Services Directive - Essay Example

The European Commission observed that Articles 43 and 49 of the EC Treaty, though guaranteeing freedom to establish services and free movement of goods, falls short of ensuring the same in all cases. Accordingly The Draft Services Directive (com 2004/2 final), of the EC Law was formulated to cover almost all the services which are defined under community law as economic services with the exception of those services in which, specific initiatives to complete the internal market exist. A few of these services are the financial, transport and electronic services, and networks for electronic communications. It is the avowed attempt of this directive to provide a legal framework which will eliminate the impediments that hinder the freedom of establishing services and the free movement of these services between Member States. To achieve this goal, this directive encompasses certain important principles, which will be discussed in the sequel. The first of these is that the implementation of the application of the country of origin principle, which requires that only the law of the country in which the service provider is located should be applicable. Further, it enjoins upon the Member States not to restrict in a discriminatory way services from a provider established in another Member State. Second, empowering citizens to use the services provided by any other Member State without being delayed or discouraged by restrictive measures imposed by their country. Third, creation of a mechanism to provide assistance to citizens who use a service provided by an operator established in another Member State and fourth, the allocation of tasks between the Member State of destination and origin, in respect of the posting of workers. This directive is not applicable to non - economic and non - remunerated activities. Hence, it is not applicable to the non - remunerated activities of the governments of Member states in respect of its cultural, educational, legal and social commitments towards its citizens1. The origins of this directive lie in the questions thrown up by the incident described in the next few lines; a liqueur, Crme de Cassis, was not allowed to be imported and sold in Germany by the importers Rowe-Zentral AG. The reason for this was cited as low alcoholic content for that particular type of alcoholic drink. The importer approached the European Court of Justice, which challenged the validity of national legislation that was attempting to introduce non - tariff barriers to trade.2 One of the main bastions of the free movement of goods within the EU is the principle of mutual recognition. Its genesis lies in the above cited EU Court of Justice famous Cassis de Dijon judgment of February 20, 1979. This principle requires that, every Member State to accept products on its territory which are legally produced and marketed in another community Member State. The right of Member States is restricted to challenging this principle in cases involving risk to public safety, health or the environment. In such cases the measure taken must be in conformity with the principles of necessity and proportionality. On the 4th of November 2003, the European Commission published a communication aimed at illuminating the principle of mutual recognition.3 A businessman is often forced to abstain from selling a product, which does not satisfy the technical rules of that Member State, owing to ignorance as to how to proceed in such a discriminatory situation. A technical rule gives the specifications which define the features necessary in a product like its composition, presentation, packaging, labelling etc. The aim of this communication is to spell out the rights and methods of appeal which economic operators may derive from the principle of mutual recognition, when they encounter such difficulties. On the whole, wherever provisions of a national law are incompatible with the principle of mutual recognition, the national courts and administrations have to guarantee the full impact of the principle by removing, of their own accord, the conflicting provisions of national law. Similarly, an economic operator can contest any adverse decision taken against him based on the violation of the principle of mutual recognition, in the national courts.4 The plan of the Commission to abolish or restrict a number of procedures and requirements for the granting of authorization may weaken the fundamental pillars of health care systems or of the social economy in many Member States. Furthermore, it is very relevant to raise the query as to what are the implications for the quality of services provision, as quality requirements, criteria for granting authorization and licensing requirements in the regulated professions sector will be called into questions. EU insurance industry strongly disagrees with the suggestion that the quality of services would be guaranteed through compulsory insurance. According to insurance companies, there is a risk that the protection level will be reduced and that the objective of a high level of consumer protection will be defeated as the economic considerations cause the policymakers to cut back on expenditure on prevention. Further, the insurance companies currently do not have the expertise required to deal with the processes of contract arrangement, underwriting and claim settlement in all European legal systems. Finally, the broader territorial scope of insurance cover will automatically generate a remarkable increase in costs of insurance cover and service. Further, these directives also presume that a single point of contact is available to service providers coming from another Member State. And in this context, it is essential to find out whether the planned rules are reducing bureaucratic procedures or whether they have resulted in greater administrative expenditure. A recent industrial survey, which was carried out Internal Market scoreboard exercise, revealed that realization of the goal of free market economy could be broadly classified as cases relating to different national standards and specifications, 41% and cases relating to testing, certification or authorisation procedures, 34%. This 41% category is vital as it encompasses a large proportion that fall in the unharmonised areas, where mutual recognition plays