[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 4.4.2006

COM(2006) 160 final

2004/0001 (COD)

Amended proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on services in the internal market

(presented by the Commission)

EXPLANATORY MEMORANDUM

The Commission presents an amended proposal for a Directive of the European Parliament and of the Council on services in the internal market. The amended proposal incorporates those amendments proposed by the European Parliament in first reading which are acceptable to the Commission as well as many of the clarifications which have been discussed by the Council. It also fully respects the European Council conclusions, stressing the need to make the internal market for services fully operational, while preserving the European social model.

1. BACKGROUND

The Commission adopted its proposal on 13 January 2004. It was formally transmitted to the European Parliament and to the Council on 6 February 2004.

The Committee of the Regions gave its opinion on 29 September 2004 and the European Economic and Social Committee gave its opinion on 9 February 2005. The European Parliament adopted a legislative resolution at its first reading on 16 February 2006, and proposed amendments to the Commission proposal.

2. AIM OF THE COMMISSION PROPOSAL

Improve the basis for economic growth and employment in the EU . The proposal is part of the process of economic reform launched by the Lisbon Strategy. As services account for the bulk of the EU economy, competitive services markets are essential for economic growth. At present, a wide range of Internal Market barriers prevent many service companies, especially SMEs, from growing across national borders and fully benefiting from the Internal Market. This also undermines the global competitiveness not only of EU service providers, but also of the EU manufacturing sector, which increasingly relies on high quality services. It also makes Europe a less attractive place for foreign investment.

Achieve a genuine Internal Market in services by removing legal and administrative barriers to the development of service activities . Those barriers arise both when service providers from one Member State wish to establish themselves in another Member State and when they wish to provide a service from their Member State of establishment into another Member State, for example by moving to the other Member State on a temporary basis. The proposal seeks to facilitate the exercise of these two fundamental freedoms enshrined in the EC Treaty – the freedom of establishment and the freedom to provide services- and to give service providers greater legal certainty.

Strengthen the rights of consumers as users of services . The consumer demand for cross-border services is not being met due to considerable legal and administrative difficulties and a lack of information on, and of trust and confidence in, services from other Member States. The proposal will address these problems by imposing obligations on Member States to remove restrictions on the use of cross-border services, by applying the principle of non-discrimination and by requiring greater transparency and information from services providers.

Establish legally-binding obligations for effective administrative co-operation between Member States. Efficient and well-functioning administrative co-operation is essential to making the Internal Market work properly. Regulatory authorities in Member States have little knowledge of, and therefore little trust in, the legal framework and supervision in other Member States. This results in duplication of rules and controls for cross-border activities and can also be used by rogue traders to avoid supervision or to circumvent applicable national rules, with the consequent risk for users of services. The proposal establishes legal obligations of information exchange and mutual assistance between Member States, underpinned by an effectively-functioning electronic information system which will allow competent authorities to easily identify their relevant interlocutors in other Member States and to communicate with one another.

3. OPINION OF THE COMMISSION ON THE EUROPEAN PARLIAMENT'S AMENDMENTS

3.1. Scope of application and other general provisions (Articles 1-4)

Services of General Interest. Amendments 13, 44, parts of 72 and 289 , relating to Articles 1 and 2 and corresponding recitals, make clear that Services of General Economic Interest are included in the scope of application of the Directive, but that the Directive does not provide for their liberalisation or for the privatisation of public entities providing such services, nor does it deal with their funding or with state aids. Amendment 73 clarifies in Article 2 that Services of General Interest fall outside the scope of the Directive. The Commission agrees with amendments 44, relevant parts of 72 and 289. The Commission also accepts amendments 13 and 73, however, it slightly redrafts the text of amendment 73 (Article 2) as well as the text of amendment 13 (new Recital 7a) explaining that –subject to explicit exclusions of certain specific sectors – Services of General Economic Interest fall within the scope of application of the Directive because these services are of an economic nature.

Healthcare services. Amendment 78 excludes from the scope of application both private and public healthcare services, adding the corresponding modification in Article 2. Amendment 304 specifies in Recital 10 c that this exclusion covers healthcare and pharmaceutical services provided by regulated health professionals to patients to assess, maintain or restore their state of health. Amendments 233/403 explain in Article 1 that the Directive does not affect public healthcare services or access to public funding by healthcare providers. Amendment 305 adds a new Recital 10 d explaining that the Directive does not affect the reimbursement of the costs of healthcare provided in another Member State and stresses that this issue should be addressed in another legal instrument in order to achieve greater legal certainty and clarity. The Commission accepts the exclusion of healthcare services from the scope of application and confirms its commitment to come forward with a specific initiative on health services. Therefore, amendments 78, 304 and 305 are accepted. Amendments 233/403 on public healthcare have become obsolete due to the overlapping with the definition in Article 2.

Social services. Amendment 292 , states, in Article 1, that the Directive does not affect services pursuing social welfare objectives and amendment 252 , relating to Article 2, excludes social services such as social housing services, childcare and family services from the scope of the Directive. Amendments 294 and 296 provide for two new recitals which explain the nature of social services and, in particular, of social housing, childcare and support to families. Amendment 295 introduces a recital which specifies that the Directive does not deal with the funding of, or aids linked to, social housing or with the criteria or conditions set by Member States for social housing services. Furthermore, amendment 10 adds, in another recital, that the Directive does not concern requirements governing access to public funds, for example for social services. The Commission is of the opinion that any exclusion from the Directive must be clearly defined so as to ensure increased legal certainty and to avoid diverging interpretations in Member States. Accordingly, the Commission redrafts the definition of amendment 252 (Article 2) and merges amendments 294 and 296 in a new Recital 10 h , in order to specify that the exclusion from the Directive concerns those social services relating to social housing, childcare and support to families and persons in need which, because of their interest for society, are either provided by the State, or by providers mandated by the State, with the objective of ensuring support to those who are in a particular state of need. It follows that amendment 292 becomes redundant. The text of amendment 295 is redrafted to clarify that it concerns social services in general and not only social housing. Amendment 10 is accepted in its entirety. Amendment 232 highlights the specific social role of non-profit sport activities. It is accepted and inserted in new Recital 16a, subject to redrafting to ensure the legal coherence of the text.

Other sectorial exclusions and full exclusion of taxation. Amendments 300 and 302/332 concern Article 2 and exclude respectively temporary work agencies and security services from the scope of the Directive. Corresponding recitals, added by amendments 301 and 303, underline that the rules applicable to these sectors should be fully harmonised. Amendment 77 excludes legal services to the extent they are governed by other Community instruments. Amendment 79, 80 and 81 , relating to Article 2, and amendments 16 , 17 and 18 , on the corresponding recitals, exclude from the scope of application audiovisual services - regardless of their mode of production, distribution and transmission- gambling activities, and professions connected with the exercise of official authority , notaries in particular. The Commission accepts the exclusion of services of temporary work agencies and private security services provided by amendments 300 and 302/333. However, the need for full harmonisation for temporary work agencies and security services has not been proved and, as a consequence, amendments 301 and 303 cannot be accepted. The Commission does not accept amendment 77 on the exclusion of legal services; this is not required given that Article 3 already provides that in case of conflict between the provisions of the Services Directive and a provision of another Community instrument governing specific aspects of the services activity the provision of the latter will prevail. With regard to audiovisual services, the Commission accepts the exclusion provided by amendment 79 and has redrafted amendment 19 (new Recital 10 e ) to align it with the amendment to the article and to clarify that the Directive does not apply to aids granted in the audiovisual sector which are covered by Community rules on competition. The Commission also accepts in spirit the exclusion of gambling services but redrafts the texts of amendments 17 and 80 in order to limit it clearly to gambling activities as such . The Commission accepts only in part amendments 18 and 81, regarding professions connected with the exercise of official authority and brings the wording of the exclusion into line with the precise limits set out by Article 45 of the EC Treaty, which provides for a derogation from the freedom of establishment and the freedom to provide services for specific activities which involve direct and specific participation in the exercise of official authority, and not for whole professions as such.

The Commission accepts the full exclusion of taxation provided by amendments 82 , on Article 2, and amendment 19 (Recital 11).

Amendments 14, 15, 20, 74, 75 and 306 concern sectorial exclusions (in Article 2 and correspondent recitals) originally proposed as regards financial services, electronic communication services and transport services but provide additional clarification. The Commission can accept amendments 14, 15, 20, 74 and 306 in their entirety or subject to redrafting to ensure the legal coherence of the text (see Article 2 and Recitals 9, new 10a, new 10b), but cannot accept Amendment 75, because Recital 10a already contains the relevant explanation on telecommunications services.

