Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council on services in the internal market (COM(2004) 2 final — 2004/0001 (COD))
Date: 2005-02-10
Institutions: European Economic and Social Committee
Subjects: domestic market, drafting of EU law, freedom to provide services, right of establishment, services contract

8.9.2005

EN

Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the Proposal for a Directive of the
European Parliament and of the Council on services in the internal market

(COM(2004) 2 final — 2004/0001 (COD))

(2005/C 221/20)

On 20 February 2004, the Council decided to consult the European Economic and Social Committee,
under Article 95 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 11 January 2005. The rapporteur was Mr Metzler.
The co-rapporteur was Mr Ehnmark.

At its 414th plenary session of 9 and 10 February 2005 (meeting of 10 February), the European Economic
and Social Committee adopted the following opinion by 145 votes to 69, with 9 abstentions:

1. Preliminary remarks

The Committee has also referred to the explanatory
1.1
notes
from the European Commission to the Council
(Document 10865/04 of 25 June 2004 and Document
11153/04 of 5 July 2004 on Article 24) and the European
Parliament working documents of 25 March 2004 (Committee
on Legal Affairs and the Internal Market — rapporteur: Evelyne
Gebhard) and 26 March 2004 (Committee on Employment and
Social Affairs — rapporteur: Anne E.M. van Lancker).

approach includes simplified procedures, harmonised quality
assurance, and increased transparency in regulations for the
protection of consumers. The provision of cross-border services
is an essential part of the market, and the removal of barriers is
of fundamental importance for the economic development of
this sector and particularly important for consumers. The direc-
tive could lead to an increase in supply and more competition.
Consumers will thus benefit from lower prices and a wider
range of choice. The Committee therefore expressly welcomes
the overall aims of the proposed directive.

On 24 May 2004, the Section for the Single Market,
1.2
responsible for
Production and Consumption, which was
preparing the Committee's work on the subject, held a public
hearing based on a questionnaire sent out previously, attended
by representatives of the service society; it looked at over 100
additional responses submitted orally and in writing.

2.1.1 Whilst an effective internal market does require the
removal of barriers,
In
order to make Europe more competitive, national and EU-wide
rules — and consequently harmonised standards — are essen-
tial.

it also requires adequate regulation.

2. General comments

2.1
Following the Lisbon agreement, the service sector is
taking on a key role in the implementation of the European
internal market, and is of fundamental importance to economic
growth in the EU. The Commission is submitting the draft
directive on services in the internal market with accompanying
explanations as part of the European economic reform process,
which is designed to transform the EU into the most competi-
tive and dynamic knowledge-based economy in the world by
2010, capable of sustainable economic growth with more and
better jobs and greater social cohesion. The draft directive is
intended to provide an essential building block and a reliable
legal framework for the cross-border provision of services and
freedom of establishment in the Member States in the areas of
industry, commerce, trade, and the liberal professions for full-
time, part-time and temporary work. The new horizontal

Given individual Member States' differing legal systems
2.2
the Committee is aware that completing the
and cultures,
single market in services is a complex venture. The Committee
already recognized that fact in its opinion (INT/105) of 28
November 2001 (1) on the Communication from the Commis-
sion on an Internal Market Strategy for Services, and it has
explicitly welcomed European Commission efforts to speed up
single market completion. As the purpose of the draft directive
is to directly establish a framework that applies to a range of
different sectors, it should offer non-bureaucratic and flexible
solutions that draw on proven self-regulatory schemes within
the European Union. It will be vital to further optimise the inte-
gration process, not least through the additional draft directive
from the European Commission on the mutual recognition of
professional qualifications, while keeping in mind proven
social, environmental, and consumer protection (safety) stan-
dards.

(1) OJ C 48, 21.2.2002

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2.3
The draft directive has close links with the proposal for
a Directive on the recognition of professional qualifications,
with the communication on competition in professional
services, the current debate on services of general interest, and
also the ongoing consultation on social services of general
interest, the Rome I convention and the proposed Rome II
regulation. All these proposals aim at improving the func-
tioning of the single market. Specialised and improved coordi-
nation from within the Commission in order to ensure dove-
tailing of work and provisions would therefore be desirable.

services

cross-border

The draft directive focuses on two forms of free move-
2.4
ment
and cross-border
concerning
company establishment: (i) where a service provider from one
Member State wishes to establish himself in another Member
State in order to provide his services there; and (ii) where a
service provider wishes to provide a service in another Member
State from (out of) his Member State of origin, in particular by
moving temporarily to that other Member State. The draft
directive proposes four key measures to remove the obstacles
envisaged so far by the European Commission:

— the application of the country-of-origin principle,

— the allocation of tasks between Member State of origin and
Member State of destination with regard to the posting of
workers in the context of the provision of services,

— the development of mutual trust, and

— stronger mutual assistance between Member States, while at
the same time limiting the scope for Member States to
introduce their own monitoring, supervision and enforce-
ment mechanisms.

3. The proposal for a Directive point-by-point

3.1
The EESC has carefully analysed the draft directive from
the perspective of the requirements that a directive with such a
broad scope has to meet. The EESC has concluded that
numerous clarifications and amendments are needed to suffi-
ciently accommodate unresolved issues and make this new
effort to promote services in the internal market a real step
forward. This conclusion was reached not least due to the
insufficient assessments made before the draft directive was
launched. The numerous concerns of varied economic and
social interest groups aired at the public hearing held on 24
May 2004 have still not been fully addressed, in spite of the
European Commission document submitted to the Council of
the
(Council document
10865/04). An extended impact assessment by the Commission
would be of value to all stakeholders.