a very important role. Most of the time business, which are adversely affected by such impediments to the free movement of their goods within the Union, are either ignorant of the Community law or its correct application. The result is that in practice, products are manufactured in conformity with the technical specifications of the Member State of destination.5 The difficulties that arise in the services sector are due to rules which give prominence to assessments and concomitant restrictions being applied in the country of destination. Such rules were formulated with the consumer in mind. The common causes for obstacles to application of mutual recognition and infringement procedures have been detailed by the Commission as the following. First, the inappropriate internal organisation of the national administration, which results in administrative delays, costs due to bureaucratic procedure costs, disparaging measures and inability to deal with intricate situations. Second, practices related to the use by an authority of its discretionary power; many a time an authority proceeds on a case-by-case basis in accordance with ambiguous criteria, which, serve to confer an unfair advantage to national operators. Third, practices linked to an authority's biased behaviour resulting from incorrect appreciation or analysis, ignorance, or malafide intent. Legally, the EC Justice's decisions have provided a large number of solutions for dealing with such problems. The root cause of these problems, which limit the application of mutual recognition, is either a lack of administrative resources, or insufficient knowledge or grasp of the principle. In some cases, the problems eventually get resolved by themselves, because the economic operators usually agree to adapt to local requirements, or to set up a branch office or subsidiary. In such cases, the complaints are withdrawn, but the problem persists. In this respect the Commission observed that National authorities still harbour the belief that only national testing and analysis bodies are reliable. Protracted administrative and bureaucratic delays and exorbitant fees are the major culprits for having rendered mutual recognition ineffective. The Commission exhorts economic operators to stake their claims to the rights, which have been conferred under the application of mutual recognition. "Arrival at a balance between harmonising legislation in the Member States and applying mutual recognition is a delicate but essential task". Neither mutual recognition nor harmonisation should be favoured and what is required is the assessment of the economic cost involved due to lack of harmonisation on a case to case basis. In respect of the application of the principle of mutual recognition, the principle of equivalence declares that any product which has been lawfully produced is in conformity with the regulations and has been manufactured by fair and traditional methods obtaining in the exporting country must be allowed entry to the importing Member State. Further the competent authorities in the Member States cannot discriminate between imported products and domestic products. The Commission has observed that there exist three levels of protection, namely a minimum level of protection which, according to technical and scientific knowledge, provides a base level of safety. However, this cannot be relied upon when applying mutual recognition if the Member State of destination is in favour of a higher level of protection; a high level of protection as provided for in the treaties and in the case law of the Court. In these situations Member States are permitted to apply their national legislation in order to attain this high level of protection. Finally, existence of a disproportionate level of protection, regarding which it can be stated that the case law of the Court states that a Member State cannot require the observance of a level which is not based on scientifically acceptable results, or which is unjustified in terms of reaching the desired objective. The principle of equivalence is applicable even when the country of origin has no rules governing production of the product concerned. When specific restrictions with regard to requirements of general interests of the country are absent then goods produced in accordance to the fair and traditional means of the exporting country can be allowed to be traded between the Member States. Under Article 30 of the Treaty Member States are permitted to restrict the free movement of goods, on grounds of public morality, law and order, public security and the protection of health and life of persons and animals. Of these, grounds of health are the most frequently invoked reason quoted by Member States to create obstacles to the free movement of goods. In this context the question arises as to whether the proposed directive is partial to the idea of eliminating national provisions. Accordingly the creation of regulatory mechanisms at the Community level that enforce minimum standards and guarantee public safety, are important as removers of barriers in order to promote the development of the internal market. Such a regulatory framework could set the minimum standards for the European Community, within which freedom of establishment and free movement of services are guaranteed. The collective will of all the Member States is essential to prevent social dumping. This also requires the acknowledging of minimum standards in the services. The Commission had on several occasions been accused of trying to increase the use of voluntary European standards. However, it was realized that there existed the danger that some providers would not have the resources to go through the application procedure and would subsequently, face a competitive disadvantage in respect of other providers, who have been accredited with a European standard. It is also feared that the basic standards would not be sufficiently high. "The causes of international labour migration are numerous and complex. On a basic level, migration for employment is caused by complementary 'push' and 'pull' factors; the former is characterized by poor living conditions in the country of origin and the latter by the availability of well-paid work (in relative terms) in the country of employment. The labour migration process is then facilitated