Specific areas of law . Amendment 298 clarifies in article 1, the relationship of the Directive with fundamental rights as recognised in the Member States and by the Charter of Fundamental Rights, and amendment 299 introduces a new recital stipulating that the Directive should be interpreted in such a way as to reconcile the exercise of fundamental rights with the fundamental freedoms laid down in Articles 43 and 49 of the Treaty. Amendment 8 clarifies that the Directive fully respects Community initiatives based on Article 137 of the Treaty concerning the promotion of employment and improved living and working conditions. Amendment 297, relating to Article 1, and amendment 9, relating to the corresponding recital, state that the Directive shall not apply to or affect labour law i.e. any legal or contractual provision concerning employment conditions, working conditions, including health and safety at work, and the relationship between employers and workers, and that it shall fully respect the relations between social partners including the right to industrial action and not affect social security legislation of the Member States. Amendments 290, relating to Article 1, and 291 (recital) state that the Directive should not affect rules of criminal law . Amendments 7 and part of amendment 72 clarify, both in a recital and in the text of Article 1, that the Directive does not affect measures taken by Member States, in accordance with Community law, in relation to the protection or promotion of cultural and linguistic diversity and media pluralism . The Commission accepts, in relation to fundamental rights issues, amendment 298, subject to redrafting to ensure the legal coherence of the text, and amendment 299, in its entirety. Concerning labour law, the Commission agrees that the Directive does not affect labour law as set out in Amendment 297, including the right to take industrial action as well as Member States' social security law. However, in order to ensure the legal coherence of the text and to improve clarity and ease of understanding, the Commission streamlines the texts of Amendments 297 and 298 so that labour law is addressed by Article 1, paragraph 6 and the issue of fundamental rights including rights regarding collective agreements by Article 1, paragraph 7. With regard to criminal law, the Commission accepts amendment 290 stating that the Directive does not affect criminal law provisions, as well as amendment 291 (new recital 6e) subject to redrafting in order to further clarify that criminal law rules should not be misused to circumvent the rules laid down in the Directive. Concerning protection or promotion of cultural and linguistic diversity and media pluralism, t he Commission accepts amendment 7 in its entirety and redrafts the relevant part of amendment 72 to ensure the legal coherence of the text. Finally, the Commission accepts in its entirety Amendment 8 (new Recital 6f).

Relationship of the Directive with other provisions of Community law . Amendments 83 and 21 address this issue, in Article 3 and corresponding Recital 13. The Commission accepts further clarification contained in Amendment 83 that the Directive does not override other Community instruments and that in the event of a conflict with other Community instruments governing specific aspects of access to and exercise of a services activity, the provisions of those specific aspects in such instruments shall prevail. In order to ensure overall consistency of the text and to bring the work of the European Parliament and the Council closer together, the Commission has added additional clarifications (Recitals 13a and 13b). In addition, amendments 307 and 219 (merged with amendment 83) states that this Directive is without prejudice to private international law, in particular, private international law governing contractual and non-contractual obligations, and explain the effect for consumer protection rules. The Commission accepts amendment 307 and amendment 219 subject to minor redrafting to make the reference to consumer protection legally sound.

Definitions (Article 4). Amendments 23 to 26, 39, 84 to 90, 308, 92 to 98 relate to the definitions of the terms contained in the text of the Directive (see Article 4 and corresponding recitals). The Commission accepts amendments 25-26, 93-94 and 97-98 in their entirety and amendments 23-24 subject to minor redrafting and merging them. In addition, the Commission accepts amendments 39, 84, 88 to 90, 95 and 308, in principle, but has redrafted them in order to make the text consistent with the Community acquis or with the scope of the Directive. However, the Commission cannot accept amendments 85 and 86. Amendment 96, on the definition of "worker", is also redundant in relation to the re-defined scope of application and is not accepted. Amendment 92, with regard to the notion of "competent authorities", and amendment 87, on the notion of "provider" are not accepted for reasons of clarity and coherence of the text with the Community acquis . Finally the Commission cannot accept amendment 22, deleting the exemplificative list of services covered by the Directive contained in Recital 14. This recital is useful to clarify the Directive and it is thus reinstated, with minor drafting modifications to reflect the new scope of application. In addition, in order to draw on the useful additional clarification provided by the Council, the Commission has completed Recital 18a ( amendment 25 ) and Recital 20a and added new Recital 18b.

The Commission accepts in their entirety or subject to minor redrafting, amendments 1 to 3, 5, 6, 11 , which relate to recitals describing the general objectives of the Directive, and its non interference with the internal allocation of powers within the Member States, but cannot accept amendment 4 .

3.2. Administrative simplification (Articles 5-8)

Simplification of procedures (Article 5). Amendment 99 transforms section 1 of the Chapter on the right of establishment for service providers in a distinct new Chapter on "Administrative Simplification". Amendment 27 clarifies that the rules relating to administrative procedures do not aim at harmonising national administrative law, but rather at the removal of overly burdensome elements which hinder the freedom of establishment. Amendment 100 states, in Article 5, that Member States shall examine (the verb 'authenticate' used in the amendment does not seem accurate) and if appropriate simplify the procedures and formalities applicable to access to, and exercise of, a service activity. In addition, it introduces an obligation for Member States, "in conjunction with the Commission", to introduce harmonised European forms (the same flows from amendment 29 ) and adds a list of existing Community legislation to which Article 5(1a) and (2) shall not apply. Amendment 100 also explains that Member States’ right to require “non-certified" translations of documents in their official languages is not affected. Amendment 30 stresses that formal requirements, such as presentation of original documents including certified translations, cannot be imposed unless justified by an overriding reason relating to the public interest. The Commission accepts amendments 99, 27 and 29-30 in their entirety and amendment 100 in principle, subject to redrafting necessary to make the text legally coherent and to draw on the work at the Council. In particular, the Commission text makes it clear that the establishment of European forms will be carried out according to the comitology procedure and adds a new Recital (22b) which suggests a number of parameters that Member States may take into account while examining the need for simplifying procedures and formalities.

Points of single contact (Article 6). Amendment 102 explains that, in cases where a pro forma registration is required, it must be available by electronic means at the points of single contact. Amendment 103 requires the Commission to co-ordinate points of single contact by establishing a European point of single contact. Amendment 104 clarifies that the creation of points of single contact is without prejudice to the allocation of functions and powers among authorities within national systems. Amendment 309 sets out a new timetable for the establishment of points of single contact. Amendment 310 stipulates that it should also be possible to complete all procedures and formalities necessary for the supervision of compliance with Directive 96/71/EC at these points. The Commission accepts amendments 309 and 104 and furthermore clarifies in new Recital 25a, reflecting the work in the Council, that the fee that points of single contact may charge should be proportionate to the cost of procedures and formalities. However, the Commission cannot accept amendment 102 since pro forma registration with the points of single contact would be an unnecessary administrative burden. The Commission cannot accept amendment 103 either, because a European point of single contact would represent an unnecessary administrative structure and would be contrary to the principle of subsidiarity (since administrative cooperation can be best dealt with by Member States themselves). Amendment 310 cannot be accepted because reference to the supervision of compliance with Directive 96/71/EC, which is not affected in any way by the present proposal, is inappropriate.

Right to information (Article 7). Amendment 105 makes it clear that the right to information only concerns means of redress generally available. Amendments 31, 106 and 110 clarify that the obligation for competent authorities to provide assistance does not cover legal advice in individual cases; that the obligation to provide information can be fulfilled by making it accessible through a website; that advice could include a step-by-step guide; and that information shall be provided in plain and intelligible language. Amendment 107 states that information and assistance should be accessible, inter alia, at a distance and by electronic means. Amendment 108 sets out a deadline for implementation of information obligations and amendment 109 clarifies that the availability of the information in other languages has to be compatible with Member States' legislation on the use of languages. Amendment 33 , by introducing a new recital, reinforces the provisions in Article 7. The Commission accepts amendments 105-106, 108-110, 31, 33 and, in line with the work of the Council, adds in amendment 31 (Recital 25c), that issues such as liability for incorrect or misleading information are for Member States to determine. On the other hand, the Commission cannot accept amendment 107 since it would remove the obligation to provide information by electronic means, which is an essential tool for making administrative simplification a reality.

Procedures by electronic means (Article 8) . Amendment 111 sets out a revised timetable for implementation, explains that the procedures and formalities may be easily completed, inter alia, by electronic means (as does amendment 32 ) and that electronic procedures should not apply to cases when original documentation can be requested. The Commission cannot accept amendment 111, apart from the revised timetable, or amendment 32 because, as mentioned above, electronic procedures are an essential measure of administrative simplification and they can also be used for original documentation since proof of authenticity can be provided by electronic authentication. However, the Commission deems it fit to clarify on the basis of amendment 32 (Recital 26), which draws on the work of the Council, that the obligation to provide for procedures by electronic means does not prevent Member States from offering other means, in addition to electronic ones, to complete procedures and formalities.

