EU Services Rights

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The Services Directive

European Union law gives businesses established in one European Union country the freedom to provide services in or provide services to another European Union country. Numerous directives and laws which have been introduced by the European Union over the last 40 years in order to harmonise laws and standards in relation to many different types of goods and services.  The objective is to fully facilitate the freedom to trade and provide services.  

The Services Directive 2006 is a general law which is designed to streamline, fast track and give fuller effect to the right to provide freedom of services.  Its purpose is to help service providers to benefit from the freedom to provide services across borders from one European Union country to the other or to establish themselves in the other Member States.

The Services Directive seeks to give full effect to the EU Treaty freedom of establishment and the freedom to provide services throughout in the EU. It applies in tandem with the extensive case law of the European Courts on the general freedom to provide services across the EU, provided for in the EU Treaties.

The Services Directive applies both where a service provider proposes to provide services cross border from his own Member State and where he seeks to establish a business in another Member State.  

Services 

The directive defines services as any self-employed economic activity normally carried out for remuneration. A broad range of services are covered.It includes services provided to businesses and consumers such as legal and fiscal advice, real estate agency, construction services, architects, transport and distribution, trade fairs, car rental and travel agencies. It includes consumer services such as tourism, tour guides, leisure services, sport centers and amusement parks.

The list of illustrative services provided includes business services such as

  • management consultancy
  • certification and testing,
  • facilities management,
  • office management,
  • advertising
  • recruitment services
  • household support services
  • the services of commercial agents.

The directive may apply where there is a cross border element involved in the supply of the service. It is arguably also applicable to the internal provision of services.

Directive Enhances Rights of Service Providers

The Services Directive assists prospective service providers in challenging requirements which affect access to the exercise of the service activity in another EU state. A requirement is any obligation, prohibition, condition or limit provided for in the laws, regulations or administrative provisions or practice of an EU state. It may be in consequence of case law administrative practice, the rules of professional or trade bodies, organisations and associations.

The Directive potentially invalidates any requirement which impacts adversely upon access to the provision of a service by a supplier or on access a service by a user across EU state borders. A requirement includes any obligation condition, prohibition or limit in law, regulation or administrative practice. It includes the rules of professional and trade bodies and associations.

Sectoral Limits on Scope 

The Directive does not apply to certain sectors, most of which are subject to other specific EU legislation. They include “services of general interest” (which has a specific defined meaning; see other articles) financial services, electronic and network services, transport, temporary work agencies, private security agencies, health care services and audio-visual services. It does not apply to gambling services.

There are general derogations in relation to services of general economic interest in the utility sector and in relation to matters covered by other directive such as the Posted Workers Directive, the Professional Qualifications Directive, the Lawyers Directive and the Citizens Rights Directive.Financial services are excluded because they are dealt with by specific existing European legislation.  Electronic communications , audio visual services and mant transport services are dealt with by other EU  legislation.  Gambling activity, social services and governmental activities are excluded as they involve signigcant State policy choices..  

Case-by-case derogations may apply in exceptional circumstances. They allow states to take measures in relation to the safety of a service in respect of providers established in another state. This may be done only after the exhaustion of the mutual assistance procedure.

The requirement must relate to the safety of the service. There must be no EU harmonisation in the field concerned. The measures must provide for a higher level of protection for the recipient of the service than in the home state and if the home state has not taken any measure or has taken insufficient measures prepared with those in Article 35.2 The measures must themselves be proportionate.

General Limits

The Services Directive does not apply in respect of taxation. It does not affect labour law or social security legislation. It is not to affect the exercise of fundamental rights recognised by the law of the member state or EU law, including in particular, the right to enter in collective agreements and take industrial action.

The basic and general rules of the legal system are outside the scope of the Directive. Rules which apply to all persons, irrespective of EU residence or which apply to nationals and EU nationals are presumptively lawful. If they specifically affect a service activity, they may be required to be justified under the directive.

It does not apply to rules on the use of land, planning permissions, building standards, road traffic and other rules and standards which do not specifically regulate or affect the service activity which must be respected by providers in the course of carrying out their economic activity in the same way as by individuals acting in a private capacity.

Providing Services Cross Border 

The Services Directive applies both where a service provider proposes to provide services cross border from his own Member State or seeks to establish a business in another Member State.  The Directive requires Member States  to give effect to the right to provide service in a Member State other than the one in which they are established.   

In broad terms, an EU established service provider need not be authorised, licensed or registered in an another EU State, before providing services into that other EU state from its EU home state in which it lawfully conducts business. It is generally obliged to comply with the “doing business” / public protection rules applicable in that other “host” state.

Any conditions imposed on incoming service providers must be strictly justified. They must be non-discriminatory with regard to nationality of the Member State, in which a company is incorporated.  They must be necessary for reasons of public policy, public security, public health and protection of the environment and they must be proportionate to obtain the objective concerned.  

Prohibited Conditions

The following types of obligations cannot be prescribed:-

  • obligation to have an establishment in the territory where the service is provided;
  • obligation to obtain an authorisation or registration from an authority where the service is to be provided;
  • requirement to set up infrastructure in the host state;
  • the application of specific contractual arrangements between the service provider and the recipient which prevent or restrict provision of services by the self-employed;
  • obligation to possess specific identity document issued by the competent authority;
  • requirements affecting the use of equipment e.g. requirements to use of specific brands;
  • restriction on recipients which restrict useful services.

Limits on Freedoms

There are a number of service areas to which the above mentioned provisions do not apply so that a Member State can impose additional requirements.   These include:

  • general economic services such as post, electricity, gas, water;
  • services that are covered by existing directives;
  • protection of personal data,  social security schemes, administrative formalities regarding the free movement of persons, 
  • shipment of waste;
  • legal protection of semi conductors;
  • statutory audit of accounts;
  • judicial recovery of debts;
  • visa requirements for third country nationals,
  • actions involving notaries;
  • registration of vehicles leased in other Member States; and
  • obligations determined by private international law.