European Parliament adopts services directive

The European Parliament adopted the services directive at second reading in November 2006. The vote put an end to a longstanding controversy, particularly with regard to the industrial relations impact of the directive. The key contentious issue – the ‘country of origin principle’ – was replaced and EU labour law is not affected by the directive. Furthermore, services of general interest and other sensitive services are excluded from the application of the directive.

Directive 2006/123/EC (213Kb PDF) on services in the internal market aims to facilitate the provision of cross-border services. On 15 November 2006, the European Parliament voted on the directive at second reading. The final text adopted by the Parliament broadly reflects the consensus reached in first reading in February 2006 and in the Council Common position (10003/4/2006 – C6-0270/2006) (932Kb PDF) of 24 July 2006. The European Parliament adopted the text (P6_TA-PROV(2006)0490) with three amendments to the Common position. On 16 November 2006, the European Commission accepted these three amendments in its opinion (COM(2006) 718) (110Kb PDF) pursuant to Article 251(2) of the EC Treaty (488Kb PDF).

Controversial proposal for services directive

The adoption of the services directive was preceded by almost three years of debate and revision between the European Parliament, the Council of the European Union and the European Commission (EU0407206F; EU0412202N). The most contested issues of the Commission’s proposal in March 2004 were: the ‘country of origin principle’ – whereby a service provider could market its services in other Member States without having to comply with their legislation; the role of labour law; the recognition of fundamental rights to collective bargaining; and the exclusion of services of general interest and sensitive sectors such as temporary agency work.

The original ‘Bolkestein’ directive proposal, named after the then European Commissioner for the Internal Market, Frits Bolkestein, triggered strong opposition from trade unions and from European policy actors. In February 2005, the European Economic and Social Committee (EESC) adopted an opinion (173Kb MS Word doc) which suggested making far-reaching amendments to the proposal. The EESC recommended a two-stage transition period, as the immediate application of the country of origin principle ran the risk of weakening employment, environmental and consumer protection standards.

Terms of the directive

The adopted text, considerably amended by the European Parliament, seeks to balance the aims of facilitating the provision of cross-border services by removing obstacles to the free movement of services in the internal market, on the one hand, with social protection for workers, on the other. Thus, the ‘freedom to provide services principle’ has replaced the country of origin principle. The directive does not affect labour law, employment and working conditions, and explicitly does not impact on the right to negotiate, conclude and enforce collective agreements, nor on the right to strike and to take industrial action.

Several sectors and activities, such as services of general interest, social and health services, and temporary agency work, are excluded from the directive. Moreover, the services directive does not affect the terms and conditions of employment of posted workers. Directive 96/71/EC concerning the posting of workers 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 entered into force on 28 December 2006 and must be implemented by the Member States within three years. By 28 December 2009, the European Commission shall submit a report on the application of Article 16 on the principle of ‘Freedom to provide services’.

Reaction from European social partners

The European Trade Union Confederation (ETUC) considered the outcome of the European Parliament’s second reading as a success for the European trade union movement (see press release, 15 November 2006). Nevertheless, ETUC announced that it would continue its fight for improvement in the European regulation of public services and in sensitive sectors such as temporary agencies.

On the employer side, the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP) welcomed the exclusion of services of general interest and of health and social services from the scope of the directive (see press release (37Kb PDF), 16 November 2006). In its press release of 15 November 2006, the Union of Industrial and Employers’ Confederations of Europe (UNICE) said it looked forward to real benefits arising from the freedom of establishment, but regrets ‘the reduced scope of the directive and the legal uncertainty of certain provisions on cross-border provision of services’.

Meanwhile, the European Association of Craft, Small and Medium-sized Enterprises (Union Européenne de l’artisanat et des petites et moyennes enterprises, UEAPME) stated that, if the directive is properly applied at national level, it would be beneficial for European small and medium-sized enterprises (SMEs) (see press release (192Kb PDF), 15 November 2006). Previously, UEAPME had emphasised that the freedom to provide services principle is closer to the four basic freedoms of the EC Treaty – namely free movement of goods, services, people and capital – than the controversial ‘country of origin principle’ in the initial proposal (see press release (142Kb PDF), 16 February 2006).

Commentary

The services directive opens the internal market in services without eroding the European social model and the protection of workers’ and consumers’ rights. Removing the country of origin principle and excluding services of general interest and temporary agency work from the scope of the directive were important issues for social policy. Recent efforts towards a specific directive on services of general interest represent a further step in regulating these sensitive services.

Anni Weiler, AWWW GmbH ArbeitsWelt – Working World

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