COMMISSION STAFF WORKING DOCUMENT

Detailed information on the implementation of Directive 2006/123/EC on services in the internal Market

Accompanying the document

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions

on the implementation of the Services Directive. A partnership for new growth in services 2012-2015

This document is a European Commission staff working document for information purposes. It does not represent an official position of the Commission on this issue, nor does it anticipate such a position

CONTENTS

Introduction

Chapter I — Economic impact

1. Results of the economic analysis. 7

2. Selection of the most relevant sectors and requirements. 9

3. Methodology. 9

3.1. Data gathering.. 9

3.2. calulation of the economic impact 11

4. assessment of the economic impact of setting up the points of single contact. 10

Chapter II – Points of Single Contact

1. Introduction.. 13

1.1. Legal framework. 13

1.2. Businesses’ expectations. 14

2. Assessment of the state of play. 14

2.1. Information provided by PSCs. 16

2.2. Electronic procedures. 17

2.3. Usability of portals. 20

3. Awareness and usage of PSCs. 20

4. Conclusions on the state of play of PScs. 20

Chapter III – Implementation and compliance with key provisions

1. Introduction.. 23

2. Streamlining the regulatory environment for services. 24

2.1. Prohibited establishment requirements — Article 14 of the Directive. 25

2.2. Requirements subject to evaluation — Article 15 of the Directive. 30

2.3. Tacit approval of applications for authorisation — Article 13(4) of the Directive 34

2.4. Nationwide validity of authorisations — Article 10(4) of the Directive. 35

2.5. Total prohibition of commercial communications — Article 24 of the Directive 37

3. Boosting cross-border trade — Freedom to provide services clause. 38

3.1. Introduction.. 38

3.2. Implementation of the freedom to provide services clause by Member States. 39

3.3. Issues arising from the implementation of Article 16 of the Directive. 39

3.4. Rules on future legislation — Article 39(5) of the Directive. 41

3.5. Use of derogations provided for in Article 17 of the Directive. 41

3.6. Imposing specific requirements listed in Article 16(2) on cross-border service providers 42

Chapter IV — Summary of the analysis of the implementation per Member State

Annex I: Technical annex

Annex II: Detailed country-specific information

Introduction

The Services Directive is a major step forward in making the single market for services a reality. It not only aims to facilitate operators' freedom to provide services across national borders, but also to ensure that the recipients of these services can easily enjoy the opportunities brought about by the single market. The implementation of the Services Directive set in motion huge efforts in the Member States to modernise their administrations and the legal framework for the provision of services and to facilitate establishment and exercise of service activities across borders.

Implementation of the Directive has been challenging particularly because of its broad scope. It covers around 65 % of service activities within the services sector. The activities covered represent around 45 % of total EU GDP and employment. They include business services (11.7 % of value added), real estate (11.8%), retail and wholesale distribution (11.1 %), construction (6.43%) and tourism (4.4%). Among the service sectors not covered by the Services Directive (or covered only marginally, such as energy and postal services), most benefit from specific and comprehensive regulatory frameworks at EU level. This is the case for financial and insurance services (5.7 % of value added), network services (4.7%, including telecommunications, postal services and energy) and transport (3.1 %). The remaining service sectors are government services (14.4 % of value added, such as defence and public education) — which in general do not fall within the scope of application of EU law (as ‘non-economic’ services) — and health services (around 7.6 %), to which, even in the absence of a comprehensive EU framework, a number of EU rules already apply, ranging from the recognition of professional qualifications to patients’ rights.

Figure 1: Services covered by the Services Directive (darker part on the right) and other sectors of the EU economy in terms of value added by sectors, 2009[1]

Source: Eurostat, National Accounts Statistics, Gross value added, 2009

Furthermore, the Services Directive required Member States not only to assess and where necessary adjust their laws in many areas but also to take very concrete and practical steps such as setting up Points of Single Contact and making administrative procedures available in electronic form.

This report describes the significant progress achieved but also what remains to be done. At this stage and given that only two years have elapsed (the implementation deadline was 28.12.2009), it is not feasible to report on all the details of the Services Directive. The report therefore concentrates on those issues and sectors which have the most significant impact or potential in economic terms: business services, construction, real estate, retail and tourism. The implementation of the Services Directive is an ongoing dynamic process.

This report builds upon the Handbook for the implementation of the Services Directive[2] which aimed to give Member States technical assistance by describing appropriate approaches to implementation and on the Commission Staff Working Paper setting out the results of the mutual evaluation process.[3] In addition, the assessment of the implementation in each Member State is based on the information notified to the Commission according to article 39 of the Directive, the results of the mutual evaluation process and the studies[4] that were carried out for the Commission. The economic analysis is based on an economic study carried out by Commission services.[5]

Chapter I assesses the Directive’s economic impact.

Chapter II describes the state of play in the development of the Points of Single Contact.

Chapter III gives an overview of the implementation of some of the most relevant parts of the Directive, namely the provisions on administrative simplification (nationwide validity of authorisations, tacit approval), facilitating establishment (prohibited requirements, such as discriminations and economic needs tests, and requirements to be evaluated as to their proportionality, e.g. on legal form and shareholding, tariffs) and commercial communications. Particular attention is devoted to the implementation of the freedom to provide services clause and the situation with regard to cross-border trade.

Chapter IV summarises the state of implementation of the Directive per Member State. A more detailed analysis per Member State is provided in Annex II.

Annex I contains information about the sectors covered by the Services Directive as well as technical information and data concerning the economic study.

Chapter I — Economic impact

The broad scope of the Services Directive, in terms of both service activities and legal/administrative requirements, means that its economic impact is of particular significance.[6] The economic assessment carried out by the Commission is the first analysis based on information on actual implementation of the Services Directive by Member States and the first study to deal not only with its effects on trade and foreign direct investment (i.e. foreign establishment), but also with its domestic effects via the increase in productivity of domestic firms. The assessment is still a forecast since the actual impact of the changes introduced will produce economic effects only over time. Effects of a more ambitious implementation have also been estimated showing the significant additional gains to be reaped. It is important to note that, although the results presented below cover the main restrictions under the Services Directive, data limitations mean that they provide only an estimate of the economic impact of another important provision under the Directive, namely the setting up of the Points of Single Contact[7]. This is mentioned in part 4 of this Chapter.

1. Results of the economic analysis

Based on the implementation measures adopted so far by Member States, the Services Directive is generating an additional 0.81 % of EU GDP, with the majority of effects materializing during the 5-10 years following implementation (base-line scenario). The impact at EU level within the sectors covered by the analysis is estimated at more than 7 % for trade, close to 4 % for foreign direct investment (FDI) and above 4.5 % for productivity. The domestic impact of barrier reductions turns out to be greater than the international impact, at least in the short run as the analysis does not take into account, due to data limitations, the long-term effect that increased flows of trade and foreign direct investment could have on GDP through productivity improvements.

In addition to the assesment based on real implementation to date, a second scenario of a more ambitious implementation of the Services Directive has been analysed. Under this scenario, each sector in every country moves to an ‘ideal’ barrier profile where barriers are equal to the EU average in that sector, or lower (if already achieved). In the case of such ideal but still conservative implementation the cumulative long-term impact on overall GDP reaches 1.23 %. The impacts on FDI, trade and productivity would be about one and a half times larger than in the base-line scenario.

The differences in impacts across countries mainly reflect the extent to which barriers have been reduced: countries with larger barrier reductions import more, attract more inward FDI, and have a larger boost in productivity. Moreover, the results are influenced by the geographic composition of the destination of exports and outward FDI, and the barrier reductions in those destinations: more exports to or investment in those countries which had larger barrier reductions increase the effects. Finally, with regard to the overall impact on GDP, the sectoral composition of the national economy explains some of the differences observed across Member States: a greater share of services in the economy means that the removal of barriers has a greater impact.

Finally, in a third scenario the ‘ideal’ barrier profile is even lower than in the second scenario: barriers are reduced in each sector to the average level of barriers in the the five countries with the lowest levels in that sector, or lower (if already achieved). Under this third scenario close to the abolishment of almost all restrictions within the scope of the Services Directive, the additional gain could reach 1.8% of GDP compared to the base-line scenario, representing total economic gains of 2.6% of GDP.

The following figure shows per Member State the effects on GDP of the actual implementation (base-line scenario), the additional impact of the second scenario (assuming a more ambitious but still quite modest implementation of the Services Directive) and the further effects of the third scenario (close to full elimination).

Figure 2. The GDP impacts of the Services Directive under the base-line scenario and the additional effects of the second and third scenarios (in %)

Source: Commission services

Note: Yellow and blue (aggregates for Euro Area and EU27) bars = effects of actual implementation (base-line scenario); orange bars = additional impacts in the second scenario (assuming a more ambitious implementation); red bars = additional impacts in the third scenario (close to full elimination).

2. Selection of the most relevant sectors and requirements

For practical reasons and feasibility, it was decided to focus the assessment on the following key sectors that are most relevant in economic terms (GDP share, employment, growth) and in terms of the impact of the Services Directive:

– professional and business services (legal services, tax advisers, accountants, engineers and architects);

– construction and crafts;

– real estate;

– retail;

– tourism.