European Union on 25 June

3.2 Empirical basis

3.2.1
For the Committee, it is striking that the explanatory
memorandum to the proposed directive does not provide any
reliable statistical basis to quantify the cross-border provision
of services and the cross-border establishment of businesses.
This data should therefore be added to the assessment report
from the Commission. If, in future, we are to gain any reliable
picture of the significance of the service sector and the effects
on the operation of the single market — whether positive or,
indeed negative — of simplifying procedures as envisaged by
the draft directive, then a more precise empirical basis is of
considerable importance. The Committee considers that the
most accurate possible recording of the true conditions in the
cross-border provision of services and business establishment is
a crucial factor in the implementation of the internal market.

Statistical materials available in public administration,
3.2.2
research institutes,
the insurance sector and self-governing
bodies in the various Member States should be taken more
closely into account.

3.2.3
In addition, in order to deal with existing shortcom-
ings, the Committee believes that it is essential to explore new
approaches to obtaining empirical data, not least in order to
avoid further red tape. In some cases, consideration should be
given to supplementing official
through specific
surveys.

statistics

3.3 Scope: definitions — rules on conflict of laws — distinctions

The Committee calls for the scope of the directive and
3.3.1
derogations from it to be set out more clearly, and sharper
distinctions to be drawn between them. With regard to prac-
tical application of the directive, uncertainties about its scope
and which parts of the services sector will be affected and in
what way still remain, since clear distinctions have not been
drawn.

3.3.2
The Committee advocates drawing a clear distinction
between trade services and those provided by the liberal profes-
sions. Clearer distinctions are also needed in view of
the
Committee's recommendation that the harmonisation of certain
areas (liberal professions, and other sensitive areas) should be
given priority over a transition period. This would make the
quality assurance mechanisms envisaged by Chapter 4 of the
draft directive more conducive to consumer protection. In its
ruling of 11 October 2001 (Case C-267/99) the European
Court of Justice for instance highlighted the key elements that
make up the liberal professions. This ruling could serve as a
basis for a definition at European level.

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3.3.3
In 2003, the Commission submitted a Green Paper
and then, on 12 May 2004, a White Paper, on services of
general
interest, making it desirable to better identify and
distinguish the effects of the draft directive on this sensitive
area in the Member States. As the Commission is committed to
submitting a report by the end of 2005 on the feasibility of
and need for a framework law (this is referred to explicitly in
Article III-122 of the Constitutional Treaty), the Committee
believes it would be preferable to exclude all services of general
interest (economic and non-economic) from the scope of the
Services Directive, pending the establishment, within a Com-
munity framework, of the principles and conditions, economic
and financial in particular, that will enable services of general
interest to fulfil their purpose.

closely at the same time as applying the country-of-origin prin-
ciple should be investigated. Whenever there is a risk that
applying the country-of-origin principle would undermine
national welfare and healthcare systems, an overall derogation
must be put in place, as required.

3.3.7 With regard to health matters, the Committee points
out that inclusion of the hospital sector needs to be reviewed.
Perhaps the case law of the European Court of Justice on
obtaining reimbursement of costs for cross-border treatment
could be made more compatible through specific arrangements
for statutory insurance schemes; such arrangements should not,
however, fall within the field of application of the proposal for
a Directive.

3.3.4
The derogations to the country-of-origin principle set
out in Article 17(8) in respect of the Directive on the recogni-
tion of professional qualifications, which is still in the pipeline
cannot be restricted to individual articles or titles. Thus the
application of the country-of-origin principle must be coordi-
nated with the implementation of the proposed Directive on
the recognition of professional qualifications. The Directive on
the recognition of professional qualifications will put in place
an integrated quality assurance system. If the derogation provi-
sion in Article 17(8) is to apply solely to Title II of the draft
directive on the recognition of professional qualifications,
it
remains unclear how tasks should be divided between the
‘contact points’ set out in Article 53 of that draft directive and
the ‘one-stop shops’ proposed in Article 6 of the draft directive
under review here. If ‘contact points’ carrying out one and the
same role are what is meant here, then a unified term should
be employed in both draft directives.

The Committee recommends that,

3.3.7.1
in the case of
social and health services, the first step should be to await
publication of the Commission communication promised for
2005 and to ensure that there is appropriate coordination. The
Committee would point out
that many voices have been
expressed broadly in support of excluding this area from the
scope of the proposal for a Directive.

The same applies to providing a coherent definition of
3.3.8
the scope of the Eighth Council Directive on the approval of
persons responsible for carrying out the statutory audit of
accounting documents (article 17(15)), which is currently being
revised. The requisite clarity is still lacking from some transla-
tions of the Commission's proposal.

