Taking Counsel: The new Lithuanian Law on Services: another step towards the common market?

  • 2009-10-28
  • By Lina Akelyte [Jurevicius, Bartkus & Partners]
Services make up about 70 percent of GDP in most countries of the European Union. The elimination of barriers to the development of service activities between the member states is essential in order to promote balanced and sustainable economic and social progress. To implement the mentioned right the European Parliament and the Council adopted Directive 2006/123/EC on Services in the Internal Market ("the Directive") in 2006. It sets the obligation for each member state to implement this act in its national legal system by the end of 2009. Lithuania is ready to perform this duty and has therefore prepared a Draft of the Law on Services ("the Law"), which is now in the stage of coordination before submitting it to the Seimas for approval.

Currently, the provision of services as defined by the Directive is regulated by about 70 different laws and more than 800 other legal acts in Lithuania. It is therefore important to unify this field 's exactly what the Law on Services should do. Its aim is also to simplify administrative procedures regarding provision of various services. This legal act ensures two possible ways to provide services in another member state: either by establishment in another member state, or by providing the services without being established. Service providers shall be able to choose between these two possibilities, depending on their strategy for growth in each member state. 

The Law on Services is based on three essential principles that any restrictions imposed by the state regulators have to comply with: (i) non-discrimination (the requirement may be neither directly nor indirectly discriminatory with regard to nationality, place of residence or, in the case of legal persons, with regard to the member state in which they are established); (ii) necessity (the requirement must be justified for reasons of public interests); and (iii) proportionality (the requirement must be suitable for attaining the objective pursued, and must not go beyond what is necessary to attain that objective). It means in general that any legal or administrative barriers in the internal market for providing services should be removed, except for the clearly stated justifications.

It should be noted that one more principle was rejected after it was proposed in a draft of the Directive, i.e. the "country of origin" principle, according to which a company offering its services in another country would operate according to the rules and regulations of its home country. Some countries and major companies feared this would lead to a "race to the bottom," with firms relocating to countries with lower wages, weakest consumer protection and employment rules. However, the European Parliament finally removed this principle, and consequently we shall not find it directly stated in the Law on Services.

The new law shall apply to all kinds of services, i.e. any self-employed economic activity, normally provided for remuneration, in so far as it is not governed by the provisions relating to the freedom of movement of goods, capital or persons. However, the Directive, together with the Law on Services, excludes certain services from its scope, i.e. healthcare and pharmaceutical services; financial services; electronic communications services and networks, and associated facilities and services; transport services. Moreover, the Law shall not apply to the field of taxation and its administration. All the before-mentioned services shall be governed by other respective laws and legal acts.

The Law on Services is considered to be an important step towards formation of the single European market for services. Its benefits are declared to be the simplification of procedures and formalities that service providers need to comply with. It should facilitate the establishment of a business as well as the cross-border provision of services. For the benefit of consumers, the provisions of this Law strengthen the rights of recipients of services. It prohibits, for instance, discriminatory conditions based on the nationality or residence of the service recipient. It also obliges Lithuania to cooperate with other member states in order to ensure efficient supervision of providers and their services. The Law shall come into force on Dec. 28, 2009. Consequently, some legal acts in the field of services' provision shall have to be abolished while others have to be adopted in the short run.     

Lina Akelyte is a lawyer at Jurevicius, Bartkus & Partners, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality "one-stop shop" approach to clients'
needs in the Baltics.