Thus a number of sectors covered by the Services Directive, representing approximately 20% of EU GDP, were left out of the economic assessment. The GDP impacts presented above have been obtained under the assumption of no barrier changes in those sectors.

A certain level of aggregation and simplification, often requiring value judgments, was necessary in the data collection within these ‘priority’ sectors. Thus, if a requirement existed in a significant part of the activities comprised in the sector (for example an authorisation requirement for large-scale retail outlets in the ‘retail’ category), it was considered applicable to the whole sector.

As regards the barriers to the internal market in services, the Services Directive addresses a wide range of aspects. The economic assessment focused on those that have a direct impact on reducing the administrative burden and on streamlining the regulatory environment for services since these are likely to have the most significant economic impact. These are requirements dealing directly with access to or the exercise of service activities: authorisation regimes, prohibited requirements on establishment and requirements to be evaluated and simplified, and the legal framework for cross-border service provision (see the list of assessed requirements in Annex I b)). The effects of simplifying administrative procedures (recognition of foreign documents, tacit approval, etc.) have also been taken into account.

3. Methodology

3.1. Data gathering

3.1.1. Data sources

The implementation of key provisions of the Services Directive was assessed throughout 2010 during the process of ‘mutual evaluation’ provided for by the Directive. Most data on barriers are based on the results of the mutual evaluation. The information gathered in this exercise was supplemented or corrected with data from external studies[8] and from other sources (performance checks, complaints and infringement procedures, etc.).

The economic assessment also used sectoral data from different sources, including Eurostat, for the other variables in the analysis (e.g. trade flows, FDI, productivity).

3.1.2. Transformation of qualitative information into quantitative indicators

Qualitative information on barriers had to be transformed into quantitative information for the assessment. The rule followed was to assign 1 to requirements that existed before the implementation of the Directive and 0 for those that did not. Three different values were used to describe what happened to each individual requirement as a result of implementation: 1if the requirement was kept; 0.8 if the requirement was made less stringent (signifying a 20 % barrier reduction); and 0 if the requirement was abolished. For Member States with decentralised administrations, regional differences in implementation could not be dealt with separately. This required some value judgments as to which requirements at regional level should be considered as being sufficiently relevant to be taken into account.

3.1.3. Description of aggregated data on barriers

Using the collected dataset, the figures below show the total absolute number of barriers maintained, reduced and eliminated as a result of the Services Directive across sectors in the EU. The highest number of restrictions before the Directive existed in the area of legal services. The highest number of restrictions were abolished in the area of travels agencies and hotels, with the lowest in legal services and accounting.

Figure 3. Barriers across sectors in the EU

Source: Commission services

However, for the interpretation of the data on barriers, it is important to stress that, as explained in Chapter III, the Services Directive does not require Member States to abolish all requirements. In many instances requirements can be maintained if they are necessary to protect a public interest objective and are proportionate. If that is the case keeping requirements or simplifying them (which would be marked above as 'partially reduced') instead of full abolishment does not violate the Services Directive. A requirement could be considered less stringent as a result of administrative simplification (recognition of foreign documents, tacit approval, Points of Single Contact etc.). In other cases, legal form and shareholding requirements were made less stringent in some Member States by broadening the scope of available company structures for certain professional service providers, without abolishing the requirement by giving full freedom.

Looking at the results of barrier reduction per Member State, there is a group of countries (Bulgaria, Cyprus, France, Germany, Greece, Italy, Luxemburg, Portugal, Romania, Spain, Sweden) where a particularly high number of restrictions were fully abolished or partially changed. At the other end, Member States like Austria, Denmark, Ireland, Malta or the United Kingdom had a very low number of restrictions fully abolished or partially reduced. There are various reasons for this. For example a high number of restrictions abolished might mean that there was a high number of barriers to start with (e.g. Greece) or that newly introduced horizontal legislation affected many sectors (e.g. Sweden). On the other hand, a low number of changed restrictions might mean that a low number of restrictions already existed before the Services Directive (e.g. United Kingdom). For a detailed picture on the restrictions per Member State, see Chapter IV of this document.

3.2. Calculation of the economic impact

Once data on barriers before and after the Directive had been collected, the impacts on foreign direct investment, trade and productivity were estimated with regression analysis.

Barrier reduction is expected to influence productivity both directly (via its impact on domestic firms’ productivity) and indirectly, via its impact on foreign direct investment and trade (see the conceptual framework of the economic assessment in Annex I c)). Gravity models were used to estimate the effect of cross-border barriers on trade and of barriers to foreign establishment on capital flows. Dynamic panel data models were subsequently used to estimate the productivity effects of barriers to domestic establishment, of trade and of capital flows.

The impact of barrier changes on productivity, trade and FDI was calculated by multiplying the observed change in barriers(which was sector and country-specific information) times the estimated elasticities (estimated for the EU average) of each dependent variable (trade, capital flows and productivity) to barriers. Finally, the impacts on GDP were estimated using DG ECFIN’s computable general equilibrium model QUEST III using as ‘shocks’ the productivity changes resulting from barrier changes.

4. Assessment of the economic impact of setting up the Points of Single Contact

The aim of this part of the economic assessment was to quantify the economic impact of the Points of Single Contact (PSCs) in every Member State. It was carried out for two scenarios: the actually achieved procedural streamlining effect linked to the PSCs and a future "what-if" situation in which Member States make additional efforts to reach an ideal best performer in the EU27 in terms of procedural burdens related to setting-up service activities.

The methodology provides only a conservative estimate of the actual economic impact of the PSCs due to the fact that it covers neither the aspects of cross-border provision of services nor some features of the PSCs which are difficult to quantify (e.g. technical accessibility, multilingual platform, user-friendliness, etc.). In fact, the main data used comes from the World Bank Doing Business 2012 database[9] for each EU27 Member State on administrative burden related to starting a business (i.e. the number of procedures to start up and operate a firm, the average time to deal with each procedure in days, and the related external costs). The procedural streamlining indicated for each Member State by the change in these data between the time periods corresponding to before the Services Directive (2003 and 2004 data) and after (2011) is assumed to be a result of setting up the PSCs. The economic impact of this procedural streamlining effort is subsequently adjusted to take into account a set of completion scores provided by the Commission Services, computed on the basis of the findings of the Deloitte study[10] and own assessment.

Bearing in mind these limitations, the economy-wide impact of the PSCs is estimated to be around 0.13% of GDP, while an additional impact of further procedural streamlining in Member States could reach up to 0.15% of GDP in the medium run (5-year horizon) and up to 0.21% of GDP in the long run, taking into account that PSCs would have a positive effect on the creation of new service businesses.

Chapter II — Points of Single Contact

1. Introduction

The Points of Single Contact (PSCs) are a very visible and concrete innovation of the Services Directive for businesses. PSCs aim to give them access to clear, up-to-date information, together with an easy means of completing administrative formalities both at home and abroad.

The creation of PSCs has proven to be a highly ambitious project, both in terms of the innovation required to bring paper-based systems online and in terms of the complexity and number of authorities and procedures to be brought under PSCs.

1.1. Legal framework

Article 6 of the Services Directive requires Member States to establish PSCs through which service providers can complete all procedures and formalities needed to access and exercise service activities — such as declarations, notifications or applications necessary for authorisation by a competent authority.

Article 7 sets out the information that should be available to both service providers and recipients through the PSCs. These include information on the requirements applicable to providers, the contact details of competent authorities, the means of accessing public registers and databases of service providers, the means of redress available and the contact details of associations or organisations from which either providers or recipients may obtain practical assistance.

Article 8 of the Services Directive requires that businesses be allowed to complete all the procedures and formalities related to the access to and exercise of a service activity at a distance and by electronic means, be it nationally or in another Member State.

The cross-border completion of e-procedures poses a significant challenge, due in part to the lack of interoperability and differences in approach to online public services in Member States. In order to facilitate cross-border access to e-procedures, the Commission has adopted legal measures[11] to improve the cross-border use of e-signatures by requiring Member States to accept as a minimum certain e-signatures,[12] and to put in place the necessary technical means to be able to validate these, also on a cross-border basis.

1.2. Businesses’ expectations

Business organisations have carried out their own reviews of the functioning of PSCs[13]. These reviews insist on the importance of PSCs and call for Member States to enhance PSCs by going beyond what is currently required by the Services Directive. In particular, they expect PSCs to take a more business-friendly approach by covering the whole business life cycle and by providing information and possibilities for completion of administrative procedures also in other key areas (such as VAT rules, labour law, social security) that are not covered by the Services Directive.

Also, businesses would expect PSCs to provide access to such information in foreign language(s).

In analysing the effectiveness of PSCs, it is therefore important to look beyond the question of compliance with the obligations under the Services Directive and take into account the perspective of business users and their actual needs.

2. Assessment of the state of play

The deadline for putting the PSCs in place was end 2009. This means that businesses should, as of that time, be able to get all the necessary information to start or carry out their activities and to complete the relevant formalities online (including to identify themselves, sign their applications, submit required documentation and receive official documents by electronic means), both within their own and in other Member States. The PSCs should in particular make life easier for SMEs who can choose to go through the procedures online saving some time and money.