3.3.5
In order to avoid conflicts, the scope of the directive
and of the country-of-origin principle in particular needs to be
more clearly distinguished from national legislation in the areas
of taxation and criminal law. For example, under criminal law
in certain Member States, auditors, tax consultants and lawyers
have rights and obligations to maintain confidentiality vis-à-vis
investigating authorities, whereas in other Member States prac-
titioners are, to a limited extent, obliged to disclose information
or even to report on clients. In the case where a provider of
services is required to disclose information in a particular
country, but under the country-of-origin principle is entitled
and indeed obliged not to do so, is the provider of services
law system of the country
permitted to flout the criminal
concerned? Criminal law and tax legislation are the responsi-
bility of Member States and not of the EU, and therefore, in
order to avoid adverse effects for users, a clear legal distinction
needs to be made.

The point made in the explanatory memorandum, that
3.3.9
the provisions on services and freedom of establishment do not
apply to activities connected with the exercise of official
authority (Articles 45 and 55 of the EC Treaty) should be
included in the binding text of the directive.

3.3.10
Temporary work represents a particularly proble-
matic area which should be explicitly excluded from the entire
field of application of the proposal for a Directive. EU-wide
harmonisation of the requisite national provisions in this sector
is desirable. In this context, the EESC would draw attention to
the recently announced proposal for a Directive on working
conditions for temporary workers. Consideration must also be
given to ILO Convention 181 on private employment agencies,
Article 3(2) of which explicitly provides for licensing and certi-
fication systems to protect workers and encourage high-quality
work by such agencies.

3.3.6
the possibility of coordinating welfare
systems and other obligations of national governments more

In addition,

In some Member States, there are exceptionally strict
3.3.11
legal rules to protect press freedom.
the
Committee considers it essential to determine the scope of each
of these rules in relation to the draft directive.

In this area too,

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3.3.12
In addition, the Commission should make it quite
clear whether the proposal also applies to television broad-
casting services, and if so, how it intends to make the proposal
compatible with the provisions of the ‘Television without Fron-
tiers’ Directive. Likewise,
it should be made clear whether
audio-visual services in general and those provided at individual
request
the
proposal, as these are already covered by specific Community
legislation on certain legal aspects (Directive 2000/31/EC on elec-
tronic commerce).

fall within the scope of

(‘service on demand’)

3.3.13
In the EESC's view, these services should at present
be explicitly excluded from the scope of the proposed directive,
particularly with regard to its provisions on the country-of-
origin principle and the concept of establishment as an essential
connecting factor and the main criterion for identification of
the Member State concerned.

3.4 Single points of contact (one-stop shopping)

the Committee is concerned that,

3.4.1
The idea of simplifying procedures by creating a single
point of (first) contact for service providers is to be welcomed.
in the case of
However,
freedom of establishment, Article 6 allows certain procedures,
such as access to an activity, to be dealt with by a single
agency. For the Committee, the problem arises that in the case
of statutory public registration (e.g. in the trade register), the
single point of contact would need to refer matters on to the
competent registration authorities. Points of contact providing
so-called one-stop shopping will not be able to deal with this
area on their own. Clarification is needed as to how, in prac-
tice, the single points of contact will cooperate with existing
competent registration authorities.

Article 53 of the draft directive on the recognition of
3.4.2
professional qualifications mentions contact points, which are
intended to function as central information points. Article 6 of
the draft directive under review here mentions so-called ‘one-
stop shops’ as centralised contact points. Coordination is
needed here to ensure that the creation of various new agencies
does not interfere with the overall objective of safeguarding
citizens' rights to easily accessible information within and on
the European Union. Red tape should be specifically targeted
during the new Commission's term of office. The creation of
new bureaucratic hurdles in the individual Member States must
be avoided.

3.4.3 Moreover, the question of the liability of single points
of contact if they provide incomplete or even false information
needs to be clarified. In such cases, service providers may suffer
if they have neglected to obtain a given permit and are there-
fore in breach of the law. Consumers, for instance, may also
suffer, however, if the existence of adequate liability insurance
is not checked.

3.5 Country-of-origin principle

The Committee feels that, in order to make steps to
3.5.1
complete the internal market suitably effective,
the proper
conditions must first be created for there to be universal appli-
cation of the country-of-origin principle by adopting a differen-
tiated approach, making it a priority to align this approach on
employment, consumer-protection and environmental stan-
dards in each individual sector.

The blanket application of the country-of-origin prin-
3.5.2
ciple provided for in Article 16, together with the derogations
listed in Article 17,
the draft directive.
form the basis of
However, it is only appropriate for the type of services which
lend themselves to standardisation or to cases where harmoni-
legislation has progressed sufficiently to leave no
sation of
scope for distortions of competition, social dumping and lack
of confidence among consumers. It should be acknowledged
that there are areas where standards have not yet been laid
down or where indeed it would be impossible to do so (so-
called non-specifiable services).

