For the purpose of the directive, ‘service’ is defined as any self-employed economic activity, normally provided for remuneration, as referred to in Article 57 of the Treaty on the Functioning of the European Union (TFEU). The directive is characterised by a horizontal approach, i.e. a general legal framework applicable to all economic service activities.
The European Commission proposal for a directive on services in the internal market (424Kb PDF) (COM(2004) 2 final/3) outlined that its objective was to provide a legal framework that would eliminate the obstacles to the freedom of establishment for service providers and the free movement of services (referred to as ‘cross-border’ services) between the Member States, giving both the providers and recipients of services the legal certainty they needed in order to exercise these two fundamental freedoms enshrined in the Treaty.
On 15 November 2006, the European Parliament approved the services directive (212Kb PDF) after more than two years of debate and revision between the European Parliament, the Council of the European Union and the European Commission. The text adopted in the second reading broadly reflects the consensus achieved in the first reading of 16 February 2006 and in the Council Common position of 24 July 2006. The directive entered into force on 28 December 2006 and had to be implemented in the Member States before 28 December 2009. By this date also, the European Commission was obliged to submit a report to the European Parliament and the Council on the application of Article 16 on the principle of ‘Freedom to provide services’.
A number of issues in the directive that have a strong impact on industrial relations and worker’s rights were at dispute. The key contentious issues were the country of origin principle, the role of labour law, the recognition of the fundamental right to collective bargaining and the exclusion of services of general interest and sensitive sectors such as temporary work agencies. These issues in the original 2004 ‘Bolkestein’ directive proposal (named after the then Internal Market Commissioner Frits Bolkestein) had triggered strong opposition from trade unions and also from European policy actors. In February 2005, the European Economic and Social Committee (EESC) adopted an opinion on the Commission’s proposal that included a series of suggestions for amendment of the draft directive. The EESC in particular warned that an immediate application of the country-of-origin principle would lead to a watering-down of standards.
The final directive, substantially rewritten by the European Parliament, attempts to balance the aims to facilitate the provision of cross-border services by removing obstacles to the free movement of services in the internal market with social protection for workers. The ‘country of origin’ principle was replaced by the ‘freedom to provide services’ principle.
According to Article 1(6):
…the Directive does not affect labour law, that is, any legal or contractual provision concerning employment conditions, working conditions, including health and safety at work and the relationship between employers and workers, which Member States apply in accordance with national law which respects Community law. Equally, this Directive does not affect the social security legislation of the Member States.
The directive respects the exercise of fundamental rights applicable in the Member States and as recognised in the Charter of Fundamental Rights of the European Union (139Kb PDF). It strives to reconcile them with the fundamental freedom of establishment as laid down in Articles 49 TFEU and the freedom to provide services as laid down in Article 56 TFEU. The Charter of Fundamental Rights of the European Union includes the right to take industrial action. The text of the directive itself also explicitly emphasises that it does not affect the right to negotiate, conclude and enforce collective agreements and to take industrial action (Article 1(7)).
The introductory section of the directive stresses the need to fully respect European Union initiatives based on Article 153 TFEU with a view to achieving the objectives of Article 151 TFEU concerning the promotion of employment and improved living and working conditions.
The ETUC, while committed to continue to campaign for improvement in the European regulation of public services and in sensitive areas such as temporary agency work, considered the outcome of the discussion in the parliament a success. For the employers, the CEEP welcomed the exclusion of services of general interest and of health and social services from the scope of the directive, while at the same time regretting the reduced scope of the directive and the continued legal uncertainty on certain provisions on cross-border provision of services. The UEAPME stated that the directive, if properly applied at national level, would be beneficial for small and medium enterprises. However, within particular sectors the directive is considered to have greater consequences. At its annual meeting in 2007, the International Federation of Actors, EuroFia, continued to express concern that live performances remained within the definition of services in the Directive.
Several sectors and activities, in particular services of general interest and temporary work agencies, have explicitly been excluded from the adopted text. The services directive does not affect the terms and conditions of employment that apply to workers posted to provide a service in the territory of another Member State. In the case of posted workers, the directive obliges service providers to comply with the terms and conditions of employment laid down by law or in collective agreements in the Member State where the service is provided. The Services Directive is subject to the co-decision procedure.