Date: 1/10/2004
Issued On: 1/10/2004

Government Consults public on Proposes EU directive on the provision of Services in the Internal Market.

It is government’s intention to consult all concerned bodies and voice their view in the European Union’s highest institutions Competitiveness and Communications Minister Galea said when addressing delegates and leaders of constituted bodies at a conference on the Proposed EU directive on the provision of services in the internal market.

Minister Galea said that the Ministry had organized the conference in a bid to proceed with an intensive consultation process with all interested parties on this proposed directive.

“The Directive has as a main aim, the enhancement of competitiveness and economic growth in Europe by the establishment of a real and genuine internal market in services. It is focuses on the reduction of burdens and delays, and does away with unnecessary bureaucracy that normally hinders business activities from providing across the border services or from opening new businesses in other Member States” Minister Galea said.

Giving details on the directive, the competitiveness and Communications Minsiter said that the scope of the Directive is very broad – it is to cover all economic activities provided for a fee, other than a specific set of services and so-called non-economic services.

“It has been difficult up to now to exploit the considerable potential afforded by the services sector in Europe because of the many obstacles hampering the development of service activities in the internal market. The new Directive will provide a legal framework to reduce these obstacles which will allow both consumers and producers legal certainty to take full advantage of the huge opportunities opened by the establishment and creation of free movement of services between Member States within the European Union”.

In this regard it is to be recalled that the Lisbon Summit of March 2000 laid the ground for the adoption by the EU of a programme of economic reform that would eventually make the Community the most competitive economic area in the world by 2010. This was followed by the adoption in December of the same year of a document entitled “An Internal Market Strategy for Services” that aimed at bringing about the free movement and access of services across the national borders of the Union. After various other related initiatives the Commission announced in May 2003 its intention to submit by the end of the year a proposal for a Directive on services in the internal market that would “establish a clear and balanced legal framework aiming to facilitate the conditions for establishment and cross-border service provision”.

The Directive is a blend of regulatory techniques, including the following: the country of origin principle by which service providers will be subject only to the law of the country in which they are established the derogations from the country of origin principle in order to take account of differences in the level of protection of the general interest in certain fields; the establishment of obligations of mutual assistance between national authorities; the protection through targeted harmonisation of the general interest in certain fields where wide divergence in the level of protection exists, such as consumer protection; and the adoption of alternative methods of regulation, such as codes of conduct, for the regulation of certain services activities.

Minister Galea said that one of the most important elements in the new Directive is the establishment of “single points of contact”, at which service providers can compete in an atmosphere that is both easy to work in and generally congenial to the development and prosperity of business. It also sets out principles which various legal requirements should respect and follow in order to provide for certainty of law in the establishment and transaction of business. This factor, as all businessmen will readily agree, is of paramount importance for the proper conduct and success of business. The “single point of contact” for each category of industry enables a person or a firm intending to establish a business activity in an European Member State to do so without great hassle or inconvenience by doing all the necessary procedures and related paper-work at one contact point.

In order to eliminate obstacles to buying and selling services outside a country, the Directive also provides for the application of the country of origin principle according to which a service provider is subject only to the law of the country in which he or she is established. It also provides for the right of recipients to use services, including healthcare, from other Member States without being hindered by restrictive measures. The principle of the country of origin is central to the whole Directive since its main aim is to facilitate cross-border services. If a service is of a good quality as to satisfy the standards and quality requirements of a particular Member State, then it should also be acceptable in another Member State. This principle has been accepted for a very long time within the European Union with regards to goods and it will now also be extended to services.

This principle would not apply to certain services such as lawyers’ freedom to provide services, recognition of professional qualifications which would have to be dealt with through another EU Directive, and employment of workers in other EU countries who would temporarily have to abide by the labour laws in the host country. Services which are subject to a total prohibition on the grounds of public policy, public security, public health, as well as aspects of consumer and environmental protection, and lastly, network type industries such as postal services, electricity, gas, and water distribution are also outside the scope of this directive.

The Directive also contains provisions for the protection of measures to promote consumer protection, as well as encouraging harmonisation of standards within the EU. For this purpose the Directive covers all services provided to consumers and businesses except those services provided directly by public authorities for no remuneration in fulfillment of their social, cultural, educational or legal obligations. It also leaves out services covered directly by EU law, such as financial services, telecommunications and transport.

The recognition of qualifications is subject to a separate EU Directive. Non-economic services not covered by the Directive include cultural activities (such as museums, public libraries, national defence, etc), judicial and social services.

To protect the quality of service the Directive stipulates that service providers must freely provide a wide range of information to their consumers relating to a range of issues such as price, nature of service, applicable laws, after sales service, the nature of any relevant authorization scheme, professional regulations and means of legal redress. Furthermore, Member States have a responsibility to ensure that this information is provided in a clear way. If a service provider poses a potential safety or financial risk to customers, a service provider must be covered by an appropriate insurance dictated by the service users national laws. Any total prohibition on advertising in the regulated professions is not allowed, though regulation is allowed if it relates to the independence, dignity and integrity of the profession as well as professional secrecy.

“On 1st of May of this year on accession to the EU, Malta gained access to the biggest internal market in the world. Mr Fritz Bolkestein, the European Commissioner for the Internal Market, stated in a speech made earlier this year that the new Directive on services in the Internal Market is the most ambitious proposal that the Commission had produced in a decade. Services now account for a much larger share of the EU’s economy than manufacturing and agriculture combined. Despite this, the provisions of services has so far been largely unaffected by Internal Market conditions. The new Directive is intended to change all this and bring services to the forefront of European policy in the coming years. The large variety of services covered by the Directive, from retail and distribution to construction, tourism, advertising and consultancy, will ensure a lively, interesting and at the same time controversial debate in the coming months until its final projected adoption by the EU next year” Minister Galea said when addressing the conference.

The Competitiveness and Communications Minister said that Malta finds itself in a position to participate and be part and parcel of this huge Market at this point in time when these important changes are taking place. The Commission’s proposals are a major step forward in the implementation of the Lisbon Agenda to make Europe one of the most competitive, dynamic and knowledgeable economies in the world by 2010. “It would have indeed been unfortunate for Malta had it been absent from all these important developments that are taking place in Europe” the Minister added.

The consultation process that was launched through the publication of the Consultation Document on 8th July of this year and followed up by the holding of this Conference is intended to give the opportunity to all interested persons and bodies to present their views on the proposed Directive to enable Government to assess the full impact of the envisaged proposals on the economic activity of the country. Following these wide consultations, Government will continue the debate in the EU, in order to represent, as far as practicable and possible, a common and agreed stance by the country.

“I would like to underline with satisfaction that this Conference has achieved a wide-spread participation and I augur that the involvement by all present will ensure a healthy discussion that will facilitate the adoption of a national position on the proposed Directive on the Internal Market” Minister Galea Concluded.