Services Directive have not been undermined".  The directive sets out the principle of the freedom to provide services, and provides the need for Member States to establish a single point of contact.
 
Commissioner Charlie McCREEVY described the adoption of the services directive as "a milestone in the history of the European Parliament" because of the leading role the EP had played in finding a compromise.  
 
The result was a piece of legislation which would "cut red tape and provide legal certainty for service providers and consumers". It was "crucial for fostering entrepreneurship and promoting jobs", while at the same allowing Member States to "invoke essential requirements in certain clearly defined areas". 
 
The Commissioner then made a formal declaration clarifying a number of points, including the possible need for further harmonisation in future and the impact of the directive on labour law, on criminal law and on social services. 
 
For the Council presidency, Finland's trade and industry minister Mauri PEKKARINEN said "we are making internal market history" and he commended Parliament on its contribution to achieving a "historic compromise".  The directive was much changed from its original version but the essential goal remained intact and it would "open many doors".
 
Using similar words to Mr McCreevy's, he described it as "a milestone on the road to making the internal market work", the key point being that "it gives market operators legal certainty", although in fact, he stressed, "the directive marks not the end but the beginning of developing the internal market for services". 
 
After listening to the Commission, Ms GEBHARDT welcomed the Commission's clarifications. However, she pointed out that there had been some difficulties in the legislative decision-making process. Parliament's legislative rights, she said, should be fully respected in the future including conciliation rights.  The way this directive was agreed "should not be an example for the future", she said. On this occasion however, Ms Gebhardt said she was willing to accept that Parliament would not table significant amendments in second-reading as the Council had already taken on board around 90 per cent of Parliament's first reading position.  
 
Political Group speakers
 
Speaking for the EPP-ED group, Malcolm HARBOUR (UK) said: "This is an important day for European citizens, the Services Directive is about raising the standard of living of all citizens and about increasing economic growth and dynamism".  SMEs have expressed deep dissatisfaction with internal market rules and this has lead to the new Services Directive.  Mr Harbour thanked the Federation of Small Businesses in the UK and stated:  "If every SME in Europe would create one more job, the problem of unemployment in the EU would be solved".
 
Hannes SWOBODA (AT) for the PES group welcomed the broad co-operation in the Parliament and the agreement reached with the EPP-ED group.  Many European citizens in all Member States, he said, had high hopes for the Services Directive.  Nationalism and protectionism was not the answer.
 
Anneli JÄÄTTEENMÄKI (FI) speaking for the ALDE group also welcomed the excellent co-operation between the EP political groups.  She said that the growth in the European economy would result primarily from growth in the services sector.  She also stressed the importance of free movement of labour saying that it was equally as important as the new Services Directive, pointing out that only the UK, Ireland and Sweden had fully opened their labour market after the latest enlargement.
 
For the Greens/EFA, Heide RÜHLE (DE) said certain points of the directive were "not sufficiently clear", such as the definitions of different types of services. "These loopholes will have to be cleared up by the Court of Justice", she said.  The directive was "not a success for the European Parliament but a failure and we will suffer from it for a long time".
 
On behalf of his group, Francis WURTZ (GUE/NGL, FR) described the agreement on the directive as a "capitulation".  It excluded labour law and left too many "ambiguities and grey areas" which would have to be interpreted by the courts.
 
Jerzy BIELAN (UEN, PL) took the opposite view, complaining that the directive had not done enough to "do away with red tape".  He said it was "appalling that there is such fear of workers from other countries".
 
Jens-Peter BONDE, speaking in the name of the IND/DEM group described the legislation as "a judges' directive" as the rules were "extremely unclear" in their present form. His own political party in Denmark, the June Movement, was in favour of a single market but not in favour of "wage competition downwards on Danish workers".
 
Non-aligned French MEP Marianne LE PEN described the directive as "a victory for ultraliberalism", saying that dishonest service providers would exploit its weaknesses.  She was against the cross-border provision of services and would vote against the Gebhardt report.
 
British and Irish speakers
 
Arlene McCARTHY (PES, UK) expressed her immense pride at the work and commitment of both the rapporteur and the Members of the committee enabling Europe to finally give the go-ahead to open up the market in services.
 
Mrs McCarthy stated that the law has been controversial in cutting red tape and bureaucracy for business, but high quality standards and choice for consumers needs to be ensured while safeguarding employees' conditions and health and safety. Parliament listened to people's concerns and fears so that the freedom to provide services is not the freedom to undermine consumer or employee rights. Each Member State must now ensure free access to its territory and it must be equally clear that the right to maintain national rules, to protect public policy, public health, security or the environment must not mean that legitimate protection turns into negative protectionism. It must be justifiable, proportionate and non-discriminatory to other operators.
 
Looking to the future, Mrs McCarthy stated that the litmus test will be whether opening up the market for businesses can be done to give the benefits to consumers. We cannot, she said, shout about the benefits if we do not deliver.
 
As Chair of the Internal Market Committee, Mrs McCarthy stands ready to make good on the commitment to assist the Commission and the Council in making sure respect for the rights of consumers and employees and delivery for business across Europe.
 
