THE SERVICE sector plays a major role in the economy of the European Union, accounting for up to 70% of the EU’s GPD, 68% of employment and 96% of new jobs. However the service sector only accounts for 20% of the intra-EC trade* so the European Commission decided to look at breaking down some of the legal and administrative barriers to trade in the sector by implementing the Services Directive which comes into effect on December 28, 2009.

What is the scope of the Services Directive?

The Services Directive applies to the provision of a wide range of services – to private individuals and businesses throughout the European Single Market. Services covered include:

distributive trades

the activities of most regulated professions (e.g. legal)

construction services and crafts

business-related services (e.g. consultancy)

tourism services

leisure services

installation and maintenance of equipment

information society services (e.g. publishing – print and web)

accommodation and food services

training and education services

rentals and leasing services

real estate services

household support services (e.g. cleaning)

The directive does have some specific exceptions with certain services explicitly excluded, including:

financial services

electronic communications services with respect to matters covered by other community instruments

transport services falling into Title V of the EC Treaty

healthcare services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health profession

temporary work agencies’ services

private security services

audiovisual services

gambling

certain social services provided by the State, by providers mandated by the State or by charities recognised as such by the State

services provided by notaries and bailiffs (appointed by an official act of government).

How does the Services Directive help businesses set up in another member state?

The Services Directive facilitates the establishment of a business in a Member State. This concerns cases in which a legal or a natural person intends to establish in another country. Under a general obligation for Member States to simplify procedures and formalities some very specific obligations are established by the Directive:

Member States must set up “points of single contact”, i.e. one-stop shops through which service providers can obtain all relevant information and complete all procedures relating to their activities.

Member States must ensure that all these procedures and formalities can be completed at a distance and by electronic means.

Member States must review and evaluate all their authorisation schemes concerning access to a service activity or the exercise thereof and abolish them or replace them by less restrictive means, where they are unnecessary or otherwise disproportionate. Remaining schemes are to be rendered clearer and more transparent. Furthermore, authorisations have in principle to be granted for an indefinite period and be valid throughout the national territory.

Member States must abolish discriminatory requirements, such as nationality or residence requirements, and particularly restrictive requirements, such as “economic needs” tests. It also requires the review of other burdensome requirements which may not always be justified.

How does the Services Directive facilitate the cross-border provision of services?

The Services Directive aims at improving the regulatory environment for service providers who want to supply their services across borders to other Member States, without setting up an establishment there. In this respect, the Services Directive lays down the “freedom to provide services” clause whereby Member States should, in principle, not impose their national requirements on incoming service providers. Member States are thus generally prohibited from imposing restrictions upon incoming service providers. However, certain requirements can still be imposed under very limited circumstances, i.e. when they are non-discriminatory, justified for reasons of public policy, public security, public health or the protection of the environment and do not go beyond what is necessary in order to achieve their objective.

For those requirements that Member States are still allowed to impose on incoming service providers, service providers will have to be able to obtain all relevant information and complete all procedures and formalities through the “points of single contact”, at a distance and by electronic means.

:: The Enterprise Europe Network is the European Commissions business and innovation support network. Contact us if you would like more information on this or any European directives www.een-northeast.co.uk

* Statistics taken from ‘Introduction to the Internal Market for Services’ Directorate General Internal Market and Services.

** Text taken from http://ec.europa.eu/internal_market/services/services-dir/index_en.htm the website of the European Commission.