Trade unions reject EU draft services Directive

In February 2005, the Union of Free Trade Unions of Slovenia (ZSSS) announced strong opposition to the adoption of the European Commission's controversial proposal for a Directive on services in the internal market. ZSSS's main demand is that the draft Directive's 'country of origin' principle, whereby service providers would be subject only to the law of the country in which they are established (rather than those in which they operate), should not apply to labour and social legislation. The law of the country where the service is provided should apply in these fields, as should its mechanisms for controlling and supervising service provision .

In January 2004, the European Commission proposed a draft EU Directive on services in the internal market (EU0407206F). The proposal aims to provide a legal framework that will eliminate the obstacles to freedom of establishment for service providers and free movement of services between the EU Member States. It covers services provided both to consumers and to businesses. The draft quickly drew criticisms from trade unions at both national level - eg in Belgium (BE0406302F) and Finland (FI0406201N) - and European level - notably the European Trade Union Confederation (ETUC) and some of its sectoral industry federations, particularly in the public sector and chemicals. Trade union concerns centre on the 'country of origin' principle, according to which service providers would be subject only to the law of the country in which they are established (rather than those in which they operate). Unions fear that this would lead to cost undercutting and might also damage collectively-agreed regulation of employment terms in some countries (EU0412202N).

The Union of Free Trade Unions of Slovenia (Zveza svobodnih sindikatov Slovenije, ZSSS), the country's largest trade union organisation (SI0210102F), discussed the draft Directive on 23 February 2005 and came out strongly in opposition to its adoption.

ZSSS views

ZSSS states that the proposed Directive seeks the implementation of the EU's four freedoms - the free movement of goods, capital, people and service - and is also important for the attainment of the goals of the Lisbon strategy (EU0004241F). However, ZSSS believes that the draft involves a one-sided implementation of the Lisbon strategy because it gives priority to the freedom of establishment and free movement of service providers. The proposal does not take into account social cohesion and does not give acceptable security and protection to the employees delivering out the services.

Another of the four freedoms, the free movement of workers, has been implemented very restrictively since EU enlargement in May 2004, ZSSS points out. On one hand, one-sided restrictions are in force in most of the old Member States with regard to the free movement of workers from the new Member States, while on the other hand there is completely free movement of services in the whole EU (with the exception of Austria and Germany, for which exceptions are in force).

In spite of the single EU market, states ZSSS, there is no unified labour, social, consumer and economic legislation because these laws are a competence of the Member States, including Slovenia. Another exclusive competence of the Member States is the control and the supervision of the implementation of legislation on their own territory. In spite of a certain level of adjustment of this legislation in accordance with adopted EU regulations, the sovereignty of the Member States is valid in these fields.

The proposed 'country of origin' principle means that the legislation of the country where the services provider is registered is always valid. On one hand, the application of this principle would mean free and simple provision of services in the whole EU, states ZSSS. On the other hand, this would cause competition between national legislations and as a consequence a reduction of protection by labour law and social protection for workers, a reduction of the quality of services for consumers, and in general a problematic influence on the well-being of citizens. This would happen, it is argued, because of the simplification of the procedures for the service providers (ie no registration and no representative required in the country of service provision), no control and supervision in the provider’s own country and the differences between national legislations and standards.

Social and health services are 'services of general interest' for citizens and are regulated by national legislation. Their inclusion as economic services in the draft Directive would mean an intervention in the competence of the Slovenian state, ZSSS claims. At the same time, this means indirect pressure for the privatisation and market liberalisation of these services and the lowering of quality standards.

ZSSS states that in Slovenia no serious analysis has been made of the consequences of the implementation of the proposed Directive in numerous fields that it affects.

ZSSS conclusions

The ZSSS presidency thus argues that the proposed Directive fundamentally interferes with Slovenian sovereignty in the regulation of certain issues which, according to the EU treaties, lie within the competence of the Member States. Although aware of Slovenia's obligations concerning the regulation of contractually determined common matters in the EU, ZSSS is nevertheless of the opinion that the proposed text of the Directive on services in the internal market is not acceptable, and therefore rejects it.

According to the union confederation, the draft Directive proposal should either be withdrawn or its contents should be fundamentally changed to take into account the following:

• the 'country of origin' principle must not apply to labour regulations - including pay policy, laws, collective agreements, social dialogue, and freedom of trade union activity and of association - and social legislation, . The regulation, control and supervision of service provision of the country where the service is provided must apply;

• the Directive should not apply to recruitment services;

• in ascertaining the country of origin, it must be taken into account whether the provider is actually providing services in the country of registration, in order to prevent the 'fictional' establishment of companies ('letter box' companies) and a mass flight of company headquarters to countries with lower standards; and

• public and private services must be distinguished in order to prevent increases privatisation of the former (eg homes for the elderly) and their subjection exclusively to the market forces.