The responsibility for the development of PSCs lies with the Member State authorities, but the Commission has adopted measures to facilitate the cross-border aspects of e-procedures where the major challenges lie due to technological divergences. In addition to the relevant legal measures that aim at enhancing the cross-border accessibility of e-procedures via setting clear obligations on the acceptance of e-signatures, making available information needed for cross-border validation of e-signatures and obliging Member States to put in place technical solutions for common formats of e-signatures, the Commission has been assisting Member States with practical tools in the form of open source software for e-signatures, and facilitating exchanges of best practices.

Against this background of expected delivery of PCSs, an extensive benchmarking survey was carried out by Deloitte Consulting[14] in 2011 and Member States participated in a mutual test of each other’s PSCs, organised by the Commission. The analysis set out in this report is largely based on this fieldwork carried out in 2011, complemented by results from other relevant studies[15] and additional input from Member States. It cannot, in all cases, reflect all ongoing improvements and developments[16] as PSCs are a constant ‘work in progress. The primary focus of the survey, studies and mutual testing was the key functions of the PSCs in terms of how they are used by businesses. Although some of the information that is required under Article 7 to be provided to service recipients through the PSCs was indirectly covered by the analysis, it was not examined in depth. A more focused analysis of the implementation of Article 7 will be undertaken in the framework of future activities concerning the PSCs.

Taking into account the main aspects of PSCs,[17] namely the availability of information, availability of e-procedures and ease of cross-border completion of e-procedures, and user-friendliness, the Commission has established three broad categories of PSCs that reflect an overall assessment of the state of play of PSCs in the Member States. The green colour in the figure below indicates Member States with the most advanced PSCs compared to others and the red colour indicates the most problematic ones, where the development is substantially lagging behind the average. The biggest number of Member States falls into the yellow category, which represents the middle ground. Being the biggest group, it is rather heterogeneous and encompasses both PSCs which are relatively advanced and score relatively well for many of the main features and PSCs that underperform in certain categories but do better in other areas, e.g. information availability can be very good but the completion of the procedures is poor. It should be noted that the green colour does not mean that these PSCs are fully compliant with the Services Directive in absolute terms: for all PSCs further improvements are needed, but these may be more or less considerable and may also vary as regards the areas where currently the deficiencies exist.

Figure 1: Categories of PSCs overall (including the availability of information, e-procedures, ease of cross-border completion of e-procedures and user-friendliness). For Germany it should be noted that PSCs are set up and managed by each Land with considerable differences between them as regards organisational structure. There is a central portal directing businesses to the relevant PSC.

Looking at the PSCs from the businesses' perspective the situation in the bigger Member States could be of particular interest in terms of business opportunities. In this regard it should be noted that in Spain and the United Kingdom the PSCs are well functioning and user-friendly even if cross-border completion of procedures needs to be enhanced in Spain. In Germany the situation is very divergent between the Länder but on average relatively good. In France the PSC is well established but not all mandatory information is available nor are all procedures covered yet. A major disincentive for cross-border use is the lack of other languages as the portal is in French only. Italy was late in setting up the PSCs but is improving rapidly. In Poland the situation is relatively good above all for national use, further improvements mostly regarding technical accessibility are needed for cross-border access.

Sections 2.1 to 2.3 below give a more detailed assessment of the degree of sophistication of the PSCs.

2.1. Information provided by PSCs

The following figure gives the categorisation of PSCs for the aspect "availability and quality of information":

Figure 2: The categorisation of the PSCs for the aspect "quality and availability of information".

2.1.1. Scope and availability of information

As to the overall availability of information, procedures falling under the Services Directive are well covered (81 % of the procedures analysed, covering 6 business scenarios for 3 sectors). The best performing Member States according to the Deloitte study are Estonia, Ireland, Finland, Latvia, Norway, Portugal, Spain, the Netherlands and the United Kingdom. The least information is available through the PSCs of Bulgaria, Romania, Slovenia and Lithuania.

Most information is given on company registrations, permits and insurance issues (94 % coverage overall). The recognition of professional qualifications is also relatively well covered (more than 60 %). Requirements related to the location or the premises of the provider are less well covered. These issues are often under the responsibility of local authorities (around 55 %).

Even though it is not within the scope of the Services Directive, information on taxes is very well developed (covered by 76 % of PSCs), as is information on employment (76 %) and social security-related issues (64 %). Many PSCs also provide advice on funding and intellectual property rights issues (67 % coverage). The three most complete PSCs, when viewed from this wider perspective, are those located in Estonia, Luxembourg and the United Kingdom.

2.1.2. Structure of information

The most common way of presenting the information is either by a thematic index of procedures or service sectors. Portals that offer the best search possibilities are those of Cyprus, Hungary, Luxembourg, Norway and Sweden. Information is less easy to find on the PSCs of Austria, France, some German Länder (such as Brandenburg and Hessen), Greece, Ireland and Italy.

Only 40 % of end-users found that the PSCs clearly explained the requirements they had to fulfil. Less than half of PSCs make a clear distinction between requirements that apply to establishment and those applicable to cross-border service provision.

2.1.3. Language support

Providing information in languages other than the language of the Member State of the PSC is not a legal obligation under the Services Directive. It is, however, highly useful for end-users. The PSCs of 20 Member States provide some information in other languages. Of these, 15 give information on requirements in other languages and 8 allow application forms to be completed in other languages. The Czech Republic, Poland and Portugal offer a tool for the online translation of their web pages.

2.2. Electronic procedures

There are vast differences between Member States in terms of coverage of procedures. The positive finding is that more than one third of all PSCs provide a critical mass (more than 50 %) of e-procedures.

Taking into account the number of procedures available in Member States and the possibility for cross-border users to complete the procedures (both for cases where no technical barriers exist and for those where some support is provided also for cross-border e-signatures and e-identification), Member States can be divided into the following three groups:

Figure 3: The categorisation of the PSCs for the completion of e-procedures.

2.2.1. Availability of e-procedures

Overall, out of the 81 % of procedures on which information is available, at least some interaction is possible for 55 % of them[18] (as a minimum, downloading forms and submitting by email). For another 26 % of procedures only a very low level of information is provided.

Out of the 55 % of transactional procedures, 22 % are one-way interaction (meaning that forms can be downloaded), 9 % are two-way interaction (forms can also be uploaded), and 24 % are full case-handling (the procedure can be completed entirely online).

The four websites with the highest level of transactional procedures are in Estonia, Italy, Liechtenstein and Sweden. As regards the types of procedures, it appears from the Deloitte study that company registration is well covered. Less well covered are procedures relating to the premises of the provider and to the place where the service is carried out. This seems to be due, in many cases, to the fact these types of procedures fall under the responsibility of local authorities, which in many Member States have a varying, and often lower, level of e‑government maturity. The degree of availability of procedures relating to the recognition of professional qualifications differs significantly between Member States. In some cases, the portals offer comprehensive information, including the possibility to complete such procedures online (e.g. in Cyprus, Luxembourg and Sweden). In other cases, the information available is still patchy and it is not yet possible to complete procedures electronically.

Tax and financial formalities and social security formalities, which are not strictly required under the scope of the Services Directive, are relatively well covered.

2.2.2. Completion of e-procedures

Even where e-procedures are available, the ease of their completion differs depending on the approach chosen in Member States. In Member States[19] where scanned copies of required documents are accepted and simple means are used if identification is required (such as a simple username and password), no technical barriers exist and the completion of procedures is facilitated for businesses. This does not mean, however, that all procedures are necessarily available. In a number of Member States scanned copies are not accepted and more secure means are required to allow access to personal data or to ensure data authenticity. In such cases official e-IDs (national government-issued or -guaranteed) and e-signatures are required. The usability of e-procedures, above all across borders, depends greatly on the capacity of the PSCs to deal with e-signatures and e-identification from other Member States. According to the Deloitte study and information provided by Member States, at least 14 Member States[20] require the use of official e-IDs for online procedures, and 18[21] require (qualified) e-signatures. However, only around half of these have solutions currently in place that allow their cross-border use, at least from some other Member States,[22] but never from all other Member States. In other words, none of these PSCs allows the completion of procedures from all other Member States but at best from a limited number of Member States. This means that in many cases businesses are unable to use PSCs in other Member States.

In summary, 20 Member States make the online completion of procedures available to foreign users to some extent, either by relying on simple solutions that create no obstacles to cross-border use or by relying on more complex solutions where no e-identification or simple identification (login/password) is used and no e-signatures are required or by using more complex solutions but having put in place at least some technical support to allow also for limited cross-border use.

