Continuing controversy over services Directive 

A controversial draft EU Directive on the provision of services in the internal market was the subject of a public hearing at the European Parliament and a debate in the competitiveness Council in November 2004. Trade unions are concerned that the Directive might have an adverse effect on pay and conditions in the service sector.

The European Commission’s proposal for a Directive on the provision of services in the internal market is continuing to cause controversy. The Commission issued this proposal in January 2004 with the aim of facilitating the free movement of services and making it easier for service providers to establish themselves in different EU Member States. To this end, it proposes removing national barriers to the free movement of services in the EU.

However, during the summer of 2004 trade unions around Europe staged vociferous protests against the Directive (EU0407206F). One of the most controversial provision of the draft Directive is the so-called 'country of origin' principle, according to which a service provider is subject only to the law of the country in which it is established and Member States may not restrict services from a provider established in another Member State. This principle is accompanied by derogations which are either general, or temporary, or may be applied on a case-by-case basis. However, trade unions fear that this will result in service employers locating themselves in countries with the lowest fiscal, social and environmental requirements and subsequently extending from this base their activities throughout the whole of the EU.

A public hearing of the European Parliament (EP) committee on the internal market and consumer protection took place on 11 November 2004, at which a debate on the draft Directive was held. Some speakers argued against the removal of existing barriers to the free movement of services in the EU. Others were in favour of removing existing obstacles, but stated that it would be almost impossible to harmonise the differing national practices already in place in individual Member States.

The proposal was also discussed at the meeting of the competitiveness Council of Ministers that took place on 25 and 26 November 2004. Ministers looked at the country of origin principle and in general agreed that it was an essential element of the draft Directive. However, some delegations expressed specific concerns about this, even though they stated that they could accept it as a starting point for discussions. Ministers also felt that the Directive needs to be further clarified and stressed that it should not undermine the 'European social model' or affect the EU Directive (96/71/EC) concerning the posting of workers in the framework of the provision of services. They felt in particular that there was a need for clarification of the derogations and exemptions provided for by the text.

The European Trade Union Confederation (ETUC) is maintaining its campaign of opposition to the draft Directive as it currently stands. In a press release issued jointly with the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP) on 24 November 2004, ETUC and CEEP state their belief that the text 'poses a severe threat to a well-functioning internal market for services' and are particularly concerned that labour laws and collective agreements must not be treated as obstacles to be eliminated in order to ensure free movement of services. ETUC and CEEP also believe that market forces should not take priority, particularly in areas such as the provision of health services.

The Union of Industrial and Employers' Confederations of Europe (UNICE) issued a press release on 11 November 2004, stating that it broadly welcomes the draft Directive and that the establishment of a genuine internal market for services is long overdue. However, it also states that the proposal as it stands needs some clarification, particularly in areas where it relates to matters covered by the posted workers Directive and in its provisions for derogation.

This proposal is subject to the co-decision procedure, requiring agreement between the Council of Ministers and the EP. The EP is expected to give the text a first reading in the summer of 2005.