Services in the Internal Market[fr][de] 

Article 49 of the 1957 Treaty establishing the European Community stipulates that "restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of member states who are established in a State of the Community other than that of the person for whom the services are intended." 

But in reality, this principle is limited by a number of barriers that prevent service providers from setting up shop in another member state or providing their services there. 

The EU's internal market programme of the 1990s, ensured that barriers to trade in goods was mostly freed up, but the services sector was largely left out so that service providers, such as architects and lawyers, wishing to offer their services outside their home country, still face huge obstacles in the form of national standards and legislation. 

Removing such obstacles would provide a major boost to the European economy as the services sector accounts for 70% of jobs and GDP in the Union. 

This was the aim of the draft 'Services Directive'  presented by the Commission on 13 January 2004, which was later dubbed the 'Bolkestein Directive' after the then Internal Market Commissioner Frits Bolkestein.

'Country of origin' principle versus 'Freedom to provide services' 

According to the Commission's 2004 draft, service providers would, temporarily, have been subject to the laws of their country of origin rather than those of the country where the service is provided. They could thus test a new market without having to register with the authorities. This principle was the most controversial part of the proposal as many of Europe's older member states worried that cheaper workers from the eastern EU countries would flock massively to the West, pulling down social standards. 

Instead, the article was renamed "freedom to provide services" and provides that member states must "ensure free access to and free exercise of a service activity within [their] territory" while allowing them to continue applying their own rules on conditions of employment, including those laid down through collective bargaining agreements. 

Concretely, this means that service providers will not need to be established in the territory in which they are seeking to work; to obtain an authorisation; to register with a professional body or association; or be banned from setting up a certain type of infrastructure which they may need to supply the services in question. Only requirements concerning public policy, public security, public health or the protection of the environment may be imposed on a service provider, so long as they are "non-discriminatory, necessary and proportional". 

Scope

Included:

• Services of general economic interest. Member states can define which services belong to this category. Typically, the definition includes postal service, water supply, electricity and waste treatment, but in fact, only a proportion of the provisions of the directive applies to these services. The provisions labeled as 'freedom to provide services' do not apply, whereas the rules relating to establishment in another Member State do. 
• Business services  such as management consultancy, certification and testing, facilities management (including office maintenance and security), advertising, recruiting, services of intellectual property rights  and services of commercial agents. 
• Services provided both to businesses and to consumers  like legal or fiscal advice, real estate  services, construction (including architects), distributive trades, the organisation of trade fairs, car rental and travel agencies. 
• Consumer services  like tourism, leisure services, sports centres and amusement parks.  

Excluded:

• Non-economic Services of general interest (SGI)
• Public and private healthcare  and social services,  such as social housing, childcare and family services
• Industries already covered by sector-specific legislation, such as financial services, electronic communications  and transport  (including port services)
• Audiovisual services
• Gambling and lotteries
• Professions and activities linked to the exercise of public authority (e.g. notaries) and tax services

Does not affect: 

• Labour law; 
• criminal law;
• posting of workers,  and;
• social services.   

The Commission will give assistance to member states  for the proper implementation  of the Services Directive, but these "analyses and orientations" will neither provide legally binding interpretation nor amend the provisions of the Services Directive.  The Commisison will also examine the need to consider additional further harmonisation within the field of services' sector.  

Internal Market Commissioner Charlie McCreevy stressed the directive's importance for citizens and businesses. He voiced his conviction that the principle of the freedom to provide services, which replaced the country-of-origin principle, will "enhance legal certainty". In a formal declaration to be added to the minutes of the Parliament debate, the commissioner stressed that the Services Directive does not affect either labour law or criminal law as established in the member states. He announced that the Commission will examine whether, for certain services, there is a need for additional harmonisation. 

For the Finnish Presidency, Trade and Industry Minister Mauri Pekkarinen praised the Parliament's vote in first reading as "a historic compromise", for which he thanked the House. He said that, as different as the text finally adopted was from the original Bolkestein Directive, "it still expressed the common goal of opening up the internal market for services".

Rapporteur Evelyne Gebhardt  called the Services Directive an example of "policies for the people", stressing that the parliament managed to remove the disputed Country of Origin principle and ensure consumers’ rights. She stressed, however, that "important points remain to be discussed", in particular in the fields of labour, social and penal law. On what she described as "a note of bitterness", Gebhardt recommended that the Council "change its practice. The Council can’t say we can’t agree to any amendments from Parliament, because we have found such a difficult compromise in Council." Gebhardt added: "We have found a difficult compromise in Parliament also!"

MEP Malcolm Harbour (EPP-ED, UK) called the vote "an important date for European citizens", adding: "This directive is about enhancing the standards of life of people throughout Europe." He recalled that the directive obliges member states to take 40 measures to remove barriers to the cross-border provision of services and to improve their procedures in 65 cases. 

MEP Bill Newton Dunn (ALDE) said: "The Services Directive will bring massive economic benefits to Europe. Estimates range from a 0.3% rise in GDP and a 0.7% increase in employment, predicted by Copenhagen Economics, to a 1.8% GDP increase and 2.5 million new jobs, foreseen by the European Commission. 

MEP Heide Rühle (Greens/EFA) said that the three major groups "have refused to hold a proper second-reading debate here". Citing issues such as Services of General Interest, Services of General Economic Issues, social services and collective agreements, she said that the Council did not fully enhance the Parliament's vote in first reading but brought instead "a new lack of legal clarity".

MEP Francis Wurtz, the chairman of the GUE/NGL Group, said: "We know about co-decision and conciliation in Parliament-Council relations. Today, with the services directive, capitulation can be added to this. What else can you call this barely credible decision taken by the majority groups to give in to the injunctions of the Council by accepting to withdraw all the amendments that were examined in the Internal Market Committee and to adopt, without any resistance, the Council's Common Position which is undeniably a set back on their own compromise of 16 February last? " 

Hans-Werner Müller,  Secretary General with UEAPME, the association of small and medium-sized businesses, said: "The European Parliament’s vote marks the end of almost three years of negotiations over a complex and controversial piece of legislation, and shows how far the European institutions can go when they are willing to listen to requests and comments from European stakeholders. However, efforts to open up the services market in Europe should continue. It is now up to Member States to abide to the compromise text they approved at the European Council, and ensure that it is promptly put into practice." 

ETUC, the European Trade Union Confederation, declared: "Today, the European Parliament (EP) has approved at second reading the modified Services Directive, burying for once and for all the initial Bolkestein proposal. The European Trade Union Confederation (ETUC) considers this outcome as a success-story for the European trade union movement, and an example of good cooperation with the European Parliament. However the ETUC will continue its fight for improvements in some areas." ETUC named in particular "campaigning for better European regulation of public services and pushing for urgent adoption of European regulation especially in sensitive sectors such as temporary agencies."