Possibility of completing procedures electronically across borders (i.e. by users from abroad), based on Deloitte study and input from Member States

|| Number of PSCs || Percentage of PSCs || List of PSCs

Online completion of procedures is possible for foreign users || 20 || 58 % || AT, BE, CY, CZ, DE, DK, EE, EL, ES, FI, FR, IE, IS, LI, LT, LV, NL, PL, PT, UK

By what means is online completion of procedures possible? || Number of PSCs || Percentage of PSCs (% of all) || List of PSCs

- No technical barriers (no e-ID or e-signature is required) || 9 || 47 % (27 %) || AT, BE, DE (for e-identification and depends on a Land) DK, FI, FR, IE, IS, NL, UK

- Official e-IDs issued in other Member States are supported (at least in part) || 7 || 37 % (21 %) || CY, EE, ES, EL, LI, LT, PT

- Qualified e-signatures issued in other Member States are supported (at least in part) || 10 || 50 % (30 %) || CY, CZ, EE, ES, EL, LI, LT, LV, PL PT

2.3. Usability of portals

The usability of portals was assessed by Deloitte, who gathered users’ feedback via end-user testing conducted in summer 2011. Their analysis reveals that, overall, 40 % of businesses found it very difficult to complete procedures online. Specifically, in 8 Member States, at least 50 % of users found the PSC easy/very easy to use (only one quarter of PSCs were found to be predominantly easy to use); in 10 Member States, at least 50 % of users found the PSC satisfactory to use (one third of PSCs, was found to be mostly satisfactory). In 12 Member States, at least 50 % of users found the PSC difficult/very difficult to use (40 % of PSCs were found to be difficult to use).

A composite usability index was used by Deloitte to measure the user's experience of the PSCs. The index was composed of four measures: effectiveness and efficiency (whether the users can successfully achieve their objectives and, efficiency how much efforts and resource is expended in achieving those objectives), satisfaction (whether the experience was satisfactory), propensity for portal re-use and e-accessibility. The composite index for usability was generated by combining the rankings for each of the Member States studied against the fours measures. The index ranks Ireland, Slovakia, Czech Republic, Estonia and one German Land (Hessen) most highly for this criterion. Portugal, Austria, Greece, Slovenia and Lithuania have been placed at the bottom of the ranking of usability[23].

3. Awareness and usage of PSCs

The actual usage of PSCs depends greatly on the awareness of their existence and the services they offer to businesses. Overall, the level of awareness among businesses appears to be rather low. As an indicator, only 30 % of Deloitte focus group participants were aware of the existence of the PSC in their country. Major efforts need to be made to raise the awareness of PSCs among businesses at both national and EU level. The activities already undertaken include promotional campaigns in Member States and by the Commission, for example via leaflets or articles, which have often been limited partly due to availability of resources. A common brand (EUGO) has been created to give PSCs a coherent common identity, and activities are ongoing to make it easier to find PSCs online. A more active role played by business organisations in the promotion of PSCs among their members would enhance the level of awareness.

The actual usage of PSCs is not easy to measure due to differences between the methodologies used in Member States, but the data gathered from Member States show that it is steadily increasing. The figures vary between Member States (where statistics are collected) but for example between 2010 and 2011 a very steep increase was noted in the Czech Republic (more than 100 %) and Belgium (around 80 %), with significant increases found in Italy, Latvia and the Netherlands. Currently the rise is most manifest for domestic use except for cases where domestic demand has reached a high level (e.g. in the Netherlands), further increases are expected from cross-border use.

4. Conclusions on the State of Play of PSCs

The establishment of PSCs has posed a huge challenge to Member States. It has involved significant changes in administrative procedures, in internal cooperation methods and in technical developments.

The majority of the PSCs have been built on existing e-Government business websites which provide services going beyond the Services Directive and take a more holistic approach to business needs. In seven Member States[24] entirely new websites were created. Most of the PSCs serve primarily as gateways to relevant competent authorities' websites. The level of standardisation and integration of competent authorities varies between Member States. PSCs are found to be easier to navigate and use in those Member States where a consistent or more standardised approach exists between competent authorities with regard to the provision of information and the completion of procedures.

With regard to information provision, the overall picture of PSCs is relatively positive. A large proportion of information is provided by the majority of PSCs at least for the most important service sectors, and it often goes beyond the requirements of the Services Directive. The level of detail and structure of the information however varies and further efforts are needed to increase the user friendliness of the information, including via a clearer structure, more search functions and more language support. Work in this regard continues at national level and also via the EUGO Network.

When it comes to online completion of procedures, the current picture is less positive. Many administrative procedures which are relevant are not yet online and possibilities for cross-border completion of procedures are very limited. The cross-border completion is mainly possible in Member States who do not require advanced e-identification or electronic signatures. Main problems with online completion exist in Member States who require electronic identification and electronic signatures but do not technically support these from other Member States, and this number remains relatively high with one third or even more. At the same time there are signs of progress in a number of Member States and clear plans in others to have the necessary technical solutions in place in 2012 or over the coming two years. The solutions mentioned rely in several cases on the results of projects financed by the CIP[25] Large Scale Pilots, above all for e-identification[26], and the tools provided by the Commission for e-signatures[27] in support of Commission Decision 2011/130/EU adopted under the Services Directive. The Commission will continue to assist Member States with the technical aspects of PSCs to increase their cross-border access, in particular via open source software and best practice sharing in the EUGO network.

Finally, more impetus should be given to the cross-border use of e-identification and e-signatures in a wider context with the Commission proposal for a Regulation on electronic identification and trust service for electronic transactions in the internal market.

Chapter III — Implementation and compliance with key provisions

1. Introduction

The Services Directive entails an ambitious programme of administrative and regulatory simplification to remove unjustified obstacles to cross-border service activities. The aim of this simplification is to facilitate market access for businesses, in particular SMEs, across the EU, and to offer consumers a broader choice.

The Services Directive should be seen as opening up possibilities for service providers to develop their activities in a more effectively functioning single market. Cross-border service activities remain limited. The ambition of the Services Directive is to boost cross-border trade and offer new opportunities to service providers.

Streamlining the regulatory environment for service providers is beneficial for service providers intending to establish themselves in a Member State by creating a new business or by opening, for example, a subsidiary or a branch. These benefits accrue equally to service providers seeking to become established in another Member Stare and to those setting up business in their own country.

Service providers established in one Member State, and providing services in another, benefit from the ‘freedom to provide services’ clause (Article 16 of the Services Directive). This clause requires Member States to refrain from imposing their own requirements on cross-border service providers except where their application is necessary for reasons of public policy, public security, public health or the protection of the environment.

The Services Directive facilitates the exercise of economic activity by EU companies operating in the services sector, in particular for SMEs. Indeed, the provisions on administrative simplification and those facilitating access to foreign markets have a significant positive impact on SMEs which have limited resources and technical capacity to comply with the administrative costs and various barriers to establishment and cross-border provision of services. This is of particular importance given that out of 21 million of companies in the EU, over 99% are SMEs. Looking at the number of the companies in the particular economic sectors, over 75 % of them operate in the sectors covered by the Services Directive, again over 99% of these (over 16 million) are SMEs.

With a view to enhancing the rights of recipients and strengthening their confidence in the internal market, the Services Directive obliges Member States to remove obstacles for service recipients wanting to buy services supplied by providers established in other Member States, such as obligations to obtain a specific authorisation to receive such services. It also obliges Member States to make general information available to service recipients, including through the Points of Single Contact, and to provide assistance on the legal requirements and redress procedures applicable in other Member States. Finally, it lays down an obligation on Member States to ensure that discriminatory requirements based on service recipients' nationality or place of residence were put to an end. The latter provision is subject to in-depth analysis in a separate document[28] (hereafter referred to as the Staff Working Paper on Article 20(2)). Many Member States have introduced in the horizontal laws transposing the Services Directive provisions reproducing in full or in part the Services Directive's provision on non-discrimination. Others relied on pre-existing legislation that achieves the same end (see Annex I to the Staff Working Paper on Article 20(2)). The national provisions implementing Article 20(2) of the Services Directive make the prohibition of discrimination on grounds of nationality or residence binding on service providers. It is then for relevant national competent authorities to ensure compliance with this obligation. In order to perform this assessment, a case-by-case analysis is required in all instances.

This Chapter does not examine systematically the implementation of all the provisions of the Services Directive. Member States have dedicated significant resources and efforts to implementing the Services Directive in all its aspects. The Commission services are monitoring the implementation process of the whole Directive. However on this occasion, focus has been placed on certain provisions which are key to improving the situation for establishment and cross-border service provision with particular regard to important economic sectors with growth potential (professional services, construction, crafts and certification services, real estate, retail and tourism).

Chapter III provides an overview of the implementation of these provisions in these sectors. Member States are quoted and examples provided. Chapter IV provides a summary of the analysis of the implementation of the Services Directive per Member State. Issues where action is needed are identified for each of them. More detailed information on individual Member States is given in annex II.

2. Streamlining the regulatory environment for services: freedom of establishment for service providers

Prior to the implementation of the Services Directive, service providers frequently had to be authorised or had to comply with administrative formalities to exercise activities. The Services Directive required Member States to eliminate authorisation schemes and other burdensome requirements when they were not justified or to replace them with less restrictive measures, for instance, notifications or declarations.

