The Directive means that the process of setting up in Member States will be streamlined and made simpler. It will remove many administrative obstacles and disguised protectionist measures that individuals and companies can encounter when trying to work abroad. Each Member State will also have to set up a single contact point on-line for all necessary information and applications.

In addition, the Directive will introduce a new electronic database to help Member States share information and work more closely together. This will help make sure that service providers meet their obligations to customers and that consumers across the EU are protected.

Rocky road
However, the Services Directive has a rocky road to reaching this stage and had to be watered down from the original proposal. Initially, the move had prompted fears that low-paid workers from new EU countries would undercut domestic tradesman. A factor in France's rejection of the proposals last year was due to concerns that Polish workmen would take French jobs.

In the revised version which has been accepted this week, many sectors are excluded from the scope of the legislation, including financial services, ranging from banking to insurance, public and private healthcare, public transport and ports, radio and television, temporary agencies and security services.

In addition, service providers operating abroad will have to comply with the labour laws of their host country — a requirement that will prevent companies from countries with weaker social protection from undercutting competition. The original proposal would have required service providers to respect their home — not host — nation rules.

The legislation, which will be rubber-stamped by governments next month and come into force in 2010, will make the long-established EU principle of the freedom to provide services more a reality for professions ranging from management consultants, advertisers, estate agents and architects to tour guides, travel agents, electricians and plumbers.

Procedures for setting up a business elsewhere in the EU will be simplified and each country will have to establish a single online contact point providing all the relevant information. New electronic contacts between national administrations are designed to overcome any obstacles that might arise and ensure that consumers are protected when dealing with foreign service providers.

Small firms
Small business pressure group, the Forum of Private Business (FPB), welcome the adoption of the Directive, which, it believes, will significantly benefit UK small firms.

FPB's EU spokesman Martin Smith said: "Smaller businesses often don’t have the capacity to take the unreasonable risk of setting up a permanent office in another country, they need to test the market first.

"Unlike for goods, free trade alone is not sufficient for services as some services can only be delivered locally, and therefore need a local presence. Service providers also need to navigate their way through the regulatory minefield present in many member states. This Directive will mean they can set up an operation in another member state without the same regulatory headaches that might have put them off in the past."

Member States will have three years to implement the Directive, during which time they will have to screen out any domestic laws that do not comply.

The FPB urged each Member State to extend its consultation of this process to business groups outside its own borders. He said: "The main benefit of this Directive will definitely be to businesses considering entering a market from outside. Therefore it makes sense that they should be consulted on how the regulations in that market are changed to comply with the Directive."

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Susie Hughes
The Editor © Hardhatter 2006