3.3. Freedom of establishment for providers (Articles 9-15)

Authorisation schemes. Amendment 35 clarifies in Recital 27c that the provisions of the Directive dealing with authorisation schemes concern neither decisions by authorities to set up a public or private entity nor the conclusion of contracts by authorities. Amendment 37 indicates that overriding reasons relating to the public interest such as public health may justify the application of authorisation schemes and other restrictions to social services, on condition that the principles of non-discrimination, necessity and proportionality are respected. Amendments 112-113 reorganise and rename the Chapter and the Section respectively. Amendment 116 (as well as amendment 209 ) excludes authorisation schemes from the mutual evaluation process. The Commission accepts amendments 35, 112-113 in their entirety and amendment 37 subject to minor drafting changes. On the other hand, the Commission cannot accept amendments 116 and 209 because the obligation to evaluate and report on authorisation schemes is an essential measure for facilitating the access to and the exercise of service activities. However, the Commission specifies in a new Recital (27d), in accordance with the work in the Council, that the reporting obligation concerns only the existence of authorisation schemes and not the criteria and conditions for the granting of an authorisation. As regards amendments 114, 115 and 117 , which contain mainly technical changes, the Commission accepts amendment 115 and amendment 117, subject to redrafting necessary for legal coherence. However, the Commission cannot accept amendment 114, which would make the text less clear.

Conditions for granting of authorisation. Amendments 34 and 121 stipulate that the authorisation should normally cover the entire national territory except if a more limited geographical scope is justified by an overriding reason relating to the public interest, such as environmental protection. Amendments 34 and 123 provide that local and regional competencies in the granting of authorisations are not affected by the Directive. Amendment 119 adds "transparency" and "accessibility" to the criteria with which authorisation schemes must comply. Amendment 120 clarifies that, in assessing whether the conditions for granting an authorisation are equivalent or essentially comparable to those to which the provider is already subject in another Member State (non-duplication), not only their objective and purpose but also their effect and the effectiveness of their enforcement need to be considered. Amendment 122 excludes decisions to grant an authorisation from the requirement to state reasons and to provide for means of redress before the courts. Amendment 118 deletes the word 'objective' from the phrase "justified by an overriding reason relating to the public interest" in Article 10. The Commission accepts amendments 34, 118, 119 and 123 in their entirety. As far as amendment 120 is concerned, acceptance is coupled by the insertion of a new Recital (27g): this aims to clarify that the requirement of non-duplication does not prevent Member States from applying their own conditions but merely require them to take into account equivalent conditions already satisfied by the provider in another Member States. In addition, the Commission agrees with the substance of amendment 121, but opts for a different wording. On the other hand, the Commission cannot accept amendment 122 because the exclusion of decisions to grant an authorisation from the obligation to state reasons is capable of rendering judicial review of an administrative decision, in particular for third parties, less effective or even virtually impossible.

Duration of authorisation. Selection from among several candidates. Amendments 128 and 36 state that Member States' ability to revoke authorisations, especially when conditions for their granting are no longer met, is not affected. Amendments 124-127, 129, 38 and 30 provide useful clarifications in Article 11 and corresponding recitals. Amendment 130 provides that Member States may take into account, in applying their selection procedure, a number of public interest objectives. The Commission accepts amendments 128 and 36, limited to situations where conditions for granting of the authorisation are no longer met. In addition, the Commission accepts amendments 124-127, 129, 38 in their entirety or in part and amendments 130 and 30 subject to minor drafting adjustments.

Authorisation procedures. Amendment 134 and 28 delete the rule according to which in the absence of a response within the set time limit, the authorisation shall be deemed to be granted ("tacit authorisation"). Amendment 135 states that an acknowledgement of receipt for applications should only be provided at the request of the applicant and does not need to specify the available means of redress. Amendments 131-133 and 136-137 contain technical clarifications which the Commission can accept, subject to minor changes as far as amendments 136-137 are concerned. On the other hand, the Commission cannot accept amendments 134 and 28 because tacit authorisation (in the absence of a reply from the authorities) is key to facilitating the freedom of establishment. However, the Commission clarifies in a new Recital (28a), in accordance with the work of the Council, that, as regards tacit authorisation different arrangements may be put in place in respect of certain activities where they are objectively justified by overriding reasons relating to the public interest. Likewise, the Commission cannot accept amendment 135, because this would create an additional burden for the applicants and render judicial review more difficult.

Prohibited requirements (Article 14). Amendment 138 modifies the title of this section. Amendment 140 (and 41 ) clarifies that the prohibition of a case-by-case application of an economic test does not concern planning requirements which do not pursue economic aims but serve overriding reasons relating to the public interest. Amendment 141 clarifies that the prohibition on involving directly or indirectly competing operators in the granting of authorisations does not concern the consultation of organisations such as chambers of commerce on matters other than individual applications. Amendment 40 provides that in some cases it may be justified to compel a service provider to be present in person during the exercise of the activity. Amendment 142 explains that the prohibition on requiring a financial guarantee or insurance from a service provider established in a Member State’s territory does not affect Member States' ability to require financial guarantees as such, or to require that insurance be taken out from an undertaking with special or exclusive rights, nor that it affects requirements relating to participation in a collective compensation fund. Amendment 143 clarifies the requirement of previous registration . The Commission accepts amendments 138, 140, 141, 143 and 41 in full, amendment 40 subject to an additional clarification. The Commission accepts the spirit of amendment 142, but redrafts the relevant provision to make it coherent with Community law and added further clarification in new Recital 32a, in line with the Council's work. In addition, amendment 143 provides for technical clarifications which the Commission accepts, whilst at the same time providing in a new Recital (32b) based on the Council's work, further clarification about the prohibition of pre-registration.

Requirements to be evaluated (Article 15) . Amendment 42 clarifies that the mutual evaluation process does not affect the freedom of Member States to set a high level of protection of the public interest in their legislation and that the evaluation has to take into account the specificity of Services of General Economic Interest and of the particular tasks assigned to them, which might justify certain restrictions on the freedom of establishment. Amendments 144 and 145 remove examples of requirements concerning the provider's legal form or the shareholding of the company. Amendments 147/242 exclude from the evaluation process requirements concerning selling below cost and sales. Amendments 149/242 deletes the word 'objectively' from the phrase "justified by an overriding reason relating to the public interest" Amendments 148/242 (as well as amendment 43 ) exclude "must-carry" obligations from the evaluation process. Likewise, amendment 150 excludes Services of General Economic Interest and social insurance schemes from Article 15, paragraphs 1 to 4. In addition, amendment 150, together with amendment 151 , removes the prohibition on Member States to introduce any new requirement of a similar kind unless these fulfil the criteria of non-discrimination, necessity and proportionality, and the corresponding obligation of Member States to notify such new laws, regulations or administrative provisions. Amendment 146 adds a reference to the Professional Qualification Directive. The Commission accepts amendments 42, 147 and 148/149/242. The Commission also accepts the deletion of examples from the relevant articles as in amendments 144 and 145. The Commission also adds in Recital 34, in line with the work of the Council, a clarification that the evaluation of requirements imposing minimum and/or maximum tariffs only concerns tariffs imposed by competent authorities for the provision of certain services, whereas it does not concern general rules on price determination such as for the renting of houses. The Commission accepts in principle amendment 150 relating to Services of General Economic Interest and it specifies that paragraphs 1 to 3 of Article 15 only apply to legislation in the field of Services of General Economic Interest in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular task assigned to them. Deletion of the notification obligations (amendment 151) would seriously water down the evaluation process and therefore cannot be accepted. Finally, amendments 146, 148 and 149/242 propose technical changes which the Commission accepts (as far as 146 is concerned, however, reference is made to the Professional Qualification Directive as a whole and not to its Title II only).

3.4. Freedom to provide services and derogations (Articles 16-19)

Freedom to provide services (Article 16). Amendment 152 (concerning the title of the Chapter) and amendment 293/rev4 (concerning Article 16) replace the former country of origin principle by a provision on the freedom to provide services. Amendment 293/rev4 confirms the right of service providers to provide a service in a Member State other than the one where he is established and obliges the Member State where the service is provided to ensure free access to and free exercise of the service activity within its territory. Paragraph 1 of Article 16 additionally stipulates that the Member State where the service is provided cannot apply its own national requirements to service providers established in another Member State unless these are justified on grounds of public policy, public security, public health or the protection of the environment, they are non-discriminatory, necessary and proportionate. Paragraph 3 again confirms the possibility of Member States provided for in paragraph 1 to impose their national rules where they are justified on grounds of public policy, public security, public health or the protection of the environment on service providers from other Member States moving into its territory. Paragraph 3 also clarifies that Member States, in conformity with Community law, are not prevented from applying their employment conditions. Article 16 paragraph 2 establishes a list of requirements, such as a requirement to have an establishment in the territory in order to be allowed to provide a service, which Member States may not impose on service providers established in other Member States. Amendment 293/rev4 also provides that the Commission, after consultation of the Member States and the social partners, shall submit a report on the application of Article 16 including consideration of the need to propose harmonising measures.

