Services Directive 2006/123

Objective:

• Purpose: The directive aims to liberalise the EU market for services, aligning with the Lisbon Strategy from the 2000 Lisbon European Council summit. This strategy emphasised a shift towards a services-based economy in the EU.

Background:

• Original Proposal (Bolkestein Proposal): Proposed introducing the principle of mutual recognition, allowing service providers from one Member State (MS) to operate across all other MS. This faced significant criticism for potentially leading to “social dumping,” where cheaper labor from lower-cost countries might undermine local job markets in higher-cost countries. The term “Polish Plumber” exemplified concerns about job security for Western European workers due to perceived competition from Central/Eastern European labor.

Key Provisions:

1. Facilitation of Freedoms:

◦ Article 9: Prohibits MS from subjecting service activities to authorisation schemes unless these schemes do not discriminate and are justified by an overriding reason of public interest.

◦ Article 6: Establishes “points of single contact” where service providers can complete all necessary formalities to access other MS markets.

2. Critique of the Directive:

◦ General Scope: The directive has been criticised for being too broad and general, regulating a wide range of activities without specific focus. The directive’s broad application raises questions about its effectiveness in addressing specific sectoral issues.

◦ Conflicting Legislation: According to Article 3, if there is a conflict between the directive and other secondary legislation, the latter prevails, potentially limiting the directive’s impact in specific areas.

Panagiotis Delimatsis, From Saachi to Uber (2018):

• FM Rights as Fundamental: Delimatsis argues that free movement (FM) rights have been raised in status to that of fundamental rights and have been progressively recognised as such. Courts often refer to these rights as "fundamental freedoms" or "fundamental principles.”

• Directive’s Role:

1. Instrument for EU Objectives: Acts as a legal tool to advance the EU’s services objectives.

2. Transparency and Trust: Enhances transparency and builds trust among MS. However, the lack of trust reflects a nationalistic mindset that may hinder short-term integration of the single market.

3. Limited Scope: Excludes several sectors (e.g., gambling, notary, healthcare, financial services), restricting its substantive reach.

Article 16:

• Spirit of ‘Country of Origin’ Principle: Emphasises free access and exercise of service activities, while respecting non-discrimination, necessity, and proportionality principles.

Barnard’s View:

• ‘Legislative Hot Potato’: Describes the Services Directive as a contentious piece of legislation in the early 21st century, reflecting its controversial and debated nature.

Copenhagen Economics 2005:

• Economic Importance of ‘Country of Origin’ Principle:

◦ The principle was highly contested but ultimately not included in the directive. It would have allowed service providers to be subject only to the regulations of their home MS, potentially easing cross-border trade. Economic analyses suggested that this principle could have delivered substantial welfare gains, estimated at around 10% of the total benefits anticipated from the Services Directive.

Summary

The Services Directive 2006/123 aims to liberalise the EU services market by removing barriers and facilitating cross-border provision of services. Despite its intent to promote market integration, it has faced criticism for its broad and general approach, and its exclusion of several key sectors. The directive reflects an ongoing tension between facilitating economic freedoms and addressing concerns about social and economic impacts.