EN Official Journal of the European Union C 318/109

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Towards a better functioning Single Market for services — building on the results of the mutual evaluation process of the Services Directive’

COM(2011) 20 final

2011/C 318/18

Rapporteur: Martin SIECKER

On 27 January 2011, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union (TFEU), on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Towards a better functioning Single Market for services — building on the results of the mutual evaluation process of the Services Directive

COM(2011) 20 final.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 23 June 2011.

At its 473rd plenary session, held on 13 and 14 July 2011 (meeting of 13 July), the European Economic and Social Committee adopted the following opinion by 134 votes to two with three abstentions.

1. Conclusions and recommendations

1.1 The Committee supports the Commission's desire to improve the functioning of the single market for services: it goes without saying that obstacles in the form of discriminatory, unjustified or disproportionate requirements should be removed. The Committee therefore welcomes the initiative to modernise public administrations by setting up ‘points of single contact’, and can only applaud the development of administrative cooperation in cross-border matters. However, this cooperation also needs to be extended to policy areas where compliance with obligations is at stake.

1.2 The EESC considers the Commission's conclusions on the impact of the Services Directive and on the functioning of the services sector to be premature. The directive has been in force for only a few years. Not all the Member States are equally satisfied with the directive and they need to implement it in their own legislation in their own way; these are complicating factors that are not taken into account in the communication. The services sector is large and complex, with many different branches, and it will take time to streamline the single market for services by means of European legislation.

1.3 The Services Directive was drafted under the old treaty, in which economic interests were still the top priority in the single market. Under the Lisbon Treaty, other interests are regarded as equivalent, rather than subordinate, to economic interests. It is interesting to look at how legislation and case-law developed under the old treaty relates to the new treaty. In its opinion on the Single Market Act, the EESC recommended that the Posting of Workers Directive should be examined in the light of the new treaty. It would be interesting to see whether an examination of the judgments of the ECJ that give primacy to the single market (old Article 49) could shed new light on the matter.

2. Gist of the Commission document

2.1 Although services constitute a significant economic force in the European Union, the Commission feels that the services market is not yet achieving its full potential. For example, in its communication on the Europe 2020 strategy (1), it stresses that a more integrated single market for services must be created on the basis of the Services Directive, and, in its communication ‘Towards a Single Market Act’ (2), it highlights the need to further consolidate the single market for services. This, it claims, is necessary to help businesses in the services sector to grow and to better position themselves globally, so that they can create more jobs.

2.2 The adoption of the Services Directive in December 2006 (3) and its subsequent implementation marked the start of a process of improving the functioning of the single market for services: the European Commission simplified the regulatory framework, and the Member States adopted a wide range of implementing legislation to abolish hundreds of unjustified or disproportionate requirements throughout the EU.

2.3 The Services Directive established a ‘mutual evaluation process’ as a peer review mechanism. In 2010, the Member States plus Liechtenstein, Norway and Iceland evaluated almost 35 000 statutory requirements, most of which had been imposed on businesses in the services sector. These included requirements on establishment (such as authorisation schemes, territorial restrictions or capital ownership restrictions) and requirements relating to the cross-border provision of services (such as registration, notification or insurance obligations).

2.4 The most striking conclusion drawn from this process is that, in certain services sectors, the single market continues to be a work in progress. According to the Commission, the main issue is that, to date, not all discriminatory barriers have been removed by legislative means, and that the laws that do remove barriers have not yet been fully implemented, or are not being properly enforced, in all Member States. It also claims that the Member States are still making wide use of the possibility to reserve certain service activities for certain operators.

2.5 In order to move forward with the single market for services, the Commission proposes a number of measures to be implemented in the next 18 months, including: — a ‘performance check’ of the single market for services, in order to assess the situation from the perspective of users (businesses, the self-employed, consumers); — targeted actions aimed at tackling remaining unjustified regulatory barriers hindering the potential of the single market for services; — targeted actions to make the single market for services a more concrete reality on the ground. The Commission will assess the effectiveness of means of redress available at national level to service providers for breach of their single market rights by national administrations and decide on next steps by the end of 2012.