The Commission accepts amendments 152 and 293/rev4 subject to minor drafting adjustments in paragraph 3 clarifying that – in accordance with the jurisprudence of the ECJ – national requirements always have to be non-discriminatory, necessary and proportionate. The Commission also accepts – subject to drafting adjustments – amendment 45 on Recital 37, indicating that Member States can impose their requirements which are indispensable for reasons of public policy, public security, public health and the protection of the environment as well as amendments 46-47 which delete recitals referring to the former country of origin principle. Furthermore, the Commission, in accordance with the work of the Council, adds further explanatory recitals, one recital referring to the jurisprudence of the ECJ on the right of Member States to take measures in order to prevent service providers from abusively taking advantage of the Internal Market principles (Recital 37a), another recital stressing the necessity of ensuring that providers are able to take equipment which is an integral part of the provision of the service with them when providing services in another Member State (Recital 39a) as well as one additional recital explaining the concept of equipment (Recital 39b).

Additional derogations from the freedom to provide services (Article 17) . Amendment 400 renames Article 17 and stipulates that the provision on the freedom to provide services shall not apply to Services of General Economic Interest provided in another Member State, inter alia to postal services, electricity, gas and water distribution, waste water services and the treatment of waste. The Commission accepts amendment 400.In addition, the Commission clarifies, based on the work of the Council, in a Recital (40a) that the derogation for postal services covers both activities reserved to the universal service provider and other postal services. Furthermore, amendment 165 clarifying the derogation in Article 17 point 12 for the authorisation regime provided for in Articles 3 and 4 of Council Regulation (EEC) No 259/93 on the supervision and control of shipments of waste within, into and out of the European Union, can also be accepted.

Concerning activities of lawyers and notaries , amendment 160 deletes the derogation for matters covered by Council Directive 77/249/EEC to facilitate the effective exercise by lawyers of the freedom to provide services and amendment 166 deletes the derogation for acts requiring by law the involvement of a notary. These amendments become obsolete given that the Commission does not accept a general exclusion of the activities of lawyers of or notaries from the scope of application of the Directive. These derogations should therefore be maintained. Concerning the judicial recovery of debts, amendment 161 introduces a new derogation which can be accepted by the Commission. At the same time the Commission clarifies in a new recital (40b) in line with the Council work, the scope of this derogation.

Concerning requirements which reserve an activity to a particular profession, amendment 162/404 adds – in addition to the derogation concerning matters covered by Title II of Directive 2005/36/EC on the recognition of professional qualifications – a new derogation. Amendment 162/404 as well as amendment 48 which explains this new derogation in a recital (41c) can be accepted in principle subject to redrafting to make its wording more precise.

Concerning the free movement of persons and their residence , amendment 163 clarifies the derogation relating to Directive 2004/38/EC and can be accepted.

Concerning the derogation for the movement of third country nationals in the context of the provision of a service , amendment 164 reformulates the wording of the derogation contained in Article 17 point 11. Since Article 25 has been deleted, the derogation in Article 17 point 11 had to be further reworded. Amendments 50 and 51 which introduce Recitals 41a and 41b providing explanations on the derogation for the Posting of Workers Directive are accepted subject to minor drafting changes.

Concerning specific prohibitions and specific requirements justified by reasons relating to public policy, public security, public health or the protection of the environment , amendments 167 and 168 provide for modifications of the derogations contained in Article 17 point 16 and 17. In the Commission's view these amendments are obsolete since, as a consequence of the fact that Article 16 now gives Member States in more general terms the possibility to impose national requirements relating to public policy, public security, public health and the protection of the environment, the more specific derogations in Article 17 point 16 and 17 have become superfluous. Consequently they are deleted together with the corresponding recitals.

Concerning reimbursement of hospital care , amendment 169 deletes the derogation for the authorisation system applicable to the reimbursement of hospital care. In line with the exclusion of health services from the scope of application and the deletion of Article 23 on the assumption of health care costs, the Commission accepts amendment 169.

Concerning private international law , amendment 170 introduces in Article 17 a derogation for all provisions of private international law, particularly those dealing with contractual and non-contractual obligations, including the form of contracts. The Commission accepts this amendment which is required in Article 17 because the provision on the freedom to provide services is the provision of this Directive that could possibly conflict with the application of rules of private international law. Amendments 171, 172 and 173 delete the derogations for consumer contracts, formal validity of contracts relating to immovable property and the non-contractual liability of the provider in case of an accident which are now covered by the broader derogation for all provisions of private international law. The Commission accepts these amendments as well as the corresponding changes in the Recitals ( amendments 53 and 54 relating to Recitals 45 and 46).

In addition, the Commission has added technical clarifications reflecting the work of the Council.

Transitional derogations (Article 18). Amendment 174 fully deletes Article 18 containing transitional derogations from the (former) country of origin principle. The Commission accepts this because gambling activities have been excluded from the scope of application of this Directive, the access to the activity of judicial recovery of debts is covered by a new derogation in Article 17 point 7a and transport of cash and valuables has been included in Article 40(1).

Case-by-case derogations (Article 19). Amendment 175 adapts the title in line with the new renamed Article 16. Amendment 176 refers to the conditions under which the case-by-case derogation can be taken and removes the obligation to comply first with the mutual assistance procedure before taking such measures. The case-by-case derogations relating to public health and public policy and to the exercise of health professions have become obsolete due to the exclusion of healthcare from the scope of application of the Directive and due to the fact that Article 16 now allows Member States in more general terms to impose requirements relating to public policy and public health. The Commission therefore deletes the corresponding case-by-case derogations and limits Article 19 to the safety of services. However, the Commission cannot accept the deletion of the mutual assistance procedure which is essential to ensure that this derogation does not lead to unnecessary restrictions to the freedom to provide services.

3.5. Rights of recipients of services (Articles 20-23)

Prohibited restrictions/Non-discrimination . Amendments 177 and 55 , relating to Article 21 and Recital 50 state that the recipient of services should not be made subject to discriminatory requirements based "solely" on his nationality or place of residence. The Commission cannot accept this addition to the non discrimination clause set out in Article 21, because this could be interpreted as allowing discrimination if they are based also on other grounds. The rest of amendment 55 clarifies Recital 50 and can be accepted. In addition, the Commission adds some clarifications in line with the Council's work concerning the concept of financial assistance mentioned in Article 20 (see Recital 48 and new Recital 48a).

Assistance for recipients . Amendment 178 , concerning Article 22, on the assistance for recipients of services clarifies a number of points on information and advice given by the points of single contact to recipients. In addition this amendment deletes the contact points of the European Consumer Centres Network from those associations and organisations whose contact details recipients should be informed of and who could provide practical assistance. Amendment 179 adds a new Article 22a concerning the possibility for a service provider to complete all procedures and formalities with the points of single contact. The Commission accepts amendment 178, except the part which deletes the reference to European Consumer Centres Network, which, for the Commission, should play a particularly active role in giving practical assistance to consumers. The Commission cannot accept amendment 179 and the provision of a new Article 22a, given that role and responsibilities of single points of contacts are already sufficiently dealt with in the Chapter of the Directive on administrative simplification.

Reimbursement of healthcare received in another Member State . Amendments 56 to 62 and 180/247 delete Article 23, the provisions dealing with the reimbursement of healthcare received in another Member State, and corresponding recitals. The Commission accepts these deletions and, as mentioned above, it will come forward with a separate initiative on health services.

3.6. Posting of workers (Articles 24-25)

Specific provisions on posting of workers and posting of third country nationals. Amendments 181, 182/248, 63-64, 183/249 and 65-66 delete the relevant provisions regarding the removal of administrative obstacles and regarding obligations of Member States to cooperate regarding the posting of workers and the posting of third country nationals. While the Commission believes that it is of high importance to address any undue administrative burdens which hinder the opportunities for service providers to provide cross-border services by posting their staff and that it is important to improve administrative cooperation in order to combat black labour and social dumping, the Commission accepts the deletion of these provisions as part of an overall compromise. In order to address undue administrative burdens and to establish a better-functioning system of administrative cooperation the Commission will provide guidance for Member States on these issues.

3.7. Quality of services (Articles 26-32)

Information on providers and their services (Article 26). Amendments 184 and 186 set out a systematic obligation for service providers to make information to be given to recipients available via the points of single contact. Amendment 185 introduces an obligation to make available to the recipients information on the legal form of the service provider. The Commission accepts amendment 185 subject to minor redrafting. On the contrary, the Commission cannot accept amendments 184 and 186 because they would create an unnecessary burden to service providers.