As a consequence of this requirement, Member States have removed a significant number of authorisations schemes. Italy has established a general principle that all economic activities that previously required an authorisation can be started upon filing a simple declaration with the competent authorities. In Hungary more than 50 authorisation schemes have been replaced by declarations, for various activities ranging from tourist guides, through private recruitment agencies to property management. In Spain, more than 30 authorisation schemes at national level, in the area of industrial services, have been replaced by declarations, e.g. as regards installing high-voltage lines, high-pressure equipment or lifting equipment. In Greece, Malta and Slovakia a wide range of authorisations have been replaced by declarations.

Furthermore, Member States had to facilitate and streamline procedures in particular so that, (1) where no response to a request for authorisation is provided within the deadline set in the national legislation, authorisation is deemed to be granted (Article 13(4), tacit approval of authorisation) and (2) authorisations should allow providers to exercise their activities throughout the national territory (Article 10(4), nationwide validity of authorisations).

2.1. Prohibited establishment requirements — Article 14 of the Directive

Requirements listed in Article 14 of the Directive are discriminatory or particularly restrictive and thus have to be removed.

Before the implementation of the Services Directive, the Court of Justice had already found these requirements to be incompatible with Article 49 TFEU. As a consequence, Member States had already removed them to a large extent from their legislation.

Where such requirements still existed, Member States have in general repealed them. However, residence requirements, economic needs tests and the involvement of competitors in individual decisions still apply in some Member States.

The obligation imposed on Member States to remove these requirements is precise, clear and unequivocal.

Where Article 14 violations are identified, they must be corrected as a matter of priority.

2.1.1. Prohibition of discriminatory requirements based on nationality or residence (Article 14(1)

Member States have been active in removing requirements based on nationality or residence which are clear violations of EU law.

For instance, Spain has removed nationality and residence requirements for casual trading and the Netherlands for doorstep selling as well as for the inspection of certain heating installations. Austria has removed a nationality requirement for chimney sweeps. In Bulgaria, nationality requirements for cartographers and land registry service providers and for industrial property agents are in the process of being removed. Poland has removed a residence requirement for service providers conducting training for drivers transporting hazardous goods. Romania has removed a nationality requirement for tourist guides.

However, requirements based on nationality or residence are still applied. This means that a service provider has to be a national of the country of service provision or be resident in the country to start a business or, in the case of a company that its registered office has to be located in the Member State. This also concerns cases where the legislation requires the service provider, its staff, persons holding the share capital or members of the provider's management or supervisory bodies to be nationals or to reside in the Member State.

In the professional services sector, in Malta and Sweden patent agents must be residents in the respective Member State.

In the crafts, construction and certification sector, if a nationality requirement has been removed for chimney sweeps in Austria, a residence requirement still applies.

In the real estate sector, both natural and legal persons must have a registered office or place of business in Cyprus.

In the tourism sector, residence requirements have been identified in Italy for ski instructors and in Cyprus and Sweden for car rental services. In particular, Cyprus has introduced this requirement with a new legislation adopted at the end of April 2012.

In the education sector, discriminatory requirements have also been identified as regards driving schools in Cyprus and Poland. A residence requirement was identified in Lithuania for a natural person wishing to provide formal vocational training.

2.1.2. Prohibition of requirements limiting the choice of the service provider between principal and secondary establishment — Article 14(3)

Requirements limiting the choice of the service provider have been repealed in certain regions of Austria and of Italy for ski instructors and in France for veterinarians.

However, service providers still face restrictions as to the type of establishment they want to have in another Member State. This is the case in certain regions of Spain for travel agencies.

In Hungary, the activity of issuing hot meal and holiday vouchers (SZÉP Card) cannot be pursued by a branch office of a foreign company.

In Romania, in the sector of education, a provider already established in another Member State can only choose to set up a branch but is not able to set up another form of establishment.

2.1.3. Prohibition of economic needs tests — Article 14(5)

Access to an activity cannot be subject to ‘economic needs tests’. Purely economic needs tests, i.e. tests that make the granting of an authorisation subject to proof of the existence of an economic need or market demand, an assessment of the potential or current economic effects of the activity or an assessment of the appropriateness of the activity in relation to the economic planning objectives set by the competent authority, are banned.

The obligation for service providers to prove the existence of an economic need or market demand, or to assess the potential or current economic effect of their activity for instance on competitors, or to assess the appropriateness of the activity in relation to economic planning objectives, hinders or severely delays the establishment of newcomers. The economic studies that service providers often have to have carried out are costly and time-consuming.

These requirements were in force in national legislation relating to the retail sector.

They have been removed in Belgium, France, Luxembourg, Italy, the Netherlands and most regions of Spain.

The Netherlands have explicitly introduced in their zoning legislation a ban on the application of economic needs tests.

In France, economic needs tests previously imposed on retail operators in order to be authorised to open new shops or extend existing ones have been abolished.

However, economic needs tests are still applied in Romania, Austria, Greece and the Netherlands.

In Romania an economic needs test and the involvement of competitors in the authorisation procedure are still applied for the opening of large retail stores (exceeding 1 000 m2). Any applications for setting up large retail sale structures must be accompanied by a market impact survey.

In Austria, an economic needs test has to be carried out before the relocation of a tobacco shop can be authorised.

In Greece, the delivery of authorisations for open air casual trading is linked to an economic test connected with the opinion of a committee involving potential competitors.

In the Netherlands, economic criteria are applied for the establishment of certain retail outlets at local level despite a clear prohibition in the zoning legislation.

The absolute prohibition contained in Article 14(5) of the Services Directive does not concern planning requirements that serve overriding reasons relating to the public interest. Sometimes these planning requirements take into account economic data such as demand and supply figures. The use of economic data and criteria as a means to attain other objectives, such as the protection of the environment or town and country planning (e.g. safeguarding of the vitality of city centres) does not constitute an economic needs test within the meaning of Article 14(5) of the Services Directive. In those cases, the use of economic data and criteria for the purpose of serving other reasons in the general interest, such as safeguarding the vitality of city centres or protecting the environment, can be justified if the restrictions are necessary and proportionate and the overriding public interests to be served are not purely economic (that is, they do not protect existing competitors). Such requirements may have to be examined according to other relevant provisions of the Services Directive and the Treaty.

2.1.4. Ban of involvement of competing operators in the decisions of competent authorities — Article 14(6)

The direct or indirect involvement of competing operators, including within consultative bodies, in the granting of individual authorisations or in the adoption of other decisions of the competent authority is forbidden by Article 14(6) of the Services Directive. This prohibition does not concern the consultation of organisations, such as chambers of commerce or social partners, on matters other than individual applications for authorisations, or the consultation of the public at large. The involvement of competing operators in an individual decision, for instance an authorisation, goes against the basic goal of favouring the market entry of newcomers.

In the retail sector, legislation governing the setting up of large-scale retail establishments in certain regions of Spain and in France have been amended to remove the involvement of competitors in decisions concerning individual operators.

In France, competing operators were previously part of local committees granting authorisations for the opening of retail shops. They have been replaced in such committees by independent experts.

However this requirement has been maintained in this sector in Austria, Romania and in Greece.

In Greece the opinion of a committee is required for outdoor casual trading. The requirement for participation of the Trade association in the authorisation procedure was abolished, nevertheless other potential competitors, such as the Federation of professionals and craftsmen of the Prefecture still have to be involved.

In Romania a ‘socio-economic commission’ has to be involved in the examination and approval of applications to set up large retail outlets. This commission includes a representative of the economic operators in the closest neighbourhood of the large retail outlet to be established.

In Austria, the regional commission of tobacconists, which consists also of competitors of a service provider, has to be consulted.

In the professional services sector, competitors are involved in individual decisions in Sweden and in France.

In Sweden, lawyers already established in Sweden have to confirm the good reputation of candidate lawyers wanting to establish themselves in Sweden.

In France, committees granting authorisation to those organising and managing events include competitors.

In the crafts, construction and certification sector, in Germany boards consisting partly of competing operators still have to confirm to the competent authority that an applicant structural inspection engineers fulfils all the necessary application requirements for being authorised.

2.1.5. Ban of the obligation to obtain a financial guarantee or insurance from an operator established in the same Member State — Article 14(7)

This obligation requires service providers established in one Member State to obtain a financial guarantee or insurance in the Member State where they want to set up a secondary establishment. This may force them to duplicate financial guarantees or insurance and could be very costly.

The obligation to obtain financial guarantees in the Member State of establishment has been removed in Greece for the tourism sector and in numerous sectors in Portugal, such as professional services, construction, real estate and tourism.

In Greece, in the tourism sector, the obligation to obtain an execution bond from the Public Deposit and Loans fund or a bank established in Greece has been changed and bonds issues by banks established in other Member States are equally accepted.

In Portugal, amendments to sector-specific legislation for construction, real estate and tourism for example, systematically include clauses specifying that the required insurance for established service providers can also be hired from any insurance provider in the EEA. The implementation of Article 14(7) of the Services Directive has also been ensured through the horizontal law.

In the professional services sector an obligation for accountants, tax advisers and patent attorneys to obtain insurance from an operator who is authorised to exercise in Austria has been identified.