The Committee therefore believes the blanket applica-
3.5.3
the country-of-origin principle in the cross-border
tion of
provision of services is premature. This principle assumes a
comparable environment — both de facto and in law. The
Committee feels that it will only be possible to apply the
country-of-origin principle effectively if there is legal certainty
and clarity regarding its scope. Applying this principle without
an appropriate transition period would therefore give rise to
problems, especially in view of the fact that the Committee
believes not all
sector-by-sector
the available options for
harmonisation have yet been made use of. It involves the risk
of systems competing with one another, weakening employ-
ment, environmental, and consumer protection standards,
given that differing legal, welfare and healthcare systems
continue to exist within the EU. Rather than prematurely intro-
ducing measures of a purely horizontal nature, the needs of the
single market could be best met by harmonisation on a sector-
by-sector basis, particularly in sensitive areas. This process
would involve examining — as part of a comprehensive impact
assessment, also including social and environmental aspects —
the suitability of each sector for introduction of the country-of-
origin principle, in conjunction with all the groups concerned,
especially consumer protection organisations and the social
partners. As harmonisation measures are at least as important a
means of completing the single market, there should be legisla-
tive harmonisation within an appropriate time frame in areas
where Member States have responsibilities in respect of health
care, welfare and professional activity. At an intermediate stage,
the European Commission, Parliament and Council should

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assess whether harmonisation in these areas has made sufficient
progress.
If necessary, and depending on the stage which
harmonisation of legislation has reached, an additional transi-
tion period could be granted to bring national legislation into
line. The Committee feels that this approach, together with an
exact definition of services which qualify for special treatment
(e.g. those provided by the liberal professions), would enable
gradual adjustment in the areas concerned; on completion of
the transition period the country-of-origin principle could then
come into force, enabling completion of the single market. The
same applies to co-regulatory and self-regulatory mechanisms.

The Committee feels that it would be worth examining
3.5.4
whether it would be useful to have a central,
independently
administered and readily accessible register of infringements
and misconduct arising in the course of cross-border service
activities involving regulated professions. Authorities could
record professional misconduct in the register. The aim of the
register would be to make communication between the relevant
national authorities as rapid and as free of red tape as possible,
besides ensuring effective monitoring and disciplining of opera-
tors on the market.

3.5.5
The draft directive stipulates that the Member State of
origin is responsible for supervising the provider and the
services provided by him,
including services provided in
another Member State. This provision places a very heavy
responsibility, and workload, on the country of origin and the
appropriate bodies there. However, Article 6 b) of the draft
directive on the recognition of professional qualifications
already emphasises the need for activities in cross-border
services requiring certain qualifications to be reported in the
host country. Furthermore, competition may be unexpectedly
distorted if a service provider moves to another Member State
with stricter regulations. The Committee is convinced that such
distortions of competition could be avoided if national legisla-
tion were to be gradually aligned on minimum standards stipu-
lating appropriate protection for consumers, employees and the
environment. The terms and conditions for the supervision of
service providers operating in other Member States must be
clearly defined, so that consumers can be confident that the
services offered to them comply with the laws in force.

The country-of-origin principle is only workable if
3.5.6
the
national authorities are highly organised,
regional and local
level. Current supervision structures and
cooperation networks operating on an electronic basis are not
adequately linked up. Even supervision by the country of origin
which, under Articles 36 and 37 of the draft directive is to take
the form of cooperation between country of origin and host
country, is not guaranteed to be effective.

including at

3.5.7
The Committee believes that delays due to language
barriers and slower channels of communication will make it
impossible to offer a prompt response to consumers who have
been affected by, or suffered losses as a result of poor service.
Consumers must be guaranteed the possibility of an effective
and straightforward method of lodging complaints and submit-
ting claims for unsatisfactory service. Under the directive's
proposals the competent authorities in the host country would
not even be able to act themselves, as they are not routinely
informed of the name under which the foreign service provider
enters into contact with consumers in the host country, what
kind of liability insurance cover is in place, etc. The directive
will therefore have to make at least supplementary provision,
making it compulsory for certain information to be communi-
cated to the competent authorities of the host country and
authorising the host country to take disciplinary measures. The
central register could play the key role here. Amendments
along these lines have already been taken up in the legislative
procedure for the proposal for a Directive on the recognition
of professional qualifications during its first reading by the
European Parliament.

Finally,

the Committee is concerned that

3.5.8
the draft
directive, in spite of partial derogations in Article 17(20)-(23),
jeopardises the successful creation of a unified legal instrument
for contractual and non-contractual obligations as set out by
the Rome I regulation and the proposed Rome II regulation.
Both regulations follow a universal approach by applying inter-
national civil law in a uniform fashion both within the EU and
in third countries, thus ensuring legal clarity for all parties to a
contract.

3.6 Posting of workers

terms and conditions of employment

3.6.1
The purpose of Directive 96/71/EC of 16 December
1996 on the posting of workers is to ensure that increased
possibilities for companies to provide services in other Member
States are consistent with the implementation of employees'
minimum social standards. The directive covers the practical
coordination of
for
posted workers. With Article 17(5) of the draft directive the
Commission has provided for a derogation from the country-
of-origin principle for the directive on the posting of workers,
and in doing so has demonstrated that a clear distinction
between the respective areas of application was what it had
intended. However, following closer examination of Articles 24
and 25 of the present draft directive the Committee is not
convinced that the wording of the intended derogation is suffi-
ciently clear and comprehensive.

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3.6.1.1
The relationship between the Posting of Workers
Directive and the Services Directive has provoked a large
number of questions. These questions differ from country to
country depending on differing labour market systems. The
views of the social partners, both European and national, must
be considered carefully if a Services Directive is to be accep-
table.