Professional liability insurance (Article 27). The first sentence of amendment 187 deletes the obligation for Member States to ensure that service providers whose services present a particular risk to the health or safety of the recipient or a particular financial risk to the recipient take out professional liability insurance and replaces it by a mere declaration of the possibility for Member States to require such insurance coverage. The second sentence specifies that the insurance shall also cover risks presented by such services when they are provided in other Member States. The Commission accepts both sentences of this amendment subject to minor drafting adjustments. Furthermore, amendment 67 adding Recital 63 a is accepted subject to necessary adjustments reflecting the changes in Article 27(1). Recital 63 was adjusted accordingly. Amendments 188, 189 and 190 are accepted by the Commission as far as they are necessary and do not create an additional burden for service providers. In addition, based on the work in the Council, the Commission clarifies the text of Article 27 and the corresponding Recitals, in particular on the scope of application of this Article, and addresses the risk of failure of the insurance market by providing for the possibility to establish a procedure dealing with situations of verifiable failure of the insurance market.

After-sales guarantees (Article 28). Amendment 191 deletes the obligation for service providers to provide information on the after-sales guarantees they supply. Amendment 192 deletes the provision clarifying that after-sales guarantees provided for in other Community instruments should not be affected. The Commission cannot accept amendment 191 because the relevant information on after-sales guarantees must be provided to recipients by service providers. Moreover, the Commission cannot accept amendment 192 because the link with other Community legislation on after-sales guarantees has to be explicitly mentioned.

Commercial communications (Article 29) . The Commission clarifies the text reflecting the work in the Council, according to which professional rules on commercial communications must comply with the principles of non-discrimination, necessity and proportionality.

Multidisciplinary activities (Article 30) . Amendment 193 (as well as amendment 210 ) excludes multidisciplinary activities from the mutual evaluation process. The Commission cannot accept amendments 193 and 210 because the obligation to evaluate and report on restrictions on multidisciplinary activities is an essential measure for facilitating access to, and exercise of, service activities. The Commission, on the basis of the Council's work, provides further clarification on what restrictions may be justified and explains this in a new recital (64a).

Policy on quality of services (Article 31). Amendment 194 clarifies that Member States in cooperation with the Commission shall encourage the development of voluntary European standards. The Commission accepts amendment 194, whilst stressing at the same time, on the basis of the Council's work, the role of consumer associations.

Settlement of disputes (Article 32) . Amendment 195 introduces further contact details to be supplied by providers. Amendment 196 replaces the word 'appropriate' by 'satisfactory'. The Commission accepts amendments 195 and 196, whilst clarifying at the same time, on the basis of the Council's work, what equivalent financial guarantees are to be deemed equivalent within the meaning of this Article explains this in a new recital (65a).

3.8. Administrative co-operation (Articles 34-38)

Mutual assistance and supervision. Amendments 199 to 202 and amendments 68 to 69 reorganise the chapter on administrative cooperation and clarify the obligations of the respective Member States. Amendment 199 renames the chapter. Amendments 200-202 aim to set out more clearly the distribution of tasks between the Member State of establishment and the Member State where the service is provided. In particular, the Member State of establishment is responsible for the supervision of service providers established in its territory and cannot refuse to take supervisory or implementing measures on the ground that the service has been provided in another Member State. The Member State of establishment must carry out checks, inspections and investigations as well as provide information on service providers established in its territory at the request of another Member State. The Member State where the service is provided is responsible for the supervision of the activity of the service provider in its territory with regard to matters in respect of which it can impose its national requirements in accordance with Article 16 paragraph 1 (Article 21 paragraph 1 in the consolidated text of the Parliament). In other cases, it shall carry out the checks, inspections and investigations on the spot when objectively justified and non-discriminatory or when requested by the Member State of establishment. Amendment 69 explains that effective administrative co-operation is necessary in order to avoid proliferation of rules applicable to service providers or duplication of controls for cross-border activities and to remove the possibility for rogue traders to avoid supervision or circumvent applicable national rules on services. Amendment 68 sets out the need for a well functioning electronic information system. The Commission accepts amendments 68-69 in their entirety and amendments 200-202 in spirit. Recognising the need to set out clearly the tasks and obligations of the Member State of establishment and the Member State where the service is provided in order to have effectively working administrative cooperation, the Commission incorporates the amendments of the European Parliament into the structure drawn up by the Council.

Alert mechanism . Amendment 203 sets out an alert mechanism, in case a Member State becomes aware of serious specific acts or circumstances that could cause serious damage to the health or safety of persons, to inform immediately the Commission and the Member States concerned. The Commission accepts amendment 203 and has also added the environment to the reasons which come under the alert mechanism. However, this new system serves a different purpose than the mutual assistance system in the event of case-by-case derogations and cannot therefore replace it.

Information on the good repute of providers. Amendment 197 adds that the information Member States' must supply at the request of a competent authority in another Member State must be directly relevant to the service provider's competence and that the request itself must be duly substantiated. Amendment 198 stipulates that the provisions on information requests must comply with rules on the provision of personal data and that any information which is public should be accessible to consumers. The Commission accepts both amendments and further clarifies, reflecting the work of the Council, that Member States shall supply information on disciplinary or administrative actions or criminal sanctions and decisions concerning insolvency or bankruptcy, in conformity with their national law; that the sanctions and actions shall only be communicated where a final decision has been taken; and that the provisions on the good repute of providers do not pre-empt initiatives in the area of police and judicial co-operation in criminal matters (new Recital 66f).

Accompanying measures. Amendment 68 describes the need for a well-functioning electronic information system to improve administrative cooperation between Member States. The Commission acceps amendment 68, transfers its contents to an Article and explains this in a new recital (66g). Moreover, the Commission, reflecting the work of the Council, introduces another accompanying measure for the exchange of officials in charge of the implementation of mutual assistance.

3.9. Convergence programme and final provisions (Articles 39-48)

Codes of conduct (Article 39) . Amendments 205 and 70 stress the importance of codes of conducts at Community level drawn up, in particular, by professional bodies, organisation and associations, and clarify that the codes of conducts are complementary to Member States' legal requirements. Amendment 71 moves into a recital the description of the areas which should be included in the codes of conduct. The Commission accepts these amendments and adds, reflecting the work of the Council, a new recital (67b) which describes the objective of the codes of conduct.

Additional harmonisation (Article 40) . In line with the redefined scope, amendment 206 deletes gambling activities and amendment 208 deletes other subjects from matters for possible additional harmonisation, such as those identified through the case-by-case derogations or the mutual evaluation procedure. Amendment 207 adds security services to the list of subjects to be assessed for additional harmonisation. The Commission accepts amendments 206, 208 and 207, while specifying that an assessment of the possibility of additional harmonisation for security services and transport of cash and valuables will be made, one year after the date of implementation of the Directive.

In addition, the Commission accepts amendments 211-212 which concern the date when the Commission shall present the report on mutual evaluation and the review clause.

Finally, amendment 213 sets out a 3-year deadline for the transposition of the Directive into Member States' laws. Due to the urgency of advancing the Internal Market for services, the Commission considers that 2-year deadline for transposition should be preserved.

4. AMENDED PROPOSAL

Pursuant to Article 250(2) of the EC Treaty, the Commission amends its proposal as described above.

2004/0001 (COD)

Amended proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on services in the internal market (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular the first and third sentence of Article 47(2) and Articles 55, 71 and 80(2) thereof,

Having regard to the proposal from the Commission[1],

Having regard to the opinion of the European Economic and Social Committee[2],

Having regard to the opinion of the Committee of the Regions[3],

Acting in accordance with the procedure referred to in Article 251 of the Treaty,

Whereas:

(1) The European Union is seeking to forge ever closer links between the States and peoples of Europe and to ensure economic and social progress. In accordance with Article 14(2) of the Treaty, the internal market comprises an area without internal frontiers in which the free movement of services and the freedom of establishment are ensured. The elimination of obstacles to the development of service activities between Member States is essential in order to strengthen the integration of the peoples of Europe and to promote balanced and sustainable economic and social progress. In eliminating such barriers it is essential to ensure that the development of service activities contributes to the fulfilment of the task laid down in Article 2 of the Treaty of promoting throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.

(1a) A competitive market in services is essential in order to promote economic growth and create jobs in the EU. At present numerous barriers within the internal market prevent service providers, particularly small and medium-sized enterprises (SMEs), from extending their operations beyond their national borders and from taking full advantage of the internal market. This weakens the worldwide competitiveness of European Union service providers. A free market which compels the Member States to eliminate restrictions on cross-border provision of services while at the same time increasing transparency and the information for consumers would give consumers wider choice and better services at lower prices.