3. General comments

3.1 The Commission quite rightly states that the single market for services is not an end in itself but a tool to improve European businesses' and citizens' daily life and welfare. It would be advisable to take a more in-depth look at the contribution of the single market to these horizontal objectives. The Services Directive was drafted under the old treaty, in which economic interests were still the top priority in the single market. Under the Lisbon treaty, other interests are regarded as equivalent to economic interests, rather than subordinate, as previously. It is interesting to look at how legislation and case-law developed under the old treaty relates to the new treaty. In its opinion on the Single Market Act, the EESC recommended that the Posting of Workers Directive should be examined in the light of the new treaty. It would be interesting to see whether an examination of the judgments of the ECJ that give primacy to the single market (old Article 49) could shed new light on the matter.

3.2 The evaluations carried out so far have focused too closely on the regulations themselves and – partly as a result of that – have been too ‘technocratic’ in nature; for example, a Member State's regulation of certain professions may very well be motivated by a desire to maintain the quality of the service provided, and thus be in the interests of public welfare. The fact that such a regulation is seen as a barrier to the freedom to provide cross-border services does not automatically mean that the ‘barrier’ needs to be removed: in such cases, consumers' and employees' interests may be given greater weight than considerations relating to economic freedoms. Only if a barrier really is based on unjustified and discriminatory grounds should it be abolished.

3.3 The EESC considers the Commission's conclusions on the impact of the Services Directive and on the functioning of the services sector to be premature. The directive has been in force for only a few years. Not all the Member States are equally satisfied with the directive and they need to implement it in their own legislation in their own way; these are complicating factors that are not taken into account in the communication. The services sector is large and complex, with many different branches, and it will take time to streamline the single market for services by means of European legislation.

3.4 The document refers to both freedom of establishment and the freedom to provide cross-border services, which are two different things. Requirements relating to establishment are primarily national competences, whereas cross-border services in the context of economic freedoms are covered by EU legislation. It is up to the Member States to strike the right balance here.

3.5 It would also be advisable to draw up a clear definition of what is included in ‘cross-border services’ and how that relates to the data given in the communication. The Commission states that the Services Directive covers 40 % of EU GDP, and then, later on, that the services sector accounts for around 70 % of EU GDP. That suggests that well over half of the services market comprises cross-border service provision, which is highly debatable.

3.6 The communication does contain a few assumptions that either cannot be tested or are at best debatable, and that the Commission is rather too quick to count on: in section 5.1, the Commission expresses high expectations regarding the outcome of the ‘performance check’ already being undertaken with the Member States, despite the fact that some Member States are actually hindering the completion of the single market for services.

3.7 The Commission also states, in section 2, that conservative estimates predict that the implementation of the Services Directive has the potential to bring about economic gains of up to EUR 140 billion, representing up to 1.5 % of EU GDP. This figure can be traced back to a study undertaken by the Netherlands Bureau for Economic Policy Analysis in 2007, shortly after the Services Directive was introduced and before the expected impact of the directive had been undermined by the crisis that later unfolded. It would therefore seem that this statement, too, needs to be qualified somewhat.

3.8 There are some doubts regarding the assessment, in sections 3 and 4, of the mutual evaluation process carried out in 2010: the Commission's communication states that this mutual evaluation has had an ‘unprecedented Single Market effect’ within Member States, without making it clear what that effect comprises. It may have given rise to a great deal of activity within parts of the Member States' civil services, but what effect and practical impact has it had on the single market for services?

3.9 The European Commission has not made its position clear concerning the possible hierarchy in the various horizontal objectives the European Union is aiming to achieve, as is evident, inter alia, from the vagueness concerning the Member States' authority to implement regulations in the interest of public welfare that may have restrictive effects. Questions concerning this authority deserve broader public discussion, not least given the lack of public support for the European project as raised in the Monti report.

4. Specific comments

4.1 The Committee supports the Commission's desire to improve the functioning of the single market for services: it goes without saying that obstacles in the form of discriminatory, unjustified or disproportionate requirements should be removed. The Committee therefore welcomes the initiative to modernise public administrations by setting up ‘points of single contact’, and can only applaud the development of administrative cooperation in cross-border matters. However, this cooperation also needs to be extended to policy areas where compliance with obligations is at stake (4).

4.2 Under the Services Directive, only electronic points of single contact are required, but a number of Member States have also set up physical points of single contact: these constitute a different, more proactive and more extensive service for businesses that want to launch activities on markets in other Member States. In the Committee's view, these contact points need to be easily accessible, including in a foreign language, and the option should also be provided of e-registration. The EESC is interested in the differences in businesses' experience and perceptions of these different approaches, and requests the Commission to examine whether these physical contact points are more popular and more highly valued than the electronic versions.