3.6.1.2
The Services Directive must not affect trade union
rights, the right to organise and collective bargaining, including
the right of the social partners to enter into collective agree-
ments, or the right to take industrial action. We propose that
this be made clear in Article 3. Workers from another Member
State must receive exactly the same treatment as workers from
the country in which the work is being done. This is quite clear
from the anti-discrimination perspective that underpins the EU
treaties. Wages and working conditions are therefore in all
significant aspects to be governed by the rules applying in the
country in which the work is being carried out. Control of
compliance with these rules in all significant aspects must, to
be effective, take place at the place of work. The Services Direc-
tive must therefore make clear that the objective of the Posting
of workers Directive is to protect workers and that under this
directive it is fully permissible to have better rules than the
mandatory minimum requirements for workers in a certain
country.

3.6.2
The Committee feels that the prohibition of supervi-
sory procedures provided for in Articles 24 and 25 of the draft
directive renders the derogation in Article 17(5) absurd, as
there is the unanswered question of how the country of origin
is to be informed of possible infringements in the country of
posting, which, for its part, is no longer allowed to exercise
supervision and impose penalties. Even if we admit this as a
possibility, it is still unclear how the country of origin should
proceed in a foreign country in which it has no jurisdiction. By
contrast,
the Directive on the posting of workers allows
Member States to stipulate which statements may be required
from companies in the host country (for example in the case of
public procurement), who should act as an authorised agent for
legal proceedings and fines, and how detailed activity notices
should be. This is how it should remain.

3.6.3 While closer cooperation between authorities in the
country of origin and the country of posting is indeed both
desirable and to be encouraged, practical experience suggests
that what actually happens in such cases is rather different, and
the Committee feels that the draft directive does not yet take
that sufficiently into account. The conclusion of the EESC is
that the Directive on services needs to be much clearer and

more specific with regard to cooperation between the country
of origin and the country of posting.

the Member State of origin to ensure that

3.6.4
In the case of cross-border posting of third-country
nationals, according to the draft, it must be the responsibility
the service
of
provider only posts workers who, whether or not they are citi-
zens of the EU, fulfil the conditions for residence and lawful
employment as laid down in the legislation of the country of
origin. The host Member State may not impose any preventa-
tive controls either on workers or the service provider. The
effects of this proposal are likely to give rise to difficulties
comparable to those described above. Therefore, here too the
directive should make clear that the legal position will remain
as it currently is.

3.7 Consumer protection through compulsory insurance

The Committee acknowledges that making profes-
3.7.1
sional
indemnity insurance compulsory for service providers
whose services involve a health, safety, or financial risk for
clients is one way of raising consumer confidence. Laying
down a uniform set of rules on professional indemnity insur-
ance to apply throughout Europe is also advisable in order to
ensure that service providers compete on a level playing field.
the arguments for and against
However, weighing up all
compulsory insurance, the latter can only be warranted if there
is an overwhelming need to protect third parties or consumers.
The directive should stipulate to which groups of professions
and sectors this applies. Rules also need to be flexible enough
to accommodate individual risk situations and the insurance
cover needs of the many potential policy holders.

3.8 Quality assurance through certification

3.8.1
The Committee is convinced that to provide a knowl-
edge-based service, competitors need to engage in continuous
training. They will only be able to stand their ground if they
are on top of the latest scientific and technological standards.
Stamps of quality and certificates will only have the desired
effects in terms of quality assurance if it is clear to consumers
which standards are behind them. For widespread recognition,
a certain level of familiarity needs to be attained, or the trans-
parency required by consumers will be lacking. Consumers
should have clear and transparent information on how the
quality of services is designated. Due to the appearance on the
market of many stamps of quality which are not recognised by
consumers, there is a risk that such designations may become
devalued, without providing consumers with the information
they need.

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3.9 Transparency in pricing

fective,
it limits their enforcement. In many Member States,
there are legal constraints which make it difficult to enforce
such agreements.

3.9.1
As already implied in Article 26(3) of the draft direc-
tive, there should be transparency in pricing and the method
used to calculate prices. In the view of the Committee, it is
worth considering making it compulsory to disclose pricing
details not just at the request of (non-business) clients but,
automatically, whenever orders are placed. One way of
achieving such transparency would be to lay down regulations
on standard fees and charges in a way which is compatible
with Community law. However, these would not necessarily
apply to business-to-business transactions.

3.10 Use of electronic media

and,

positive

generally

3.10.1
The Committee is pleased that, in principle, all proce-
dures are to be processed electronically. This is a forward-
looking
development.
speaking,
However, it must be remembered that, as already indicated in
the restrictions set out in Article 5 of the draft, originals — or
certified translations thereof — of significant documents such
from registers, etc., can only be
as certificates, extracts
submitted electronically if their authenticity can be verified by
a recognised signature or the like. In the case of ordinary elec-
tronic means of communication, this is not yet the case, and
the appropriate technology needs to be put in place in all
Member States (see the Committee's work on modern media
and communication).

3.11 Inter-disciplinary cooperation

intersectoral cooperation in the provision of

For the Committee, it is important for consumers to
3.11.1
have access to comprehensive packages of solutions in the case
of
services.
However, given the special position of some service providers
legal
under their country's legal system, the importance of
requirements for cooperation must be remembered. Coopera-
tion will only be possible if the rights and obligations relating
to confidentiality that apply to certain service providers are the
same for all of the various professionals working in a single
office. Failing this, there is a risk of infringing the rights of indi-
vidual consumers guaranteed under the European Charter of
Human Rights.