(2) The report from the Commission on "The State of the Internal Market for Services"[4] drew up an inventory of a large number of barriers which are preventing or slowing down the development of services between Member States, in particular those provided by SMEs, which are predominant in the field of services. The report concludes that a decade after the envisaged completion of the internal market, there is still a huge gap between the vision of an integrated European Union economy and the reality as experienced by European citizens and service providers. The barriers listed affect a wide variety of service activities across all stages of the service provider’s activity and have a number of common features, including, in particular, the fact that they often arise from administrative burdens, the legal uncertainty associated with cross-border activity and the lack of mutual trust between Member States.

(3) Since services constitute the engine of economic growth and account for 70% of GDP and employment in the majority of Member States, this fragmentation of the internal market has a negative impact on the entire European economy, in particular on the competitiveness of SMEs and the movement of workers , and prevents consumers from gaining access to a greater variety of competitively priced services. It is important to point out that the services sector is a key employment sector for women in particular, and that they therefore stand to benefit greatly from new opportunities offered by the completion of the internal market for services. The European Parliament and the Council have emphasised that the removal of legal barriers to the establishment of a genuine internal market is a matter of priority for achieving the goal set by the Lisbon European Council of improving employment and social cohesion and achieving sustainable economic growth so as to make the European Union the most competitive and dynamic knowledge-based , employment-boosting economy in the world by 2010. Removing those barriers , while ensuring an advanced European social model, is thus a basic condition for overcoming the difficulties encountered in implementing the Lisbon Strategy and for reviving the European economy, particularly in terms of employment and investment. It is therefore important to achieve an internal market for services, with the right balance between market opening and preserving public services and social and consumer rights.

(4) It is therefore necessary to remove barriers to the freedom of establishment for service providers in Member States and barriers to the free movement of services as between Member States and to guarantee recipients and providers the legal certainty necessary for the exercise in practice of those two fundamental freedoms of the Treaty. Since the barriers in the internal market for services affect operators who wish to become established in other Member States as well as those who provide a service in another Member State without being established there, it is necessary to enable service providers to develop their service activities within the internal market either by becoming established in a Member State or by making use of the free movement of services. Service providers should be able to choose between those two freedoms, depending on their strategy for growth in each Member State.

(5) Those barriers cannot be removed solely by relying on direct application of Articles 43 and 49 of the Treaty, since, on the one hand, addressing them on a case-by-case basis through infringement procedures against the Member States concerned would, especially following enlargement, be extremely complicated for national and Community institutions, and, on the other hand, the lifting of many barriers requires prior coordination of national legal schemes, including the setting up of administrative cooperation. As the European Parliament and the Council have recognised, a Community legislative instrument makes it possible to achieve a genuine internal market for services.

(6) This Directive establishes a general legal framework which benefits a wide variety of services while taking into account the distinctive features of each type of activity or profession and its system of regulation. That framework is based on a dynamic and selective approach consisting in the removal, as a matter of priority, of barriers which may be dismantled quickly and, for the others , the launching of a process of evaluation, consultation and complementary harmonisation of specific issues, which will make possible the progressive and coordinated modernisation of national regulatory systems for service activities which is vital in order to achieve a genuine internal market for services by 2010. Provision should be made for a balanced mix of measures involving targeted harmonisation, administrative cooperation, the provision on the freedom to provide services and encouragement of the development of codes of conduct on certain issues. That coordination of national legislative regimes should ensure a high degree of Community legal integration and a high level of protection of general interest objectives, especially protection of consumers, which is vital in order to establish mutual trust between Member States. This Directive also takes into account other general interest objectives, including the protection of the environment, public security and public health as well as of the need to comply with labour law.

(6a) Since the objectives of the proposed action, namely the elimination of barriers to the freedom of establishment for service providers in the Member States and to the free provision of services between Member States, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale of the action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary to achieve those objectives.

(6b) It is appropriate that the provisions of this Directive concerning the freedom of establishment and the free movement of services should apply only to the extent that the activities in question are open to competition, so that they do not oblige Member States either to liberalise services of general economic interest or to privatise public entities which provide such services or to abolish existing monopolies for other activities or certain distribution services.

(6c) This Directive does not concern requirements governing access to public funds for certain service providers. Such requirements include notably those laying down conditions under which service providers are entitled to receive public funding, including specific contractual conditions, and in particular quality standards which need to be observed as a condition to receive public funds, for example for social services.

(6d) This Directive does not interfere with Member States' measures taken, in accordance with Community law, in relation to the protection or promotion of cultural and linguistic diversity and media pluralism, including the funding thereof.

(6e) This Directive aims at creating a legal framework to ensure the freedom of establishment and the free movement of services between the Member States and does not harmonise or prejudice criminal law. Therefore, rules of criminal law will generally not be affected by this Directive. However, it should not be possible for a Member State to circumvent the rules laid down in this Directive and to restrict the freedom to provide services by applying criminal law provisions which specifically affect the access to or the exercise of a service activity.

(6f) It is equally important that this Directive fully respects Community initiatives based on Article 137 of the Treaty with a view to achieving the objectives of Article 136 of the Treaty concerning the promotion of employment and improved living and working conditions.

(6g) This Directive does not affect terms and conditions of employment, including maximum work periods and minimum rest periods, minimum paid annual holidays, minimum rates of pay as well as health, safety and hygiene at work, nor does it affect relations between social partners, including the rights to negotiate and conclude collective agreements, the right to strike and to take industrial actions, nor does it apply to services provided by temporary work agencies. This Directive does not affect the social security legislation of the Member States.

(6h) This Directive should be interpreted in such a way as to reconcile the exercise of fundamental rights as recognised in the Member States and by the Charter of Fundamental Rights of the European Union with the fundamental freedoms laid down in Articles 43 and 49 of the Treaty. Those fundamental rights include i.a. the right to take industrial action. This Directive should be interpreted in such a way as to give full effect to those fundamental rights and the fundamental freedoms.

(6i) This Directive concerns only service providers established in a Member State and does not cover external aspects. It does not concern negotiations within international organisations on trade in services, in particular in the framework of GATS.

[Recital 7 deleted]

(7a) This Directive covers only services which are performed for an economic consideration. Services of General Interest are not covered by the definition in Article 50 of the Treaty and therefore do not fall within the scope of this Directive. Services of General Economic Interest are services that are performed for an economic consideration and therefore do fall within the scope of this Directive. However, certain Services of General Economic Interest, such as those that may exist in the field of transport, are excluded from the scope of application of this Directive and certain other Services of General Economic Interest, for example, that may exist in the area of postal services, are derogated from the provision on the freedom to provide services . This Directive does not deal with the funding of Services of General Economic Interest and does not apply to systems of aids granted by Member States, in particular in the social field, in accordance with Community rules on competition. This Directive does not deal with the follow-up to the Commission White Paper on Services of General Interest.

[Recital 8 moved]

(9) Financial services should be excluded from the scope of this Directive since these activities are subject of specific Community legislation aimed, as is this Directive, at achieving a genuine internal market for services. Consequently, t his exclusion covers all financial services such as banking, credit, insurance, including reinsurance, occupational or personal pensions, securities, investment, funds, payments, investment advice, including the services listed in Annex I to Directive 2000/12/EC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions [5] .

(10) In view of the adoption in 2002 of a package of legislative instruments relating to electronic communications networks and services, as well as to associated resources and services, which has established a regulatory framework to facilitate access to those activities within the internal market, notably through the elimination of most individual authorisation schemes, it is necessary to exclude issues dealt with by those instruments from the scope of this Directive.

(10a) The exclusions from the scope of application regarding matters of electronic communications services as covered by Directives 2002/19/EC [6] , 2002/20/EC [7] , 2002/21/EC [8] , 2002/22/EC [9] and 2002/58/EC [10] of the European Parliament and of the Council should apply not only to questions specifically dealt with in these Directives but also to matters for which the Directives explicitly leave to Member States the possibility of adopting certain measures at national level.

(10b) Transport services, including urban transport, taxis, and ambulances as well as port services are excluded from the scope of this Directive.

(10c) The exclusion of healthcare covers healthcare and pharmaceutical services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health profession in the Member State in which the services are provided .

(10d) This Directive does not affect the reimbursement of healthcare provided in a Member State other than that in which the recipient of the care is resident. This issue has been addressed by the Court of Justice on numerous occasions, and the Court has recognised patients' rights. It is important to address this issue in another Community legal instrument in order to achieve greater legal certainty and clarity to the extent that this issue is not already addressed in Council Regulation (EEC) No 1408/71 on the coordination of social security systems[11].

(10e) Audiovisual services, whatever their mode of transmission, including within cinemas, should also be excluded from the scope of this Directive. Furthermore, the Directive does not apply to aids granted by Member States in the audiovisual sector which are covered by Community rules on competition.

(10f) Gambling activities, including lottery and betting transactions, should be excluded from the scope of this Directive, in view of the specific nature of these activities, which entail implementation by Member States of policies relating to public policy and consumer protection.