4.3 The assertion that the services sector is one of the most innovative and dynamic sectors and therefore has the potential to make a significant contribution to economic growth needs to be put into context. The Services Directive does, of course, make a significant positive contribution to employment trends in the EU, and a considerable number of high-quality jobs have been created, but many of the ‘new’ jobs in the services sector are low-skilled, repetitive and poorly paid; the increase in the number of working poor – a phenomenon that a number of studies have linked to these new services – does not help to increase the welfare of European citizens.

4.4 The freedom to provide services is not the same as the free movement of labour; nonetheless, various studies have shown that the freedom to provide services is regularly used as a pretext for recruiting workers. Cross-border services with the sole purpose of recruiting cheap labour must be prevented: the country-of-work principle must apply in full to cross-border labour recruitment, in order to protect the interests of both employees and bona fide employers and to prevent unfair competition due to the use of pseudo-self-employment or other ways of evading national labour regulations.

4.5 The European Union cannot define the monitoring and enforcement of compliance with the working conditions applicable in the country of work as ‘obstacles’ or ‘barriers’ to the functioning of the single market for services unless such practices are used to stifle competition: not only do they relate to the fundamental rights of employees, which must be respected, but it is also in the interests of bona fide employers that compliance with collective contracts be monitored. This applies both to large multinationals and also to small and medium-sized enterprises. The registration and notification requirements needed in order to monitor compliance with these basic rights are fundamental elements of the obligations attached to the provision of cross-border services. Better cooperation between Member States in this respect is in the interests of all parties concerned, and can only be of benefit to the cross-border provision of services.

4.6 The European Commission states, in its communication, that the share of cross-border services in intra-EU trade is lagging behind the scale of national services sectors. Many services are local and location-specific, and cannot easily be sold remotely; the Commission does mention this in passing, but does not do justice to the scale and significance of this aspect. Nor do the examples that the Commission gives in the communication do much to clarify its intentions: they appear to relate to incidents in a small number of Member States where the Services Directive has clearly not been adequately implemented, rather than to fundamental weaknesses in the directive itself.

4.7 The Commission focuses primarily on competition, claiming that it brings advantages for consumers in terms of choice and price. But consumers also expect other key things from services, such as safety, security, quality, transparency of prices, fair contractual conditions, clear, easily understandable information and a money-back guarantee if the services provided are unsatisfactory. Sectoral regulations are also needed, to ensure that consumer rights are not harmed as they were when the energy and telecommunications markets were liberalised.

4.8 In order to avoid cowboy operators, to guarantee service quality and to provide the option of legal redress if a service provider fails to meet its obligations, recognised professionals in each sector need to be listed in a publicly accessible register. The qualifications of service providers included in this register must meet set criteria and their vocational skills must be checked periodically. This will enable consumers to make safe and informed choices, which will increase confidence in the single market.

4.9 In the legal field, the communication repeatedly advocates creating means of redress for service providers, particularly for small and medium-sized enterprises. This approach is too one-sided: means of redress developed in this connection should be available not only to businesses but also to consumers and employees.

4.10 The barriers caused by Member States' national regulations to which the Commission refers in section 5.2 should not and cannot be seen solely from the perspective of service providers. Reserved activities, capital requirements and insurance requirements are also justified by quality requirements laid down by society and, moreover, such requirements also serve to guarantee both civil liability and the availability of legal redress to consumers and employees.

4.11 Authorities and institutions responsible for monitoring and enforcement regularly raise the issue of ‘letterbox companies’ in cross-border trade, which abuse the single market for services to evade or side-step regulations in a number of countries. A similar problem arises where self-employed status is widely used in cases that are in fact pseudo-self-employment. The Committee recommends that the European Commission undertake further research to analyse this distortion of competition – which is particularly harmful to bona fide businesses, both large and small – and to take appropriate action if necessary.

Brussels, 13 July 2011. The President of the European Economic and Social Committee Staffan NILSSON

(1) COM(2010) 2020 final.

(2) COM(2010) 608 final.

(3) Directive 2006/123/EC.

(4) COM(2008) 703 final.