Commission accepts dilution of draft Services Directive

The draft Directive on Services in the Internal Market, originally put forward by the Commission in January 2004, is designed to cut the red tape that currently prevents businesses from offering their services across borders, or from opening premises in other Member States.

But plans to cover the majority of all services provided to consumers and businesses were dashed in January after MEPs drastically watered down the text of the proposals. The European Parliament also removed the controversial “country of origin” principle from the draft. This would have entitled European traders to work in any of the 25 Member States while complying only with the relevant laws of their home state.

The European Commission has now published an amended draft that takes these amendments into account. According to reports, the Commission took the view that it was better to have a watered down Directive than none at all.

Accordingly, the amended proposal does not affect labour law or deal with the posting of workers. It also excludes the following from the scope of the Directive: financial services, telecommunications, transport services, port services, healthcare, social services relating to social housing, childcare and support of families and persons in need, activities connected with the exercise of official authority, temporary work agencies, private security services, gambling and audiovisual services.

The country of origin principle has also been deleted from the text.

The main features of the draft include:

• Establishing a business anywhere in the EU: businesses will be able to complete all formalities online and through a single point of contact. Authorisation schemes will be clearer and more transparent, while "economic needs" tests (expensive procedures requiring businesses to prove to the authorities that they will not "destabilise" local competition) will no longer be allowed. This will speed up authorisation and reduce costs for businesses.
• Providing services across borders: the freedom to provide services anywhere in the EU will be underpinned. Member States must respect service providers' rights to provide a service in a Member State other than that in which they are established. They must receive free access to and enjoy free exercise of a service activity in any territory. However, Member States will be able to apply measures that are non-discriminatory, proportionate and necessary for reasons if these are necessary to protect public policy, public security, public health and the protection of the environment.
• Better consumer protection: businesses will be under an obligation to make key information available to consumers and will not be allowed to discriminate against a consumer on grounds of residence or nationality.
• Better supervision of businesses: Member States will have to step up administrative cooperation between them to ensure improved and effective supervision of businesses. This will be backed up at a practical level by an electronic information system enabling authorities to exchange information directly and efficiently.

Separately, the Commission is also publishing guidance to Member States on the operation of the Directive covering the posting of workers from one Member State to another. It will also come forward with a separate initiative in the area of health, covering issues such as patient mobility, and will publish Communications on social services and on services of general interest.

"This is a realistic, practical and workable solution. It has the potential to make a real economic difference at a critical time for Europe,” said Internal Market and Services Commissioner Charlie McCreevy.

The draft Directive now goes forward for consideration by the Council of Ministers. MEPs will also have a chance to vote on the amended proposals.