19th Sep 2019


The services directive: What implications for companies?

Services account for about 70% of GDP in most member states and although the freedom of movement for services is enshrined in the Treaty of Rome, there are still far too many obstacles erected by member states hampering services trade.

Barriers identified by the Commission include long and complicated procedures to obtain licences and permits, overlapping legal requirements from country to country, establishment obligations and discrimination on nationality grounds.

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  • Construction is one of the areas covered by the services direcitive (Photo: Notat)

Although the directive in its current form falls short of the business community's initial expectations – especially on the freedom to provide services across borders – it should help to reduce the legal and administrative barriers that can hinder businesses from offering their services in another country, simplify procedures and increase transparency.

While the scope of the directive has been reduced – and some key sectors such as temporary work have been excluded – the text still covers most service sectors including hairdressing, hotels, construction, advertising, management consultancy and architect services.

If applied rigorously, the directive should considerably reduce the barriers within these services sectors, especially with respect to setting up a branch of a company in other member state.

These are some of the key ways the directive will help service companies to access new markets in other member states:

Facilitate establishment

The directive should make it easier and cheaper for companies to become established in a new member state. Service companies will be able to obtain information on the necessary procedures and complete all administrative formalities through single points of contact in each country. This will speed up authorisation and reduce costs.

Simplify procedures

Member states must remove cumbersome or discriminatory authorisation procedures and all procedures must be made transparent and accessible. The elimination of duplicate controls and checks and the simplification of procedures will mean that companies will waste less time and resources fulfilling administrative requirements.

Remove restrictive or discriminatory requirements

Member states are required to screen their legislation, and laws or administrative requirements which discriminate against companies from another member state or create unnecessary barriers are prohibited. This will mean, for example, that companies will no longer be obliged to recruit local staff or have a local manager. Companies can no longer be obliged to prove to the authorities that there is a demand for their services or be banned from setting up their company within a certain distance of a competitor.

Facilitate cross border service provision

The country of origin principle would have meant that companies were only subject to their own national rules when trading across borders. The rejection of this principle means that companies are still faced with different sets of national rules which can be confusing. The basis of amended directive is that service providers must be able to provide their services across borders freely.

This would mean that a company wishing to offer its services in another member state would not be obliged to set up a physical office there or to be licensed by the local authorities. However, this access can be denied by member states if justified for public policy reasons and there is a risk that such a derogation might be used as a loophole by member states to retain restrictions.

Improve supervision

The directive encourages more effective cross-border cooperation between authorities to ensure improved supervision of service providers and to simplify compliance for companies.

After a long and frequently fraught debate, it is a positive thing both for the economy and for the European project that a compromise has been reached on the key issues. It is vital, in the final stages of the debate, that it is not furthered watered down.

EUROCHAMBRES would like to see a commitment to undertaking an analysis of the effects of the directive some 3-4 years after its introduction. Depending on the outcome of this assessment, the further removal of barriers or the inclusion of additional sectors should be considered.

The author is advisor for European Affairs at EUROCHAMBRES, the Association of European Chambers of Commerce and Industry


The views expressed in this opinion piece are the author's, not those of EUobserver.

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