(10g) This Directive is without prejudice to the application of Article 45 of the Treaty concerning notably certain activities, of notaries and of other professions, related to the power of authentication and certification.

(10h) This Directive does not cover those social services in the area of housing, childcare and support to families and persons in need provided by the State or by providers mandated by the State – at national, regional or local level – with the objective of ensuring support to those who are in a particular state of need because of their insufficient family income, total or partial lack of independence or to those who risk to be marginalised. These services are essential to guarantee the fundamental right to human dignity and integrity and are a manifestation of the principles of social cohesion and solidarity and should not be affected by this Directive.

(10i) This Directive does not deal with the funding of, or the system of aids linked to, social services. Nor does it affect the criteria or conditions set by Member States to ensure that social services effectively carry out a function to the benefit of the public interest and social cohesion.

(11) In view of the fact that the Treaty provides specific legal bases for taxation matters and for the Community instruments already adopted in that field, it is necessary to exclude the field of taxation from the scope of this Directive.

[Recital 12 moved]

(13) There is already a considerable body of Community law on service activities. This Directive builds on, and thus complements, the Community acquis. Conflicts between this Directive and other Community instruments have been identified and are provided for in this Directive, including by means of derogations. However, it is necessary to provide a rule for any residual and exceptional cases where there is a conflict between a provision of this Directive and a provision of another Community instrument. The existence of such a conflict should be determined in compliance with the rules of the Treaty on the right of establishment and the free movement of services. A conflict between a provision of the Directive and a future Community instrument should be avoided in the drafting and negotiation of such an instrument.

(13a) This Directive is consistent with and does not affect Directive 2005/36/EC of the European parliament and the Council[12] on the recognition of professional qualifications. It deals with questions other than those relating to professional qualifications, for example professional liability insurance, commercial communications, multidisciplinary activities and administrative simplification. Concerning temporary cross-border service provision a derogation from the provision on the freedom to provide services in this Directive ensures that Title II on the free provision of services of Directive 2005/36/EC on the recognition of professional qualifications is not affected. Therefore, none of the measures applicable in the Member State where the service is provided under Directive 2005/36/EC is affected by the provision on the freedom to provide services.

(13b) This Directive is consistent with other Community initiatives concerning services, particularly those relating to the safety of services. It is also consistent with other initiatives concerning the internal market, and those concerning consumer protection, such as Directive 2005/29/EC of the European Parliament and of the Council on unfair commercial practices[13] and Regulation (EC) No 2006/2004 of the European Parliament and of the Council on cooperation between national authorities responsible for the enforcement of consumer protection laws ("the Regulation on consumer protection cooperation")[14].

(14) The services covered by this Directive concern a wide variety of ever-changing activities, including business services such as management consultancy, certification and testing; facilities management, including office maintenance; advertising; recruitment services; and the services of commercial agents. The services covered are also services provided both to businesses and to consumers, such as legal or fiscal advice; real estate services such as estate agencies; construction, including the services of architects; distributive trades; the organisation of trade fairs; car rental; travel agencies. Consumer services are also covered, such as those in the field of tourism, including tour guides; leisure services, sports centres and amusement parks; and, to the extent that they are not excluded from the scope of application of the Directive, household support services, such as help for the elderly. Those activities may involve services requiring the proximity of provider and recipient, services requiring travel by the recipient or the provider and services which may be provided at a distance, including via the Internet.

[ Recital 15 deleted]

(16) According to the jurisprudence of the Court of Justice, the assessment of whether certain activities, in particular activities which are publicly funded or provided by public entities, constitute a "service" has to be carried out on a case by case basis in the light of all their characteristics, in particular the way they are provided, organised and financed in the Member State concerned. The Court has held that the essential characteristic of remuneration lies in the fact that it constitutes consideration for the services in question and has recognized that the characteristic of remuneration is absent in the case of activities performed, for no consideration, by the State or on behalf of the State in the context of its duties in the social, cultural, educational and judicial fields, such as courses provided under the national education system, or the management of social security schemes which do not engage in economic activity. The payment of a fee by recipients, for example, a tuition or enrolment fee paid by students in order to make a certain contribution to the operating expenses of a system, does not in itself constitute remuneration because the service is still essentially financed by public funds. These activities are, therefore, not covered by the definition of service in Article 50 of the Treaty and do not therefore fall within the scope of this Directive.

(16a) Non profit making amateur sporting activities are of considerable social importance. They often pursue wholly social or recreational objectives. Thus they might not constitute economic activities within the meaning of Community law and fall outside the scope of this Directive.

[Recital 17 moved]

(18) The concept of provider covers any natural person who is a national of a Member State or any legal person who is engaged in a service activity there, in exercise either of the freedom of establishment or of the free movement of services. The concept of provider is thus not limited solely to cross-border service provision within the framework of the free movement of services but also covers cases in which an operator establishes itself in a Member State in order to develop its service activities there. On the other hand, the concept of a provider does not cover the case of branches in a Member State of companies from third countries because, under Article 48 of the Treaty, the freedom of establishment and free movement of services may benefit only companies constituted in accordance with the laws of a Member State and having their registered office, central administration or principal place of business within the Community. The notion of recipient also covers third country nationals who already benefit from rights conferred upon them by Community acts such as Regulation (EEC) No 1408/71[15] or Directive 2003/109/EC[16], Regulation (EEC) No 859/2003[17] and Directive 2004/38/EC[18]. Furthermore, Member States have the possibility to extend the notion of recipient to other third country nationals that are present within their territory.

(18a) The place at which a service provider is established should be determined in conformity with the case-law of the Court of Justice according to which the concept of establishment involves the actual pursuit of an economic activity through a fixed establishment for an indefinite period. This requirement may also be fulfilled where a company is constituted for a given period or where it rents the building or installation through which it pursues its activity. It may also be fulfilled where a Member State grants authorisations for a limited duration only in relation to particular services. An establishment does not need to take the form of a subsidiary, branch or agency, but can consist of an office managed by a provider’s own staff or by a person who is independent but authorised to act on a permanent basis for the undertaking, as would be the case with an agency. According to this definition which requires the actual pursuit of an economic activity at the place of establishment of the service provider, a mere letter box does not constitute an establishment. In cases where a provider has several places of establishment it is important to determine from which place of establishment the actual service concerned is provided. In cases where it is difficult to determine from which of several places of establishment a given service is provided, this is the place where the provider has the centre of his activities relating to this particular service.

(18b) The Treaty provisions on establishment leave economic operators free to choose the legal form which they deem suitable for carrying out their activity. Accordingly, "legal persons", within the meaning of the Treaty, means all entities constituted under, or governed by, the law of a Member State, irrespective of their legal form.

[Recital 19 moved]

(20) The concept of authorisation scheme covers, inter alia , the administrative procedures for granting authorisations, licences, approvals or concessions, and also the obligation, in order to be eligible to exercise the activity, to be registered as a member of a profession or entered in a register, roll or database, to be officially appointed to a body or to obtain a card attesting to membership of a particular profession. Authorisation may be granted not only by a formal decision but also by an implicit decision arising, for example, from the silence of the competent authority or from the fact that the interested party must await acknowledgement of receipt of a declaration in order to commence the activity in question or for the latter to become lawful.

(20a) The notion of overriding reasons relating to the public interest to which reference is made in certain provisions of this Directive has been developed progressively by the Court of Justice in its case-law in relation to Articles 43 and 49 of the Treaty and may continue to evolve. The notion as recognised in the case law of the Court of Justice covers at least the following grounds: public policy, public security and public health, within the meaning of Articles 46 and 55 of the Treaty; the maintenance of order in society; social policy objectives; the protection of the recipients of services; consumer protection; the protection of workers, including the social protection of workers; the preservation of the financial balance of the social security system; the prevention of fraud; the prevention of unfair competition; the protection of the environment and the urban environment, including town and country planning; the protection of creditors; safeguarding the sound administration of justice; road safety; the protection of intellectual property; cultural policy objectives, including safeguarding the freedom of expression of various elements, in particular social, cultural, religious and philosophical values of society; the maintenance of press diversity and the promotion of the national language; the preservation of national historical and artistic heritage; and veterinary policy.

[Recital 21 deleted]

(21a) The rules relating to administrative procedures do not aim at harmonising administrative procedures but at removing overly burdensome authorisation schemes, procedures and formalities that hinder the freedom of establishment and the creation of new services undertakings resulting therefrom.