by improving communications, the availability of transportation, and by social or ethnic networks"6. The European Commission developed the concept of mutual recognition on the basis of the "Cassis de Dijon" judgement, delivered in connection with the application of the former Article 30 (new Article 28) of the EC Treaty. The principle forms the cornerstone of the Single Market. It means that Member States have to have a European Community perspective when formulating technical and commercial regulations. They cannot adopt a strictly national point of view during this process and they cannot prevent products or services that differ from their national standards, although conforming to the standards of the country of origin, from being sold or provided on their territory, if the product or service concerned satisfactorily fulfils the legitimate objective specified in those regulations. In this manner free movement of goods and the freedom to provide services can be attained without necessitating the harmonization at Community level, of all the regulations and standards. It is evident that significant differences exist between rules relating "to access to, and the practice of, professions and in the area of consumer protection, the directive contains a number of measures designed to strengthen mutual trust between the Member States." 7 This principle of mutual recognition is envisaging a lot of opposition and it is to be remembered that the draft Constitutional Treaty (Article III-260) and the Hague programme (paragraph 3.2) recognise the importance of mutual evaluation between Member States in order to strengthen mutual trust. Access to justice is fundamental in ensuring that the laws of EC are applied fairly and that all laws are applicable to each member state wherever it is deemed to be necessary. This principle of equality is the main building block of many democratic jurisdictions. The law has to be accessible to all citizens, especially the economically backward, the vulnerable and those who do not have legal assistance. The essential intention of the Draft Services Directive is the elimination of the barriers that exist to the free movement of services and to guarantee providers and recipients legal certainty, necessary for the free provision of services between Member States. The need of the hour is the invention of more appropriate tools and procedures to be defined for the furtherance of this directive. It is of paramount importance that there should be a clear and unbiased understanding between the local governments and the union governments and that Member States cooperate with one another in order to achieve this objective. References. Cholewinski, Ryszard (1997). Migrant Workers in International Human Rights Law: Their Protection in Countries of Employment. Clarendon Press, Oxford, Page No.18. Commission interpretative communication on facilitating the access of products to the markets of other Member States: the practical application of mutual recognition - 2003/C265/02. (4 November 2003). Eurodiaconia Briefing, (n.d). Retrieved March 28, 2006, from http://www.eurodiaconia.org. First Report, On the Application of the Principle of Mutual Recognition. Working Document from the services of the Commission.(n.d). Retrieved on 28 March 2006, from http://europa.eu.int /comm. /enterprise /regulation/goods/mutrec_en.htm#principle "La libre circulation des marchandises l'heure de l'Euro", Paris Chamber of Commerce report, October 1998. McGuire Woods, European Business Law Update. (Winter 2004). Retrieved on March 28, 2006 from http://www.mcguirewoods.com/news-resources/news/872.asp Rewe-Zentral AG v Bundesmonopolverwaltung fr Branntwein. (20 February 1979). Bibliography. European Commission (2004). Report on the Public Consultation on the Green Paper on Services of General Interest. 29 March 2004. SEC 326. European Parliament (2003). Report on the Green Paper on Services of General Interest (Herzog report), Committee on Economic and Monetary Affairs. 17 December 2003. COM 270 - 2003/2152(INI). European Parliament (2003). Towards a European Directive on Services in the Internal Market: Analysing the Legal Repercussions of the Draft Service Directive and its Impact on National Service Regulations. Committee of Employment and Social Affairs. Hbel, Michael, 1995: Funktion und Grenzen Freier Wohlfahrtspflege in Europa unter besonderer Bercksichtigung des bundesdeutschen Systems, in: Zeitschrift fr Sozialreform, Heft 3+4, S. 184-192 Hritier, A. (2001). "Market Integration and Social Cohesion: the Politics of Public Services in European Regulation". Journal of European Public Policy. 8, 5 (2001), pp. 825-52. Ipsen, Knut, 1996: Gutachten: Zur Auswirkung des Europischen Gemeinschaftsrechts auf die mitgliedstaatliche Frderung sozialer Dienstleistungen im Bereich der Freien Wohlfahrtspflege, Bochum Kendall, J., (2005). The Third Sector and the Policy Process in the United Kingdom: Ingredients in a Hyperactive Horizontal Policy Environment. TSEP Working Paper 5. Kendall, J. (2003). Third Sector European Policy: Organisations between market and state, the policy process and the EU. TSEP Working Paper 1. Kuper, Bernd-Otto, 1990: Economie Sociale - eine europische Herausforderung an die Freie Wohlfahrtspflege, in: Nachrichtendienst des Deutschen Vereins fr ffentliche und private Frsorge, Heft 9, S. 307-309 Lange, Chris, 2001: Freie Wohlfahrtspflege und europische Integration. Wohlfahrtsverbnde zwischen Marktangleichung und sozialer Verantwortung, Frankfurt/M. Loges, Frank, 1994: Entwicklungstendenzen Freier Wohlfahrtspflege im Hinblick auf die Vollendung des Europischen Binnenmarktes, Freiburg/Br., 1994 Loges, Frank, 1997: Economie Sociale - Entwicklungstrends und Herausforderungen der Freien Wohlfahrtspflege in der Europischen Union, in: Jung, Rdiger H. /Schfer, Helmut M. /Seibel, Friedrich (Hrsg.): Economie Sociale: Fakten und Standpunkte zu einem solidarwirtschaftlichen Konzept, Frankfurt/M., S. 172-184 Lundby-Wedin, Wanja and Nyberg, Lars 2003. Los yttrande ver grnboken om tjnster i allmnhetens intresse. Stockholm: Los remissyttranden Meddelande frn kommissionen till Europaparlamentet, Rdet, Europeiska Ekonomiska och Sociala kommittn och Regionkommittn. Vitbok om tjnster av allmnt intresse 2004. Bryssel: Europeiska gemenskapernas kommission. Read More