3.12 Codes of conduct

3.12.1
The Committee supports the proposal to introduce
codes of conduct at a European level. With various pieces of
national legislation in place to regulate the exercise of profes-
sions and professional conduct, codes of conduct are one of
the service
several options for guaranteeing the quality of
provided. Quality assurance schemes put in place by service
providers are voluntary agreements which are not
legally
binding. Although this does not render such agreements inef-

3.13 Social security

3.13.1 Within the enlarged European Union, there are many
different social security systems, which have evolved over long
periods, and with the close involvement of the social partners.
Exchange of best practice has been the principal method of
promoting the evolution of social security systems. This also
has implications for the draft directive on services in the
internal market. It must be ensured that joint social policy
achievements are not undermined.

in this connection,

It goes without saying that the social partners have a
3.13.2
natural and strong role to play in the development of the
services sector. However,
it should be
pointed out that trade unions are not explicitly included in the
consultations of ‘interested parties’ mentioned in the draft direc-
tive. The EESC strongly emphasises that the social partners, and
organised civil society, must be consulted wherever appropriate
in the development of the services sector. It also consistently
welcomes initiatives by stakeholders.

3.13.3
A particularly important point in this context is the
fact that the proposal for a directive does not take into account
the fact that in some EU Member States, collective agreements
have taken over the role of legislation. In practical terms, this
means that collective agreements have the same legally binding
effects as conventional legislation. The specific role of collective
agreements is particularly relevant
to the Nordic countries,
where it is the usual practice for independent social partners to
negotiate pay and conditions collectively. The draft directive
should be amended so as to explicitly acknowledge that collec-
tive agreements are a means of fulfilling the obligations under
the proposed directive.

3.14 The authorisation system

Inevitably the question arises of whether

3.14.1
The proposed restrictions on the Member States'
scope to introduce or maintain their own authorisation systems
are very strict, and will lead to changes in a number of Member
States.
this will
prevent Member States from requesting the application of
national rules in areas such as the social, health and environ-
mental fields. The freedom of Member States to shape their
own provisions and the existence of decision-making leeway at
national, regional or local levels are of crucial importance when
it comes to bringing an influence to bear on quality and safety
standards in the social services and health sector. Powers in the
framing of social policy, in particular, are also linked to the
scope for imposing individual conditions and demands on
service-providers at national, regional and local levels.

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3.15 Taxation

complication. The same applies to co-regulatory and self-regu-
latory mechanisms.

3.15.1
Article 2 of the draft excludes taxation from the
scope of the directive. The Committee would point out that
one of
the main barriers to completing the single market
continues to be the lack of a consistent approach to tax rules
among Member States. Harmonised rules at Community level
may in some cases bring about change. However, the country-
of-origin principle is not considered to be fully applicable in
this area either: for example, in its reform of the sixth VAT
Directive, the European Commission is proposing that services
provided between taxable persons should be taxed in the host
country, rather than in the country of origin. Although it
would be useful or even necessary, there is a lack of consis-
tency here in the simplification of cross-border service provi-
sion.

4. Overview of the Committee's proposals

4.1
The Committee welcomes the Commission's goal, set
out in the draft directive on services in the internal market, to
turn the internal market into a reality and to take a further step
forward in making the EU the world's most competitive and
dynamic knowledge-based economy, capable of sustainable
economic growth, with more and better jobs and greater social
cohesion (Lisbon Strategy). The services market is an important
multiplier, creating jobs and engendering economic growth in
the entire EU. Completion of the single market in services can
also bring major benefits for consumers in terms of lower
prices and greater choice. Moreover, the Committee believes
that the changes and specifications recommended here should
be incorporated into the draft directive so that this target is
really achieved.

The central corner stones of

4.2
following:

this opinion are the

the Committee suggests

4.2.1
Harmonisation of specific services over a two-stage transi-
tion period: The Committee therefore believes the blanket appli-
cation of the country-of-origin principle in the cross-border
provision of services is premature. As a general recommenda-
tion,
reviewing the feasibility of
applying the country-of-origin principle to various sectors,
such as the health and social services sectors. Wherever applica-
tion of the principle appears to be generally feasible, it should
be borne in mind that harmonisation and the country-of-origin
principle carry at least equal weight as instruments in the crea-
tion of the internal market. However, harmonisation should be
given priority at least for a transitional period for work — to
be defined separately — performed in the national health
systems, the liberal professions and other sensitive areas. At
present the Committee is concerned that immediate application
of the country-of-origin principle would result in a ‘watering
down’ of standards. The new provisions must be as easy to
apply, and as clearly structured as possible in order to ensure
the implementation is achieved smoothly and without
that

4.2.2
Issues connected with the social dimension: The draft direc-
tive should not lead to any watering down of existing social
protection, wage, and safety standards in the workplace, parti-
cularly those laid down in the Directive on the posting of
workers. National arrangements for collective negotiations and
agreements, including the national implementation of the asso-
(Directive
ciated Directive on the posting of workers
96/71/EC), should not be adversely affected. Member States
must be in a position to apply set definitions to the terms
‘employees’, the ‘self-employed’, and the ‘false self-employed’, in
order to establish clear principles for application within the
scope of the Directive on posting workers, limiting the scope
of the country-of-origin principle. In addition, it should be up
to the Member States to lay down employment conditions
which would generally apply in their countries to the relevant
employees, as well as to immigrants and posted workers. If
necessary, one of the employees in the country of posting
should be designated as an authorised agent, whose task would
be to have ready the documentation required locally for
employment.

4.2.3
Scope and rules on conflicts of laws: The scope, deroga-
tions and the rules on conflict of laws in the application of the
country-of-origin principle to cross-border service provision
must be set out more clearly and sharper distinctions must be
drawn between them. The scope of this Directive must be
marked off clearly against that of the planned Directive on the
recognition of professional qualifications, and clarification is
needed as to whether and how, for example, to avoid conflicts
between the country-of-origin principle — to which the draft
directive gives precedence in each case — and the social, tax
and criminal law standards of the host country. Legal incom-
patibilities vis-à-vis existing legislation must be avoided at all
cost. In particular, the Rome Conventions I and II must not be
affected. However, in many situations disputes can be resolved
with greater clarity by reference to international private law.
interest must be excluded from the
All services of general
scope of the Services Directive, pending a Community frame-
work.

4.2.4
Central register on cross-border activities: In the Commit-
tee's view, consideration should be given to whether setting up
a central EU-wide register to record requirements and infringe-
ments noted in the course of supervision could be an effective
and useful means of fulfilling the requirements set out in the
draft directive for the monitoring of specific service providers,
such as members of the liberal professions.

Improvements in empirical record keeping: Mechanisms to
4.2.5
record trade flows within the single market for services need to
be reviewed and improved, so that the reason for — and
impact of — measures can be better identified and evaluated.

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4.2.6
Quality assurance and transparency in pricing: Consumer
protection should be upheld through quality assurance systems
and, where appropriate, the introduction of compulsory insur-
ance. In the cross-border provision of services, steps should be
taken to ensure that customers in the ‘business to consumer’
sector have an idea of the conditions and costs of such services,
without specifically having to ask for them. Rules on standard
fees and charges are one possible option, provided that they
are compatible with Community law.

Alignment of

4.2.7
In addition to many
tax regulation:
minor obstacles, both real and perceived, the main obstacle to
for
the implementation of

the single market

is a matter

Member States and local authorities: diverse and inconsistent
implementation of the legislation on social security contribu-
tions and on taxation. The Committee reminds Member States
that this situation will continue to require particular attention
on their part.

Generally speaking,

the positive aspects of

5.
the single
market, particularly for SMEs and the self-employed, should be
the
promoted more intensively, with the involvement of
Committee's PRISM project. Unless a significant number of
service providers and consumers are convinced of the benefits
of the single market, the Committee feels that it will not be
possible to tap into the growth potential of the service sector.

Brussels, 10 February 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

APPENDIX I

to the Opinion of the European Economic and Social Committee

The following amendments were rejected in the course of the debate but received at least a quarter of the votes cast:

Point 2.1.1

Amend as follows:

‘Whilst an effective internal market does require the removal of barriers, it also requires adequate regulation. In order to make
Europe more competitive, national and EU-wide rules and consequently harmonised standards are essential administrative proce-
dures and formalities for access to services and their provision need to be simplified.’

Voting:

For: 48

Against: 113

Abstentions:6

Point 3.3.3

Delete.

Voting:

For: 52

Against: 130

Abstentions:6

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Point 3.5

Delete the entire point and replace as follows:

3.5.1 Although free cross-border service provision is already covered by rights enshrined in the Treaty and by case law,
businesses are, in practice, often unsure of what their rights actually are. The Services Directive sets out these
rights and gives them practical shape. A central plank is the country-of-origin principle, which can make it easier
for small and medium-sized enterprises in particular to know their obligations and rights when providing cross-
border services without being established in the host country. Although the directive does contain a long list of
derogations from the country-of-origin principle, the Committee feels that, provided no additional derogations are
introduced, this may be a key lever for the further development of the single market in services, benefiting both
consumers and workers and boosting European competitiveness.

3.5.2 The Committee considers the country-of-origin principle as a catalyst for bringing Member States' legislation
closer into line, possibly followed at a later stage by harmonisation in the fields of consumer protection and the
environment.

3.5.3 The Committee feels that it will only be possible to apply the country-of-origin principle effectively if there is
legal certainty and clarity as to its scope. The principle should therefore be put into practice in such a way that it
does not infringe workers' and consumers' existing rights, or impinge on current levels of environmental protec-
tion. Uncertainties regarding the principle's compatibility with international law, Rome I and II and any other
legal difficulties should be resolved without impeding the principle's purpose, i.e. in order to make it easier for
companies to provide cross-border services.

Voting:

For: 68

Against: 127

Abstentions:5

Delete points 3.5.1, 3.5.2 and 3.5.3 and replace by a new point (3.5.1):

The blanket application of the country-of-origin principle provided for in Article 16, together with the derogations
stated in Article 17, form the basis of the draft directive. This is the only way to make a successful start on opening
up the market for services, without further delays. Cross-border competition between service providers will benefit
consumers and may also create new jobs. However, the Committee feels that application of the country-of-origin
principle is only likely to succeed if there is legal clarity and legal certainty as to its scope. The application of the
country-of-origin principle should therefore be accompanied by an examination of which services might benefit
from further harmonisation of the legal bases. At the same time, it is important to ensure that the freedom to
provide services is not detrimental to workers' and consumers' rights or to the protection of the environment.
Compared to the rest of the world, the EU is already setting high standards in these areas, and these standards must
be safeguarded.