In the tourism sector, in Cyprus the law provides that for the grant of a licence to establish and operate a travel agency, a deposit of guarantee by the service provider is required.

2.1.6. Ban of the obligation to have been previously registered or to have previously exercised the activity for a given period in the same Member State — Article 14(8)

By nature, requiring previous experience has the effect of hindering newcomers from entering the market.

This requirement has been identified in Greece in the professional services sector and in Hungary in the retail sector.

In Greece, accountants and architects/engineers are required to have experience in Greece in order to be promoted from one category giving access to a level of activities to another category giving access to more activities.

In Hungary, one of the conditions regarding the issuance of hot meal and holiday vouchers (SZÉP Card) consists in the entity having exercised an activity falling under the same category in the Hungarian Income Tax Law for at least two years.

2.2. Requirements subject to evaluation — Article 15 of the Directive

Member States had to assess a number of requirements that are frequently present in national regulations applicable to services. These requirements have been dealt with by the Court of Justice on numerous occasions. Some were found to be compatible with the fundamental freedoms, depending on circumstances and sectors, in so far as they were suitable to pursue valid public interest objectives and proportionate.

Member States were required to asses those requirements. They could only maintain them if they concluded that, in spite of their restrictive effects, the requirements were justified and proportionate. Member States had to report to the Commission and the other Member States on the results of their assessment.

Very often, Member States chose to preserve the status quo and did not go for a more ambitious implementation of the Directive which would have produced greater economic impact.

The most common requirements maintained by Member States are the obligation to take a specific legal form, often coupled with limitations on shareholding, i.e. ownership of shares in companies is restricted in varying degrees to members of the profession. This concerns in particular the professional services sector. Quantitative and territorial restrictions, mainly for retail are also frequent but they generally concern the sale of very specific products (tobacco, alcohol) or certain types of selling (casual trading, market stalls, doorstep selling).

2.2.1. Quantitative and territorial restrictions — Article 15(2)(a)

Quantitative and territorial restrictions have been removed or replaced with less restrictive measures in the professional services sector in France, in the retail sector in Greece and in the tourism sector in certain regions in Italy (ski schools) and Austria (ski schools). Restrictions have also been lifted in Spain (petrol stations).

In France, the profession of ‘avoué’ (specialised attorneys who were the only ones authorised to submit writs to the appeals courts), for which quantitative restrictions were imposed, has been merged with that of lawyer, where no such restrictions exist.

In the retail sector, however with special reference to the sale of particular goods (mostly alcohol and tobacco) or to certain types of selling, quantitative or territorial restrictions have been maintained in Belgium, France, Greece, Hungary, Italy, Luxembourg, the Netherlands and Spain.

In the tourism sector, requirements of this kind have been identified in certain regions in Austria (ski guides), in Cyprus (catering) and in certain regions of Italy (ski schools).

2.2.2. Obligation for the service provider to take a specific legal form — Article 15(2)(b)

Requirements that service providers take a specific legal form are serious obstacles to the establishment of service providers from other Member States. They might be forced to change their legal form or structure and adapt their business models. There is a wide diversity of legal form requirements ranging from the obligation to exercise the activity as a natural person to limitations regarding the legal form available for a legal person. For example, in certain Member States, lawyers can only exercise as natural person, in others they can also exercise under professional partnership while in other Member States the setting up of law firms is possible. In Member States where law firms are authorised, only certain legal forms may be available.

Restrictions on legal forms are closely related to shareholding requirements. For instance, when there is a requirement that the activity can only be exercised as a natural person or in a partnership between professionals, this amounts to requiring that 100% of the capital is owned by the professionals thus excluding non-professional third parties.

Legal form requirements are often but not exclusively found in the professional services sector where the implementation of the Directive lead to the removal of legal form requirements, such as the obligations imposed on providers of certain services to operate as natural persons or under specific legal forms.

This is the case in Belgium for debt recovery activities, in Denmark for real estate agents and accountants and in Portugal for real estate agents.

In other Member States, legal form requirements have been made less stringent.

This is the case in Poland where lawyers and tax advisers may now exercise their activities as a joint-stock limited partnership while previously they could only exercise them as natural persons or partnerships. In Germany, architects and engineers have now a free choice of corporate structure. In France, accountants can now provide their services under any legal form except as commercial companies. Changes are pending in Cyprus for architects and engineers who can only exercise their activities as natural persons. The draft legislation proposes that these activities can also be exercised as a company limited by shares. Italy has made requirements less stringent for all regulated professions: recent reforms make several legal forms available, among which limited liability companies.

Requirements limiting company structures are still in place in many Member States for professional services: Austria (engineers, accountants, patent agents, tax advisers), Belgium (lawyers, architects, accountants, tax advisers and driving schools), Bulgaria (lawyers, architects, engineers holding specific company titles), the Czech Republic (lawyers), Denmark (land surveyors, lawyers), France (lawyers, veterinarians), Germany (patent agents), Italy (all regulated professions even though requirements were made less stringent), Malta (architects, engineers), Poland (lawyers), Portugal (lawyers), Romania (lawyers, patent agents, mediators, insolvency practitioners, veterinarians), Slovakia (lawyers, tax advisers, mediators), Slovenia (lawyers and collecting societies) and the United Kingdom (lawyers).

For example, in the United Kingdom, advocates in Scotland and barristers in Nothern Ireland can only operate as sole practitioners, ruling out the possibility to exercise this activity through partnerships or company practices.

In Bulgaria, lawyers can only exercise their activity as sole practicioners, in a partnership or through a law firm composed of lawyers.

In Slovenia, collecting societies must be non-profit organisation.

In the retail sector Italy (itinerant sales) and in the tourism sector Spain and Portugal (travel agents) have abolished such requirements.

In the crafts, construction and certification sector, an obligation to take a specific legal form has been maintained in Austria (chimney sweeps), Bulgaria (maintenance, repair and modification of high-risk equipment) and Italy (crafts).

In the real estate sector, this requirement applies for land surveyors in Belgium, Denmark, France and Slovakia.

2.2.3. Requirements relating to the shareholding of companies — Article 15(2)(c)

Such requirements refer for instance to the obligation to have specific qualifications in order to hold shares in a company. There is a wide ranging diversity of shareholding requirements ranging from 100% capital requirement to be held by a qualified professional to 51% of capital and/or voting rights to be owned by qualified professionals (leaving then 49% to third parties, i.e. non-professionals). Sometimes, the capital or part of the capital may be held by professionals having the same qualifications or by professionals having related qualifications. For instance, in a law firm, the capital may be owned by related legal professions.

Shareholding requirements are very often closely linked to specific legal form requirements.

They are very often applied in the professional services sector. However, Luxembourg abolished a shareholding requirement in the craft/construction and certification sector (before, the qualified person/owner needed to have a majority share).

In the professional services sector, shareholding requirements have been made less stringent in certain Member States. Major changes have been made to raise the amount of capital that can be owned by third parties in companies providing professional services. For instance, in France the part of the capital which can be held by third parties in professional partnerships has raised to 49 % from the previous 25%. The same requirement applies in Spain as regards professionals exercising their activities in a professional partnership.

However, shareholding requirements still apply in this sector in Austria (accountants, tax advisors, engineers, patent agents), Belgium (lawyers, architects, accountants and tax advisors), Bulgaria (lawyers and designers), Cyprus (lawyers), the Czech Republic (construction engineers, architects), Denmark (lawyers), Estonia (lawyers), France (lawyers, accountants, veterinarians, architects, patent agents, land surveyors), Germany (lawyers, tax advisors, patent agents, architects, engineers), Greece (lawyers, accountants), Italy (all regulated professions), Lithuania (lawyers), Luxembourg (lawyers), Malta (lawyers, accountants, auditors, architects, engineers) , the Netherlands (lawyers, accountants), Poland (tax advisors and patent agents), Portugal (lawyers, accountants exercising in a professional partnership), Romania (lawyers, patent agents,insolvency practitioners), Slovakia (lawyers, insolvency practitioners, tax advisors, architects, engineers), Slovenia (lawyers), Spain (all regulated professions exercising in a professional partnership), Sweden (lawyers, accountants) and the United Kingdom (lawyers, auditors).

In the United Kingdom, 75 % of the shares in a Legal Disciplinary Practice (LDP) must be held by legally qualified persons. Furthermore, in Scotland and Northern Ireland, all shareholders of a solicitor’s office are required to be solicitors.

In Portugal, in professional firms providing legal and accountancy services, 100 % of the capital must be held by lawyers or the respective professionals.

In Slovenia, only lawyers may be shareholders or owners of law firms.

In the real estate sector, capital requirements have been identified in France where land surveyors have to hold 51% of the capital of the company.

In the crafts, construction and certification sector, such requirements have been identified in Italy (crafts) and Portugal (construction).

Minimum capital requirements, i.e. the obligation to have a minimum amount of capital in order to start a specific activity (whereas a general minimum shareholding requirement such as for limited liability companies of any kind does not fall into this category), have been abolished in the tourism sector, for instance for travel agencies in Belgium (except for the Flemish region), Ireland, Portugal and Spain.

