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Brussels, 4 April 2006

Frequently Asked Questions (FAQs) on the Commission's amended proposal for a Services Directive

Why has the Commission come forward with an amended proposal for a Services Directive?

The Commission adopted its original proposal for a Services Directive in January 2004. In accordance with the EU's "co-decision procedure" for passing legislation, the European Parliament adopted a report on this proposal in its first reading vote on 16 February 2006. Following the Parliament's report, it is normal institutional procedure for the Commission to come forward with an amended proposal. . The amended proposal will now be considered by the Member States of the EU in the framework of the Council of Ministers with a view to reaching a Common Position.

What is included in the amended proposal's scope of application?

The services proposal covers a wide range of different services provided to consumers and to businesses. This includes a variety of ever-changing activities, including business services such as management consultancy; certification and testing; facilities management, including office maintenance; advertising; and the services of commercial agents. It also covers 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. It also covers consumer services, such as those in the field of tourism, including tour guides; leisure services; sports centres and amusement parks. 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.

Financial services, telecommunications, transport and port services are excluded from the proposal.

The Commission's amended proposal does not affect labour law and the list of excluded sectors has now been extended to cover: temporary work agencies; healthcare services; audiovisual services; gambling; activities connected with the exercise of official authority; social services relating to social housing, childcare and support of families and persons in need; private security services; and it does not apply to taxation.

Those services, such as public administration or public education, which are of a non-economic nature, i.e. provided by the State in fulfilment of its public mission without any economic consideration are not covered. This has been further clarified in the amended proposal.

How will the amended proposal help service providers to establish in other Member States?

It will be easier to establish a business in the EU. Service providers will be able to obtain information and complete administrative formalities through single points of contact in any MS, thus simplifying, accelerating and reducing the cost of the authorisation process and obviating the need to deal with different levels of authorities. It will also be possible to fulfil these procedures electronically so that businesses save time, and avoid incurring considerable costs, in having to make visits in person - sometimes several times - in order to complete necessary formalities with the relevant authorities.

Authorisation schemes for the creation of establishments will be screened to assess whether they are necessary, justified, proportionate and non-discriminatory in the light of the European Court of Justice's case law, and where appropriate removed or replaced by less restrictive means such as simple notifications. Businesses will gain better access to markets and will also be given criteria for the granting of an authorisation that are clear, transparent, objective and non-discriminatory. The outcome of applications will be speedier and more predictable.

Member States would also have to abolish a number of restrictions on establishment, such as nationality requirements or "economic needs tests" (which require businesses to commission market studies, often costing hundreds of thousands of Euros, to prove to the authorities that they will not "destabilise" local competition). A list of other restrictions, such as requirements limiting the number of outlets per head of population or fixed tariffs, would undergo a transparent process of mutual evaluation. This should spread best practice of better regulation among Member States and is intended to result in a modernisation of the regulatory framework throughout Europe while at the same time safeguarding the protection of general interest objectives.

In what way does the amended proposal facilitate the cross-border provision of services?

The amended proposal will make life easier for companies providing cross-border services through the "freedom to provide services" clause. This requires Member States to respect service providers' rights to provide a service in a Member State other than where they are established and to ensure that they receive free access to and free exercise of a service activity within its territory. Member States are prohibited from imposing discriminatory or disproportionate restrictions upon incoming service providers. However, Member States may impose requirements upon the incoming service provider if necessary for reasons of public policy, public security, the protection of public health and the environment. Furthermore, in conformity with EU law, Member States may apply their rules on employment conditions, including those laid down in collective agreements. There are also a number of specific derogations from the freedom to provide services, such as for the postal, electricity, water, waste treatment and gas sectors.

There is also a list of specific requirements which Member States may no longer impose to restrict the incoming services, such as the requirement to be established in a Member State in order to be allowed to provide services into that Member State (see example below).

Here are a few practical examples of how the freedom to provide services clause would help companies to provide services across borders:

  • It will be possible to provide services in a Member State without having to establish there. Currently a business has to have a permanent presence to provide certain types of services. Removing a requirement to establish – and the associated investment in time and money – will make it possible for more businesses to offer services on a temporary or occasional basis. Activities covered by an establishment requirement in some Member States include many tourism-related services, e.g. mountain guides, yacht and sailing boat hire, ski instructors etc.
  • Businesses will no longer be required by a Member State to take on a particular legal form in order to provide services into that territory. Current examples of burdensome requirements in Member States include a requirement for real estate agencies to be "natural persons" in order to be allowed to provide the service, which excludes real estate agencies which are companies from other Member States.
  • Businesses cannot be compelled to communicate only in the national language. Operators wishing to participate in a trade fair can no longer be compelled to use the national language in all of their promotional material (catalogues, films etc.) even if their products and services are designed for an international clientèle.

How does the amended proposal affect consumers?

The rights of consumers will be strengthened, for instance by enshrining the right of non-discrimination, which would, for example, prevent EU citizens being charged different entry fees to museums on the basis of their nationality or different fees for participation in sports events, such as marathons, based on their Member State of residence. Also businesses will have to make key information available (e.g. via internet or in brochures) about themselves and their services, so that consumers are clear who they are dealing with and what services are being offered and under what conditions (e.g. in terms of insurance coverage) and prices. In this way, consumers will be able to make better-informed decisions when using services from other Member States.

More generally, the amended proposal will lead to increased cross-border competition, giving consumers a better choice of cheaper and higher quality services.

How does the amended proposal deal with the issue of assumption of health care costs?

The original Commission proposal for a Services Directive contained provisions clarifying the conditions under which patients are entitled to reimbursement for medical care obtained in another Member State aimed at ensuring that patients could benefit from a better choice of high quality treatment. The European Parliament voted to remove all health services from the scope of the Directive. The Commission has accepted this. However, the exclusion of health services from the scope of the Directive does not take away from the necessity of addressing the increasing case law of the European Court of Justice in regard to patient mobility. A separate proposal from the Commission addressing this issue may therefore be necessary. In parallel with the Services Directive, the Commission will draw up a Communication setting out the proposed action that needs to be taken in this area.

What does the amended proposal now mean for the posting of workers?

The Commission's original services proposal contained provisions dealing with the removal of certain burdensome administrative requirements relating to the posting of workers, as well as improved administration cooperation between Member States' authorities in this area. It did not affect the Posting of Workers Directive. This therefore always meant that the social and employment conditions, including minimum wages and working time, of the country where the workers are posted would have continued to apply as established in the Posting of Workers Directive.
However, a clear majority of the European Parliament voted to delete the provisions on administrative requirements and administrative cooperation regarding posting of workers. The Commission has accepted this deletion. Following this exclusion the Commission undertook to produce guidance for Member States to address any undue administrative burdens which hinder enterprises from carrying out cross-border activities involving the posting of workers. This guidance, which was adopted at the same time as the Commission's modified proposal, is aimed at helping Member States to ensure that they remain in line with the relevant ECJ case law, and identify best practice in this area. More information is available at:

How does the amended proposal improve supervision of services providers and cross-border cooperation between authorities?

Authorities responsible for supervision will benefit from enhanced trust and confidence in each other through a newly-established system of administrative cooperation, information exchange and assistance. The Services Directive will put in place precise legal obligations for authorities to cooperate with one another. This will ensure that Member State authorities co-operate in the supervision of service providers so that consumers or the public interests concerned are properly and effectively protected in the case of cross-border activities.

In line with the European Parliament's first reading amendments, the modified proposal makes clear that these legal obligations should be facilitated on a practical level by setting up an electronic system with in-built language support enabling the direct and efficient exchange of information between competent authorities in different Member States.

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