Voting:

For: 83

Against: 122

Abstentions: 5

Point 3.5.1

Delete.

Voting:

For: 73

Against: 141

Abstentions: 7

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Point 3.5.2

Amend as follows:

‘The blanket application of the country-of-origin principle provided for in Article 16, together with the derogations listed in
Article 17, form the basis of the draft directive. The country-of-origin principle, which currently applies to goods, is being
applied across the board to services. However, it is only appropriate for the type of services which is particularly appropriate
where those services lend themselves, like goods, to standardisation or to cases where harmonisation of legislation has progressed
sufficiently to leave no scope for conflict. It should be acknowledged that there are areas where standards have not yet been laid
down or where indeed it would be impossible to do so (so-called non-specifiable services).’

Voting:

For: 76

Against: 134

Abstentions: 6

Point 3.5.3

Amend as follows:

‘The Committee therefore believes the blanket application of the country-of-origin principle in the cross-border
provision of services is premature. This principle assumes a comparable environment — both de facto and in law.
The Committee feels that it will only be possible to apply the country-of-origin principle effectively if there is legal
certainty and clarity regarding its scope. Applying this principle without an appropriate transition period would
therefore give rise to problems, especially in view of the fact that the Committee believes not all the available
options for sector-by-sector harmonisation have yet been made use of. It involves the risk of systems competing
with one another, weakening employment, environmental, and consumer protection standards, given that differing
legal, welfare and healthcare systems continue to exist within the EU. Rather than prematurely introducing measures
of a purely horizontal nature, the needs of the single market could be best met by harmonisation on a sector-by-
sector basis, particularly in sensitive areas. This process would involve examining — as part of a comprehensive
impact assessment, also including social and environmental aspects — the suitability of each sector for introduction
of the country-of-origin principle. As harmonisation measures are, together with the country-of-origin principle,
complementary at least as important a means of completing the single market, there should be legislative harmoni-
sation within an appropriate time frame in areas where Member States have responsibilities in respect of health
if the European Commission, Parliament and
care, welfare and professional activity At an intermediate stage,
Council considers them necessary. should assess whether harmonisation in these areas has made sufficient progress.
If necessary, and depending on the stage which harmonisation of legislation has reached, an additional transition
period could be granted to bring national legislation into line. The Committee feels that this approach, together
with an exact definition of services which qualify for special treatment (e.g. those provided by the liberal profes-
sions), would enable gradual adjustment in the areas concerned; on completion of the transition period the country-
of-origin period could then come into force, enabling completion of the single market. The same applies to co-regu-
latory and self-regulatory mechanisms.’

Voting:

For: 79

Against: 139

Abstentions: 7

Point 3.5.4

Delete.

Voting:

For: 65

Against: 150

Abstentions: 4

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Point 3.6.2

Delete.

Voting:

For: 74

Against: 140

Abstentions: 3

Point 3.9

Delete.

Voting:

For: 73

Against: 134

Abstentions:5

Point 3.15

Delete.

Voting:

For: 90

Against: 135

Abstentions:2

Replace point 4.2.1.:

The Commission's approach in applying the country-of-origin principle across the board, apart from the derogations
mentioned in the draft directive, is correct. This is the only way to make a successful start on opening up the
market for services, without further delays. Care should also be taken to ensure legal clarity and legal certainty in
the application of the country-of-origin principle. The application of the country-of-origin principle should be
accompanied by an examination of which services might benefit from further harmonisation of the legal basis. It is
important to ensure that the freedom to provide services is not detrimental to workers' and consumers' rights or to
the protection of the environment. The new provisions must be as easy to apply and as clearly structured as possible
in order to ensure that they are implemented smoothly and without complication. The same applies to co-regula-
tory and self-regulatory mechanisms.

Voting:

For: 66

Against: 146

Abstentions: 4

Point 4.2.1

Delete and replace as follows:

‘The country-of-origin principle and harmonisation are both key tools for securing the free movement of services.
This principle can also be seen as a catalyst for bringing Member States' legislation closer into line, possibly followed
at a later stage by harmonisation in the requisite fields. In itself, the country-of-origin principle can help secure
much greater transparency for businesses embarking on cross-border service provision, but without establishing
themselves in the host country. It will be a key lever for the further development of the single market in services,
benefiting both consumers and workers and boosting European competitiveness. It is, however, important to clear
up any outstanding legal issues before the country-of-origin principle can be expected to operate effectively.’

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Voting:

For: 75

Against: 135

Abstentions:3

Point 4.2.2

Amend as follows:

Issues connected with the social dimension: The draft directive should not lead to any watering down of existing social
protection, wage, and safety standards in the workplace, particularly those laid down in the Directive on the posting
of workers. National arrangements for collective negotiations and agreements, including the national implementa-
tion of the associated Directive on the posting of workers (Directive 96/71/EC), should not be adversely affected.

Voting:

For: 84

Against: 132

Abstentions: 1

Point 4.2.4

Delete and replace as follows:

‘The proposals to simplify procedures and establish a single point of contact for service providers are to be
welcomed. Missing from the draft, however, are more specific details about the procedures involved. Particular
attention should be paid here to cutting red tape and reducing administrative burdens.’

Voting:

For: 74

Against: 141

Abstentions: 3

Point 4.2.6

Delete.

Voting:

For: 76

Against: 140

Abstentions: 1