Nigel FARAGE (IND-DEM, UK) questioned the result of joining the Common Market which led to the single market?  The answer, he said, has been regulation, cost and missed opportunities overseas. Just last month, he said, there was a poll of a thousand British businesses and 60% of them said that they want the UK to renegotiate their relationship with the European Union to being that of a simple free trade agreement and no more than that. He stated that people in the City of London are becoming more and more sceptical about the value we are getting from it all. He continued: "It is clear that British business now recognises that the cost of directive upon directive upon directive produced by institutions like this is now having a negative effect. The single market is not fit for the 21st century global economy and I believe that it will be British business that leads us out of it."
 
Ian HUDGHTON (Greens/EFA, UK) recognised that this compromise is something of an improvement on the Commission's original proposal. He also recognised that it is necessary and desirable to remove the remaining barriers to the cross-border provision of commercial services. However, he believes that, in the process, provide legal certainty should be provided to providers of essential public services and, more importantly, to provide reassurance to the many citizens who depend strongly upon locally-provided social services.
 
Verbal assurances given in good faith, however, are not what will be used by judges in the event of court challenge in the future. It is the text of a directive that will be important. Therefore, Mr Hudghton has signed a number of amendments, such as Amendment 31, which would make it absolutely clear that it would be Member States who would define services of general interest in their territory.
 
Eoin RYAN (UEN, IE) welcomed the Services Directive stating that it is one of the most important pieces of legislation to be adopted in this Parliament and a step in the right direction. He congratulated Commissioner McCreevy, Mrs Gebhardt and Mr Harbour for all their work.
 
The directive, he said, will make Europe more competitive and thereby create jobs and give better value to its citizens. People, he said, are saying that we are pulling the wool over the eyes of our citizens. On the contrary: if we do not make changes in our economy, like we are doing today, then we really will be pulling the wool over the eyes of our citizens.
 
Whether we like it or not, Mr Ryan continued, it is a fact that we are living in a globalised world and Europe must become more competitive if it is going to compete on a global scale. About 50% of all world trade now is in emerging economies and if we want to compete with them and hold on to the European social model, we need a vibrant economy to invest in the sort of services that we feel are important for the citizens of Europe. This Directive is a step in the right direction; it is the sort of reform we must make at a European level if we want to hold on to the values that we believe are right for our citizens.
 
James ALLISTER (NA, UK) stated that the abandonment of the country of origin principle and the reduction in the services covered, particularly the omission of social services and non-economic services, makes this directive a more palatable proposition than when it was last debated. However, he retained some concerns, not least the rush to timetable harmonisation of national legislation on the provision of services, with its inevitable avalanche of regulation and the fear that insecure jobs will result from foreign service providers paying low minimum wages, thus creating worse conditions in host nations, particularly if they are allowed to have temporary status and then escape national host controls.
 
On one specific point, Mr Allister welcomed the fact that gambling activities will be outside the ambit of this directive. Their inclusion would have fed the growth of that destructive industry and added to the misery and social instability which it so often spawns.
 
Proinsias DE ROSSA (PES, IE) also congratulated Mrs Gebhardt on her enormous tenacity and political wisdom. Others have obviously played a key role but she, he said, has carried the greatest burden.
 
This outcome, he said, is a success, given all the circumstances for citizens as workers, consumers and service providers and demonstrates that it is possible for effective and fair outcomes to be achieved between 25 Member States, despite all the differences. Those, he said, who ignore that diversity continue to reject this compromise, particularly the kamikaze GUE/NGL Group, which ignores the fact that the principal demand it has been making – the deletion of the country of origin principle – has, in fact, been achieved.
 
The Council, he said, must now stop playing games with labour rights in Europe. Last week's farce on the Working Time Directive was shameful. "Give us a Working Time Directive that is workable and working and an effective Posting of Workers Directive. Unless the Council does that, it will continue to preside over citizens who fear for the quality of their working lives and the race to the bottom, and those fears are eating at the heart of Europe."
 
Simon COVENEY (EPP-ED, IE) stated that the process to reach agreement on the Services Directive has not been an easy one. While no political group in Parliament has got exactly what they want, we have, he said, managed to reach a workable compromise acceptable to the vast majority of Members. Most importantly, this Parliament is sending a strong signal today to the Commission and the Council to move forward and make this directive a reality as soon as is practically possible.
 
The implementation of the Services Directive will give the sluggish EU economy a much needed kick-start at this stage. The directive aims to remove many of the barriers to cross-border trade and services and the reduce the red tape that businesses, especially small- to medium-sized enterprises encounter when they try to expand across borders into new EU markets.
 
Europe's small and medium-sized enterprises, with the capacity to grow, have been particularly disadvantaged by the costs attached to administration and legal requirements in the past. They can look forward to the benefits of this directive, which dramatically reduces that burden for future cross-border trade.
 
This directive, he continued, is of huge importance to Ireland because it is a net exporter or goods and services. Irish companies and service providers will now, he hoped, take advantage of the simplified environment for providing services across the European Union. The Directive will facilitate growth, job creation and increased economic activity in the services sector across the EU, while ensuring social and worker protection.
 
Commission response to the debate
 
Responding to the debate, Commissioner McCREEVY said the Commission could accept the three amendments on comitology but could support none of the others.  Some MEPs had voiced concern about the legal certainty provided by the directive, saying that much would have to be clarified by the Court of Justice.  He did not share this concern and pointed out that since no Member State had voted against the common position there was no reason why they would challenge the directive. 
 
Now it was time to focus on implementing the legislation.  "The Commission will start now", he said but the Member States, who have three years to transpose it, should also start soon, he said, "because their economies need this directive".
 
REF.: 20061113IPR12540