The ZSSS presidency proposes that the Slovenian government carry out a comprehensive assessment of how the proposed services Directive would be implemented in Slovenia, and its influence on economic growth, Slovenian standards and the well-being of the citizens of Slovenia. This assessment should be presented to the public.

The ZSSS presidency also proposed that the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS)(SI0207103F) should discuss the proposed Directive at its session in March 2004 and adopt a standpoint on the draft that takes into account the views and conclusions of ZSSS.

Finally, the ZSSS presidency calls on the Slovenian government and Slovenian members of the European Parliament (EP) to take into consideration its views and conclusions in the discussions and decision-making concerning the draft Directive.

Commentary

It appears that the draft Directive was largely elaborated by the European Commission directorate-general responsible for economic issues. Therefore it is not surprising that the proposal is dominated by an economic approach and that labour and social matters are completely neglected. One can only guess whether this approach was chosen in order to improve the implementation of the Lisbon strategy.

In this light of this, the Slovenian response (submitted in December 2004) to a recent consultation on social services of general interest (SGI) should be taken into account. This reads in part:

The Slovene Constitution states that Slovenia is a country under the rule of law and a social welfare state. Its citizens have the right to social care under conditions determined by law. The state arranges and implements mandatory health care, retirement, disabled persons and other forms of social welfare. The right to health care financed from public funds is universal under conditions determined by law. Pursuant to the law, disabled persons are guaranteed social care and vocational training. Children with physical or mental developmental disabilities and other severely disabled people have the right to co-financing from public funds for both education and training for active living in society. The state protects families, motherhood, fatherhood, children and youths and creates the necessary conditions for such protection. The rights, protection and status of children are determined by law. Elementary school education is mandatory and is financed from public funds. The state creates opportunities for citizens to obtain suitable education. State universities and state schools of higher education are autonomous. The method of their financing is determined by law.

From the above summary it can be seen that on the basis of the constitutional provisions and legislation in the field, Slovenia has organised several areas of social policy. For this reason we can estimate that social SGI are already well-organised and sufficiently transparent, and that they should be exempted from the Directive on services in the internal market, since social SGI have their own qualities and particularities (they are carried out in the public interest, are non-profit, must be accessible to everyone who needs them, require a high level of social sensitivity in their implementation, are regulated and co-financed by the state, the principle of solidarity is applied to their co-financing, etc). It is precisely these qualities which are used to attempt to separate social SGI from other services. We therefore estimate that their transparency is ensured through precise regulation using the legislation on social services in this field, and the concessions system also enables them to be carried out in the private sector.

The dividing line between economic and non-economic services seems especially important for an examination of eg the proposed Directive on services in the internal market.

On the basis of an analysis of national regulations and general common characteristics of social services of public/general interest it is necessary to clearly demarcate or admit the national competence for the legislative and organisational regulation of these services, especially in relation to the internal market, where the EU has defined competence.

Given the opposition to the Directive, in February 2005, the President of the European Commission, José Manuel Barroso, indicated that the Commission is willing to work constructively with all stakeholders on the text (EU0502204N). He said that 'as the Directive was written, it would not have been successful … That is the reason why the Commission unanimously accepted to make some changes.'.

The general secretary of the European Trade Union Confederation (ETUC), John Monks, said that it was a good decision by the new Commission to rework the Directive and a big step in the right direction. ETUC looks forward to working with the Commission on producing a new text that recognises workers’ and trade unions’ concerns. The importance of services of general interests must be respected.

In spite of all this, some damage has already been done. As Mr Monks said, there is an opposition to the new EU Constitution not only from the right but also from the left. The fear on the left is that the EU is going in a too liberal direction, that it is being Americanised and that welfare states, public services and trade union strength are at increased risk. This has been fuelled by some 'careless' politics, notably the draft Directive that seeks to open up a free market in services. This Directive gives an impression that services providers located in the country of origin with the lowest standards will undermine and undercut the rest. This may influence the growth of 'euroscepticism' and the outcomes in the Member States where referendums on the new EU constitution will be held. (Stefan Skledar, Institute of Macroeconomic Analysis and Development)