2.2.4. Ban on having more than one establishment — Article 15(2)(e)

Requirements limiting the provider to only one establishment in a given Member State are rare. However, in Luxembourg, lawyers can only open one office (‘cabinet’) in the territory.

2.2.5. Obligation to apply fixed, minimum or maximum tariffs — Article 15(2)(g)

Major progress has been made as regards compulsory tariffs.

Malta removed compulsory tariffs for all services activities.

Other Member States have removed tariffs for specific service activities.

For professional services, in Italy and in Greece, fixed tariffs have been abolished by a horizontal law which may need to be reflected in sector-specific legislation. In Spain professional associations are no longer allowed to set indicative tariffs (compulsory tariffs had already been abolished). Fixed tariffs have also been abolished for specific services such as architects’ services in Belgium and partly in Germany, for veterinary services in Romania, for financial auditors in Bulgaria,

Fixed tariffs have also been removed for diverse services: employment agency services in Ireland, waste management services in Belgium, catering services in Hungary, and tourist and mountain guide services in Italy.

By contrast, fixed tariffs have been maintained in the professional services sector in Bulgaria (lawyers, architects, engineers in investment design, cartographers and cadastre service providers, veterinarians), Cyprus (lawyers), Germany (veterinarians, insolvency administrators, architects, engineers), Poland (lawyers and patent agents), Slovakia (insolvency administrators), Slovenia (lawyers, insolvency practitioners) and Sweden (professional housing agents).

In the tourism sector, compulsory tariffs have been identified in Cyprus and Italy, mostly in tourism related professions.

In the crafts, construction and certification sector, in Germany, many expert services, mainly related to the construction of buildings, have to respect specific tariffs (‘Sachverständigentarife’).

2.3. Tacit approval of applications for authorisation — Article 13(4) of the Directive

Tacit approval of applications for authorisation, i.e. silence from the administration means approval, is an important way of cutting red tape as it means that an authorisation will be deemed to have been granted if an application has not received any response within a set time period.

Most Member States have introduced the principle of tacit approval in their horizontal legislation implementing the Services Directive. However, in order to provide legal certainty and transparency to service providers, these Member States may have to modify accordingly sector –specific legislation. Other Member States have introduced this principle directly in sector specific legislation.

Irrespective of the way this clause has been implemented; it is important that Member States ensure that cases where tacit approval does not apply are limited to matters duly justified by overriding reasons relating to the public interest.

Where Article 13(4) violations are identified, they must be corrected as a matter of priority.

Tacit approval ensures that silence from the administration means approval, In order to ensure that authorities have the time necessary to take a decision, it is for each national legislator to set the time period needed for examining an application, taking into account the complexity of the application. In any event, the authorisation procedure must be processed within a reasonable period. The Directive also allows Member States to put in place different arrangements than the acceptance of an application by tacit approval, if this can be justified by overriding reasons relating to the public interest. However, different arrangements should be the exception rather than the rule, and should not be applied on a case-by-case basis.

Most Member States have introduced the principle of tacit approval in their horizontal legislation implementing the Services Directive. Germany, Portugal, Romania, Slovenia and Spain have provided for tacit approval in other horizontal legislation (e.g. on general administrative procedures). In some of these Member States the clause introduced in the horizontal law should prevail over sector-specific legislation that does not lay down any rules on tacit approval or unless sector-specific rules contain explicit provisions to the contrary (e.g. Estonia, Finland, Ireland and Latvia). In Italy, the principle of tacit approval has been set in the laws regulating the administrative system as a horizontal general principle before the adoption of the implementing law, which reiterates and confirms it. The principle has a 'horizontal and national' set of exceptions, and some of them are set out in special sectoral provisions derogating from the general principle. The situation is however complicated by the fact that many sectors fall under the competence of the regions where the principle is not systematically provided for.

For other Member States the horizontal law just lays down the principle of tacit approval, which then has to be made applicable specifically in sector-specific legislation (e.g. Austria, the Czech Republic, Germany, Romania and Slovakia). Luxembourg has introduced in its horizontal law a list of sectors/laws to which the principle of tacit approval does not apply (e.g. for waste management and the fight against pollution). In the Netherlands: the law provides that the decision will take effect on the third day after the deadline for the administration to take a decision has expired.

Three Member States, namely Denmark, Fr ance and Sweden, have not adopted horizontal rules on tacit approval and seem to apply the principle only partially or not at all. In Sweden sector-specific legislation has been amended in very few sectors in order to provide for tacit approval. In Denmark several laws have been identified where tacit approval does not apply such as in some construction or craft related activities. In France, there are laws providing for tacit approval (e.g. registration of travel agents and tour operators, collecting societies and modelling agencies) but this principle is not imposed in a systematic way.

2.4. Nationwide validity of authorisations — Article 10(4) of the Directive

The Directive stipulates that the territorial scope of authorisations should extend to the entire territory of a Member State. This is an important way of cutting red-tape.

The nationwide validity of authorisations is particularly relevant for Member States with decentralised administrative structures. If, in a Member State, the granting of an authorisation for a given activity is within the remit of regional or local authorities, the Directive does not require Member States to change this. However, the mere fact that the competence to grant authorisations lies with local or regional authorities is not in itself a valid reason justifying a territorial limitation of the validity of the authorisations.

Rather, once an authorisation has been granted by the competent regional or local authority (for example of the place where the provider sets up his establishment), the authorisation will, in principle, have to be recognised by all other authorities of the Member State.

Member States must ensure that cases where nationwide validity of authorisations does not apply are limited to matters duly justified by overriding reasons relating to the public interest.

Where Article 10(4) violations are identified, they must be corrected as a matter of priority.

Authorisations that are not granted for the entire territory of a Member State but only for a specific part are likely to hinder the exercise of service activities. This is why, as a general principle, the Directive stipulates that the territorial scope of authorisations should extend to the entire territory of a Member State. However, Member States may limit the territorial scope where justified by overriding reasons relating to the public interest.

This requirement is particularly relevant for Member States with decentralised administrative structures. The Commission has therefore examined the implementation of this provision in the six Member States of the Union with a federal or regional structure.

In Austria and Germany there is no horizontal rule, but the nationwide validity of authorisations can be found in sector-specific legislation, which mainly provides for automatic recognition or the possibility of recognition of authorisations obtained in another part of the territory.

Italy has expressly stipulated the nationwide validity of authorisations in the horizontal law implementing the Services Directive and the principle can also be found in sector-specific legislation. However, a few provisions where the principle is not applied have been identified in both national and regional legislation on tourist guides and travel agencies. In Spain, the horizontal law implementing the Services Directive also stipulates that the geographic validity of authorisations can be limited to part of the Spanish territory only for overriding reasons of public policy, public security, public health or the protection of the environment. Other overriding reasons relating to the public interest can, however, be relied on to limit the geographic validity of authorisations linked to a physical establishment.

In Belgium, the principle of nationwide validity has been introduced in the horizontal legislation, but does not seem to be guaranteed throughout the country as an exception to this principle is allowed for authorisations granted by authorities of the regions, communities, provinces and municipalities. As a consequence, nationwide validity only applies if the authorisation is granted by a federal authority. All regional laws identified limit the scope of the authorisation to their own territory and no mechanisms have been set up to recognise authorisations issued in another part of the country.

In the United Kingdom the horizontal law implementing the Services Directive contains an important exception whereby the territorial scope of an authorisation issued by an authority whose functions relate only to parts of the United Kingdom is limited to those parts.

2.5. Total prohibition of commercial communications — Article 24 of the Directive

Providers need to promote their services in order to access new markets. The Directive requires that Member States remove all total bans on commercial communications by regulated professions.

The Court of Justice has ruled that Article 24 requires Member States to remove total prohibitions on using one or more forms of commercial communication such as advertising, direct marketing or sponsorship. However, Member States retain the right to lay down targeted prohibitions related to the content or method of a form of commercial communication provided that they are justified and proportionate for the purpose of ensuring the independence, dignity and integrity of the profession, as well as professional secrecy.

In the light of the interpretation given by the Court of Justice, where a total ban on a form of commercial communication is identified, it must be corrected as a matter of priority.

Member States had to remove all total bans on commercial communications by regulated professions, while at the same time ensuring that commercial communications are compliant with the independence and integrity of the professionals. Commercial communication within the meaning of the Directive covers any form of communication designed to promote, directly or indirectly, the goods, services or image of an undertaking, organisation or person engaged in commercial, industrial or craft activity or practising a regulated profession.

The Court of Justice has ruled, in its first judgment on a provision of the Services Directive (Case C-119/09), that Article 24 of the Directive precludes national legislation which totally prohibits the members of a regulated profession, such as qualified accountants, from engaging in canvassing. According to the Court, Article 24 requires Member States to remove total prohibitions on using one or more forms of commercial communication such as advertising, direct marketing or sponsorship. However, Member States retain the right to lay down targeted prohibitions related to the content or method of a form of commercial communication provided that they are justified and proportionate for the purpose of ensuring the independence, dignity and integrity of the profession, as well as professional secrecy.

