Controversial services law passes parliament hurdle

Opposition against the directive was cited by the French citizens as one of the top reasons for their rejection of the European constitution in a referendum last May.

And the issue is likely to spark further controversy in the coming weeks, as MEPs have voted in favour of a pro free-market version of the law - proposed by the centre-right group, while rejecting a more protective approach by the German socialist rapporteur Evelyn Gebhardt.

The adopted draft - to be voted on by the whole plenary in February - is based on the principle that companies established in one EU member state have the right to provide their services within the whole block.

While businesses will have to respect the basic rules about wages, safety and environment of the host country, member states will not be allowed to introduce extra restrictions to foreign companies.

"This is perfectly in line with the current EU treaties, and [principles from the treaty] will now just be confirmed by a law, instead of by rulings by the European Court of Justice, as was the practice so far when the companies complained about those cross-border restrictions," said the British conservative MEP Malcolm Harbour.

The compromise package for which Mr Harbour had gathered a majority differs from the idea of Mrs Gebhardt, who replaced the "country of orgin" principle - meaning that service providers would abide by the rules of their home country - with the principle of minimum harmonisation in the sectors covered by the law.

"This proposal - as accepted by the committee - is definitely not overcoming fears about social dumping expressed by citizens in some countries," said Mrs Gebhardt.

Apart from the controversial "country of origin" principle, the left-leaning PES group also lost its battle to remove several types of services from within the scope of the new directive.

While most public services - including health, audiovisual and gambling - have been excluded from the directive, some of those currently regarded as part of the public sector, like companies delivering energy or water, have remained covered by it.

Services make up about 70 percent of Europe's economic output, and while the freedom to provide them across borders was already enshrined in the bloc's original treaties, it has remained restricted by many national rules.