In May 2006 the Council of the European Union agreed upon the amended proposal for the Directive on Services in the Internal Market (the Services Directive) with only one country abstaining 's Lithuania. Lithuania argued that an essentially amended Directive would not be effective enough and would fail to facilitate the free movement of services in practice, not only in the Baltic region but within the entire EU.
The key ambition of the EU to recognize and apply the freedom of movement for services, as well as goods, workers and capital, within the entire EU market was already established in the 1957 Treaty of Rome, which marked the beginning of the organization. Throughout the years the EU has managed to advance the single market for goods, workers and capital. The single market for services, however, still remains relatively undeveloped. Thus the proposal for the Services Directive intending to ensure the cross border provision of services within the EU can be seen as a very welcomed initiative.
Currently, numerous legal, financial and administrative restrictions in the national legislation hamper the operation of a single market for services. These are usually related to the application of a wide range of national regulations to the cross border service providers, which makes the cross border provision of services unattractive, if not impossible. For example, a Latvian real estate agency, together with its real estate agents, has to meet certain requirements in order to obtain a permit to provide services in Latvia. However, the competent authorities of another EU member state, let's say France, are not obliged to take these requirements into consideration. As a result, the agency may be required not only to obtain necessary permits or licences, but also to establish itself in France, even if the services are to be provided for a short term. Thus the requirements of another member state create a double burden for the cross-border provision of services.
The Services Directive is aimed at abolishing all these unjustified obstacles. At the outset it established the "country of origin" principle, which was intended to facilitate the temporary cross-border provision of services by allowing for the application of legislation of the service provider's home country and excluding the necessity of re-establishment in another country. The Services Directive was also intended to cover all types of services, excluding only financial, electronic communication and transport services.
Because of these latter provisions the first wording of the directive provoked intense debate and was harshly criticized. This led to amendments proposed by the European Commission. The "country of origin" principle was abolished, and no provisions were included that could facilitate the temporary provision of services in another member state without the need to establish there. Moreover, the new wording of the Services Directive excluded from its scope some additional types of services 's e.g., health care and social services to a certain extent, gambling, etc. 's making its application rather restricted.
Limited as it might be some progress has been made. National regulations of an individual EU member state could be applied to the cross border service provider, only if they are non-discriminatory, proportionate and objectively justified on the grounds of public interest. The Services Directive also contains a general rule that the competent authority may not impose the licence requirements, except in cases provided in the Directive, which relate to non-discrimination, transparency, etc.
As the provisions of the Directive seem to be rather flexible, the member states might be willing to resort to wide interpretation. Therefore the true impact of the new Directive will only be seen after the detailed analysis of national practices and possible interpretations by the European Court of Justice.
In conclusion, it is important to acknowledge that despite numerous compromises the final agreement on the Services Directive is a big step toward establishing a single market for services and easing the cross border provision of services. The next stage for the adoption of the Directive is its second reading in the European Parliament, which is foreseen in the second half of 2006.
Gintare Stalenyte is associate advocate of Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Teder Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics
