EU Services Directive Vote Tomorrow

by Ulrika Lomas, for LawAndTax-News.com, Brussels

15 February 2006

The EU's controversial Services Directive, which would open up the market for cross-border provision of many types of service, was debated yesterday in the Parliament amid public demonstrations and will be voted on tomorrow.

After hundreds of amendments were submitted, MEPs debated a first reading report tabled by Rapporteur Evelyne Gebhardt for the Internal Market Committee. Last week, representatives of the two largest political groups reached a draft compromise on some of the key aspects of the directive.

"We have found a third path", said Ms Gebhardt afterwards. Key aspects of the compromise include:

• The Member State into which the service is provided must ensure free access to and free exercise of a service activity within its territory. However, the Member State may restrict the provision of services, subject to certain principles: non-discrimination (e.g. as regards nationality), necessity (reasons of public policy or public security, protection of health or the environment) and proportionality (i.e. what is needed to secure the objective pursued, but no more).
• An amendment sets out a list of requirements that the Member State may not impose on a service provider established in another Member State. For example, it may not require a provider to open an office in the country where it plans to provide services temporarily, nor require it to register with a professional body or association in that country, nor ban it from using its own equipment or material.

Last October the Parliament deferred its vote on the Directive when dissension over several major issues made it appear that no consensus could be reached. The chair of the Internal Market Committee, Philip Whitehead decided that amendments put forward by the three political groups were tabled too late for the rapporteur and other MEPs to take them on board. He therefore concluded that the proposals could not serve as the basis for a compromise and that it was better to delay the vote "so as not to discredit our committee".

The Parliament explained that:

• "First, there is the country of origin principle (proposed by the European Commission and defended by the ALDE and EPP-ED groups) by which a firm can provide a service in a Member State other than its own on the basis of the rules applicable in its country of origin."
• "Second, there is the distinction between the general right for a firm legally established in its country of origin to provide a service in a Member State other than its own and the actual provision of such a service (the latter would be subject to the legislation of the country where the service is provided); this distinction was proposed by the rapporteur as part of a compromise package."
• "And last but not least, there is the question whether services of general economic interest should be excluded from the scope of the directive, an idea which covers public services provided in accordance with market rules (broadly speaking, by a profit-making private company which is subject to the rules on competition)".

In November, however, the Internal Market Committee approved the legislation in pretty much its original state, discarding the amendments proposed by Evelyne Gebhardt, who observed afterwards: "This proposal - as accepted by the committee - is definitely not overcoming fears about social dumping expressed by citizens in some countries."

Austrian Chancellor, Wolfgang Schussel, said in January that he was planning to push for a resolution of the stalemate over the services directive during Austria's presidency, saying he hoped that a "balanced" compromise could be reached. He had previously proposed that a new draft of the controversial directive be put together, but Internal Market Commissioner Charlie McCreevy let it be known that he rejected the possibility of creating a new version of the legislation whilst the current one is still in the pipeline. A spokesman said: "It would be an insult to the European Parliament if we let it discuss a bill and at the same time started drafting a new proposal."

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