(22) One of the fundamental difficulties faced, in particular by SMEs, in accessing service activities and exercising them is the complexity, length and legal uncertainty of administrative procedures. For this reason, following the example of certain modernising and good administrative practice initiatives undertaken at Community and national level, it is necessary to establish principles of administrative simplification, inter alia through the introduction, coordinated at Community level, of a system of points of single contac t, limitation of the obligation of prior authorisation to cases in which it is essential and the introduction of the principle of tacit authorisation by the competent authorities after a certain period of time elapsed. Such modernising action, while maintaining the requirements on transparency and the updating of information relating to operators, is intended to eliminate the delays, costs and dissuasive effects which arise, for example, from unnecessary or excessively complex and burdensome procedures, the duplication of procedures, the red tape involved in submitting documents, the use of arbitrary powers by the competent authorities, indeterminate or excessively long periods before a response is given, the limited duration of validity of authorisations granted and disproportionate fees and penalties. Such practices have particularly significant dissuasive effects on providers wishing to develop their activities in other Member States and require coordinated modernisation within an enlarged internal market of twenty-five Member States.

(22a) Member States should introduce, where appropriate, forms harmonised at Community level, as established by the Commission, which will serve as an equivalent to certificates, attestations or any other document in relation to establishment.

(22b) In order to examine the need for simplifying procedures and formalities Member States may in particular take into account their necessity, number, possible duplication, cost, clarity, accessibility as well as the delay and practical difficulties that they could give rise to for the service provider concerned.

(23) In order to facilitate access to service activities and the exercise thereof in the internal market, it is necessary to establish an objective, common to all Member States, of administrative simplification and to lay down provisions concerning, inter alia , points of single contact , the right to information, procedures by electronic means and the establishment of a framework for authorisation schemes. Other measures adopted at national level to meet that objective may involve reduction of the number of procedures and formalities applicable to service activities and the restriction of such procedures and formalities to those which are essential in order to achieve a general interest objective and which do not duplicate each other in terms of content or purpose.

(24) With the aim of administrative simplification, general formal requirements, such as presentation of original documents, certified copies or a certified translation, should not be imposed, except where objectively justified by an overriding reason relating to the public interest, such as the protection of workers , public health, the protection of the environment or the protection of consumers. It is also necessary to ensure that an authorisation normally permits access to, or exercise of, a service activity throughout the national territory, unless a new authorisation for each establishment, for example for each new hypermarket, or an authorisation that is restricted to a specific part of the national territory is objectively justified by an overriding reason relating to the public interest.

(25) It is appropriate to provide for points of single contact in order to ensure that each provider has a single point at which he can complete all procedures and formalities. The number of points of single contact per Member State may vary according to regional or local competencies or according to the activities concerned. The creation of points of single contact does not interfere with the allocation of functions among competent authorities within each national system. Where several authorities at regional or local level are competent, one of them may assume the role of point of single contact and coordinator. Points of single contact may be set up not only by administrative authorities but also by chambers of commerce or crafts, or by the professional organisations or private bodies to which a Member State decides to entrust that function. Points of single contact have an important role to play in providing assistance to providers either as the authority directly competent to issue the documents necessary to access a service activity or as an intermediary between the provider and the authorities which are directly competent. In its Recommendation of 22 April 1997 on improving and simplifying the business environment for business start-ups[19], the Commission was already encouraging Member States to introduce points of contact to simplify formalities.

(25a) The fee which may be charged by points of single contact should be proportionate to the cost of procedures and formalities with which they deal. This does not prevent Member States to entrust the points of single contact with the collection of other administrative fees such as the fee of supervisory bodies.

(25b) Providers and recipients of services must have easy access to certain types of information. This should include in particular information on procedures and formalities, contact details of the competent authorities, conditions for access to public registers and data bases and information concerning available remedies and the contact details of associations and organisations from which providers or recipients can obtain practical assistance. This information must be easily accessible, i.e. it should be available to the public easily and without obstacles. This information should be provided in a clear and unambiguous manner.

(25 c) The obligation for Member States to ensure that relevant information is easily accessible to providers and recipients can be fulfilled by making this information accessible through a website. The obligation for competent authorities to assist providers and recipients does not include the provision of legal advice in individual cases. Nevertheless, general information on the way in which requirements are usually interpreted or applied should be given. The way in which information is provided to providers and recipients is for each Member State to determine within the framework of the Directive. Issues such as liability for providing incorrect or misleading information are for Member States to determine.

(26) The setting up, in the reasonably near future, of electronic means of completing procedures and formalities will be vital for administrative simplification in the field of service activities, for the benefit of providers, recipients and competent authorities. In order to meet that obligation as to results, national laws and other rules applicable to services may need to be adapted. This obligation does not prevent Member States from providing other means of completing such procedures and formalities, in addition to electronic means. The fact that it must be possible to complete those procedures and formalities at a distance means in particular that Member States must ensure that they may be completed across borders. The obligation as to results does not cover procedures or formalities which by their very nature are impossible to complete at a distance. Furthermore, this does not interfere with Member States' legislation on the use of languages.

(27) The possibility of gaining access to a service activity may be made subject to authorisation by the competent authorities only if that decision satisfies the criteria of non-discrimination, necessity and proportionality. That means, in particular, that authorisation schemes should be permissible only where an a posteriori inspection would not be effective because of the impossibility of ascertaining the defects of the services concerned a posteriori, due account being taken of the risks and dangers which could arise in the absence of a prior inspection. However, the provision to that effect made by this Directive cannot be relied upon in order to justify authorisation schemes which are prohibited by other Community instruments such as Directive 1999/93/EC of the European Parliament and the Council on a Community framework for electronic signatures[20], or Directive 2000/31/EC of the European Parliament and of the Council on certain legal aspects of information society services, in particular electronic commerce, in the internal market ('Directive on electronic commerce')[21]. The results of the process of mutual evaluation will make it possible to determine, at Community level, the types of activity for which authorisation schemes should be eliminated.

( 27a) This Directive is without prejudice to the possibility for Member States to withdraw authorisations after they have been issued, if the conditions for the granting of the authorisation are no longer fulfilled.

(27 b) According to the case law of the Court of Justice, public health, consumer protection, animal health and the protection of the urban environment constitute overriding reasons relating to the public interest. Such overriding reasons may justify the application of authorisation schemes and other restrictions applicable to social services. However, no such authorisation scheme or restriction may discriminate on grounds of nationality. Further, the principles of necessity and proportionality must always be respected.

(27 c) The provisions of this Directive relating to authorisation schemes should concern cases where the access to or exercise of a service activity by economic operators requires a decision by a competent authority. This concerns neither decisions by competent authorities to set up a public or private entity for the provision of a particular service nor the conclusion of contracts by competent authorities for the provision of a particular service which is governed by rules on public procurement.

(27d) In order to facilitate access to and exercise of service activities, it is important to evaluate and report on authorisation schemes and their justification. This reporting obligation concerns only the existence of authorisation schemes and not the criteria and conditions for the granting of an authorisation.

( 27e) The authorisation should normally enable the provider to have access to the service activity, or to exercise that activity, throughout the national territory, except if a territorial limit is justified by an overriding reason relating to the public interest. For example, environmental protection may justify the requirement to obtain an individual authorisation for each installation on the national territory. This provision does not affect regional or local competences for the granting of authorisations within the Member States.

(27f) This Directive, and in particular the provisions concerning authorisation schemes and the territorial scope of an authorisation, do not interfere with the division of regional or local competences within the Member States, including regional and local self-government and the use of official languages.

(27g) The provision relating to the non duplication of conditions for the granting of authorisation does not prevent Member States from applying their own conditions which are specified in the authorisation scheme. It only requires that competent authorities, when considering whether these conditions are met by the applicant, take into account the equivalent conditions which have already been satisfied by the applicant in another Member State. This provision does not require the application of the conditions for the granting of authorisation provided in the authorisation scheme of another Member State.

(28) In cases where the number of authorisations available for an activity is limited because of scarcity of natural resources or technical capacity, as may be the position, for example, with regard to the award of analogue radio frequencies or the exploitation of hydro-electric plant, a procedure for selection from among several potential candidates must be adopted, with the aim of developing through open competition the quality and conditions for supply of services available to users. Such a procedure must provide guarantees of transparency and impartiality and the authorisation thus granted must not have an excessive duration, or be subject to automatic renewal, or confer any advantage on the successful provider. In particular, the duration of the authorisation granted must be fixed in such as way that it does not restrict or limit free competition beyond what is necessary to enable the provider to recoup the cost of investment and to make a fair return on the capital invested. This provision does not prevent Member States from limiting the number of authorisations for reasons other than scarcity of natural resources or technical capacity. These authorisations remain in any case subject to the other provisions of this Directive relating to authorisation schemes.

(28a) This Directive provides that failing a response within a time period, authorisation shall be deemed to have been granted. However, different arrangements may be put in place in respect of certain activities, where objectively justified by overriding reasons relating to public interest.

[Recital 29 moved]

(30) In order to establish a genuine internal market for services, it is necessary to abolish any restrictions on the freedom of establishment and the free movement of services which are still enshrined in the laws of c