Most Member States have adopted measures to implement these obligations, mainly by implementing Article 24 in their horizontal law.

In ten Member States questions concerning compliance of the national legislation were identified. In nine of these Member States, compliance issues concern the legal profession (Bulgaria, Cyprus, Estonia, Greece, France, Ireland, Lithuania, Portugal and the United Kingdom), and three Member States have maintained restrictions on commercial communications by veterinarians (Cyprus, France and Portugal). Furthermore, restrictions have been identified in Cyprus regarding commercial communications by engineers, in France regarding the accounting sector and in Germany in one Land regarding surveyors.

3. Boosting cross-border trade — Freedom to provide services clause

3.1. Introduction

The freedom to provide services clause contained in Article 16 of the Services Directive ensures free access to and free exercise of a service activity in the territory of a Member State for providers established in another Member State. This means that national requirements should not be applied to them unless they are non-discriminatory, justified for reasons of public policy, public security, public health or the protection of the environment and proportionate. Article 17 of the Services Directive contains a list of derogations from Article 16.

The vast majority of Member States decided to implement the freedom to provide services clause in a horizontal law and to amend sector-specific legislation, while some Member States chose to implement it through sector-specific legislation only.

In Member States that have opted for horizontal legislation to implement the Services Directive, sector-specific legislation would, as a general rule, seem to prevail over the horizontal implementing law. In order to provide legal certainty and transparency to service providers, these Member States have to modify accordingly sector –specific legislation. Most Member States have already adopted or are in the process of adopting such amendments.

Irrespective of the way the freedom to provide services has been implemented, there is a need to ensure that the legal framework is adapted to facilitate cross-border service provision and that there is legal certainty as to which requirements apply to service providers who are established in another Member State and want to provide cross-border services. This requires in particular that all relevant service sectors have been addressed and barriers removed. .

The implementation of the freedom to provide services clause is on-going with Member States still amending sector specific legislation. Member States have, in general, taken a conservative approach to the implementation of the freedom to provide services clause. Service providers are often uncertain about the rules applicable to them or are required to comply with virtually all the legislation of the Member State where they wish to provide their services. The Directive would have a much greater economic impact if the freedom to provide services is used to its full extent.

3.2. Implementation of the freedom to provide services clause by Member States

Member States can be grouped into two categories depending on how they chose to implement the freedom to provide services clause:

· Member States that have introduced a freedom to provide services clause in a horizontal law: Belgium (Walloon region and Brussels Capital region), Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

· Member States that have not introduced a freedom to provide services clause in a horizontal law and chose to implement it through changes to sector-specific legislation only: Austria, Belgium (Flemish region), France, Germany and the Netherlands.

3.3. Issues arising from the implementation of Article 16 of the Directive

3.3.1. Member States that have introduced a freedom to provide services clause in their horizontal law

The vast majority of Member States chose to implement the freedom to provide services clause through horizontal legislation.

In most cases, they copied almost literally the text of Article 16, including the four overriding reasons relating to the public interest that could justify imposing national requirements on cross-border service providers: public policy, public security, public health and the protection of the environment, and the principle of proportionality.

However, some Member States added public interest objectives to the four ones listed in Article 16 or used different terminology to implement Article 16. For example, Sweden added animal protection to the four overriding reasons relating to the public interest. In some Member States, the proportionality test is not explicitly mentioned (Hungary, Malta, Poland and Slovakia).

A horizontal clause is a positive signal regarding the commitment of national authorities of the Member State concerned to give full effect to the principle of freedom to provide services and a clear point of reference for the authorities and courts applying and enforcing national law. While the Commission encouraged Member States to implement the freedom to provide services clause through horizontal legislation, it likewise pointed out to Member States that they may also need to adapt sector-specific legislation to avoid conflicting national measures. Sector-specific legislation should distinguish between requirements applicable to service providers wishing to establish and those applicable to service providers not wishing to establish in the host Member State.

The information available to the Commission regarding national implementation confirms that in Member States sector-specific legislation would generally prevail over the free movement clause introduced by the horizontal law. In practice this means that, unless sector-specific legislation is expressly amended, the free movement clause would not be effective and cross-border service providers would, in principle, have to comply with the same requirements as providers wishing to establish.

For instance in Italy, while implementation at national level is satisfactory on the whole, most of the legislation regulating economic activities lies within the competence of the regions, and no specific provision for cross-border services has been introduced by the regions. In many other Member States, legislation does not always, if at all, state which requirements apply to service providers wishing to become established and which to those wishing to operate on a cross-border basis (e.g. in Bulgaria, Finland, Ireland, Latvia, Poland, Romania, Slovenia and Sweden).

Some Member States have issued guidelines on implementation at national level for their competent authorities (Sweden and the United Kingdom). However, it would seem that as a general rule it would be difficult if not impossible for competent authorities to use the freedom to provide services clause to set aside a conflicting legal provision in sector-specific legislation. The final say on such matters would in general seem to rest with the courts.

Other Member States decided to strengthen the horizontal freedom to provide services clause by explicitly providing for the horizontal clause to take precedence if sector-specific legislation conflicts with it (Belgium (Walloon region and Brussels Capital region), the Czech Republic, Hungary, Malta, Portugal and Spain).

This approach is meant to ensure that an administrative authority would be entitled to give priority to the freedom to provide services clause over the conflicting rule unless otherwise stipulated in the sector-specific legislation. In Belgium and the Czech Republic, guidelines to explain this mechanism have been issued.

However, to date there is no information about the practical application of such a legal framework and some doubts remain as to the effects of the power conferred on national authorities not to apply a piece of national legislation on a case-by-case basis. Additionally, this rather complex situation raises issues of transparency and legal certainty. Again, it appears that a final decision as to whether a measure is justified or proportionate could only be taken in a judicial procedure.

In order to address this problem of possible conflict within a national legal order, most Member States, in parallel with the horizontal clause, have adopted ‘omnibus’ laws amending sector-specific legislation. Usually for activities within their scope these sector laws distinguish between the requirements applicable to service providers wishing to establish themselves and those providing cross-border services.

For example, Greece expressly stipulates that cross-border providers of tourism services are not subject to the authorisation required for established providers but to a declaration requirement. In the Czech Republic and Malta cross-border providers no longer have to obtain a trade licence. In the craft, construction and certification sector Bulgaria, Estonia and Luxembourg have replaced authorisation schemes with notification or declaration schemes for service providers from other Member States. Portugal is in the process of undertaking a major reform of all its sector-specific legislation to specifically distinguish establishment requirements from those imposed on cross-border service providers

3.3.2. Member States that have implemented the freedom to provide services clause exclusively through changes in sector-specific legislation

The approach of implementing Article 16 solely through changes in sector-specific legislation means that Member States had to assess all relevant sector-specific legislation to decide whether the requirements imposed on cross-border service providers were justified by one of the public interest reasons set out in Article 16 and were proportionate.

As indicated above, a horizontal clause does not by itself provide the required legal certainty. However, a purely sector-based approach risks leaving unaddressed sector specific legislation, and conflicting rules.

3.4. Rules on future legislation — Article 39(5) of the Directive

The Services Directive includes rules to safeguard service providers’ rights in the future. Member States must notify the Commission of requirements they intend to impose on cross-border service providers and justify them under the four reasons stated in Article 16 and ensure that these requirements are proportionate. The Commission communicates them to the other Member States.

This obligation is a constant reminder that new legislation should not impose unjustified or disproportionate requirements on cross-border service providers and should ensure the long-lasting effect of the free movement principle.

Bulgaria, France, the Netherlands and Lithuania have adopted internal rules on legislative drafting, which require the government bodies when drafting new legislative proposals to ensure that new proposals comply with the freedom to provide services clause

3.5. Use of derogations provided for in Article 17 of the Directive

Some Member States seem to have made broad use of the derogations from Article 16 allowed by Article 17 in relation either to specific services, such as services of general economic interest, or to matters covered by other EU law instruments, such as Directive on the recognition of professional qualifications (2005/36/EC) or the Statutory Audit Directive (2006/43/EC).

Bulgaria has excluded from the application of Article 16 all matters relating to financial audit and services provided by persons with recognised qualifications, Slovakia has excluded all the services provided by auditors as well as services involving the verification of measuring instruments, and Romania has excluded architects and veterinarians. Sweden and Denmark have adopted a broad interpretation of the derogation referring to intellectual property rights by excluding from the scope of Article 16 a number of services related to the management of intellectual property rights such as the services of patent agents in Sweden or those of collective management societies in Denmark and Sweden.

3.6. Imposing specific requirements listed in Article 16(2) on cross-border service providers

The examples of requirements listed in Article 16(2) have already been found incompatible with the freedom to provide services by the Court of Justice in a number of cases.

Member States have made considerable efforts to abolish or replace these requirements with less restrictive measures. However, obstacles to the freedom to provide services still apply to many service activities.

Article 16(2) a) of the Directive prevents a Member State from requiring a service providers to be established in its territory to provide a service. Such a requirement makes cross-border provision of services impossible. This requirement has a similar effect to the condition