Free movement of services: Commission takes action to ensure a well-functioning Single Market for services

This article is brought to you in association with the European Commission.

Today, the Commission is pursuing 24 cases against several Member States for breaches of services related legislation. These decisions are taken to ensure the correct implementation of rules aimed at the good functioning of the Single Market for services.

Services are crucial to the EU economy. They account for around 70% of the EU’s GDP and an equal share of its employment. The lack of or incorrect implementation of EU legislation is a reason for the Single Market for services to underperform. Recent studies estimate the long-term potential benefits of removing obstacles to the intra-EU services market at between €279 billion and €457 billion of additional yearly GDP. Similarly, the recently published Annual Single Market Report underlines how a genuinely integrated Single Market is a precondition for Europe to address current geopolitical challenges and develop a resilient and globally competitive European economy.

The Commission is determined to use all available tools to continue to remove barriers for companies looking to offer cross-border services and to make it easier for them to do business. These barriers hold back the full potential of the Single Market for services. The services sector and persisting obstacles deserve particular attention in the efforts to strengthen the EU’s recovery and resilience.

The Commission pursues consistent efforts to make Member States reduce restrictions in the single market for services, using all available instruments. For example, the work with Member States in the Single Market Enforcement Task Force (SMET) has particularly focused on collaborative efforts to simplify the regulatory framework and reduce administrative barriers, including in the services sector. SOLVIT is another instrument that delivers pragmatic solutions for citizens and businesses when they are experiencing difficulties with their EU rights being recognised by public authorities while moving or doing business cross-border. The Commission has also persistently taken robust enforcement actions in the past years. These actions have led to tangible improvements in the integration of the Single Market for services, allowing the Commission today to close 18 cases.

These achievements concern the revised Professional Qualifications Directive and follow two big batches of infringement cases launched in 2018-2019. Today’s closures will bring concrete benefits for businesses and workers who want to provide services across the EU, such as:

• Removing the obligation to take a specific language test for health professionals in Poland if they can attest knowledge in other ways;
• Removing an obligation to undertake a specific language test that included unrelated skills checks for health professionals in the Netherlands;
• Ensuring accelerated procedures for the recognition of professional qualifications in Portugal;
• Removing disproportionate restrictions to work as a tourist and mountain guide in Bulgaria.

Furthermore, Romania now ensures the automatic recognition of the professional title of EU lawyers, in conformity with the Lawyers’ Establishment Directive, facilitating the free movement of lawyers in the EU.

In addition, the closed cases which concerned the failure to fully or correctly transpose the Proportionality Test Directive into national legislation help to make sure that Member States correctly apply the proportionality test in practice and thus prevent unjustified and disproportionate rules from being introduced and harming the Single Market for Services.

The enforcement actions adopted today address the failures of Member States to properly integrate core Single Market rules into their own national legal frameworks within due time, or failure to ensure that the national legal framework complies with EU rules, thereby creating obstacles in important services sectors.

EU Proportionality Test Directive for regulation of professions

The Directive on a proportionality test before adoption of new regulation of professions, requires Member States to make sure that any requirements for professions they introduce are necessary and balanced. The Directive provides a set of criteria to prevent unnecessarily burdensome national rules, which can hamper qualified candidates to access or exercise a wide range of professions in another Member State. The Directive is a powerful tool for facilitating access to and exercise of regulated activities by professionals across the EU.

The issue affects many Europeans: around 50 million people, 22% of the European labour force, work in professions to which access is restricted to those holding specific qualifications or for which the use of a specific title is protected, e.g. lawyers or pharmacists. Often there will also be specific requirements on how the profession can be exercised, such as limitations on who can hold the shares of those companies or how these services can be advertised. Ensuring that such rules are justified and proportionate creates concrete benefits for European citizens, both for professionals as well as for consumers.

The Commission has decided to send 11 additional letters of formal notice to Austria, Bulgaria, Croatia, Cyprus, Czechia, France, Greece, Hungary, Latvia, the Netherlands, Slovakia, and a letter of formal notice to Estonia toensure that introduction of professional regulation via parliamentary amendments is covered by a prior proportionality assessment.

In addition, the Commission has decided to send 5 reasoned opinions to Germany, Lithuania, Poland, Slovenia and Spain for not having properly implemented the EU Proportionality Test Directive for regulation of professions. These reasoned opinions address in particular the failure to include all relevant measures in the proportionality assessments, or the lack of implementation of the necessary procedural guarantees or of certain criteria for thoseassessments.

The action taken today to ensure its proper implementation will help to prevent or dismantle disproportionate barriers in the Single Market, in line with the objectives of the EU Single Market Enforcement Action Plan.

Enforcement of the Services Directive

The Services Directive aims to remove the barriers to trade in services within the EU. It simplified the administrative procedures for service providers, enhanced the rights of consumers and businesses receiving services, and fostered cooperation among EU countries. In addition, it obliges Member States to remove all total prohibitions on commercial communication, including all total prohibitions of a form of commercial communication, for regulated professions.

• Bans on commercial communications of lawyers

Advertising restrictions for legal services hamper business development and client acquisition. They also hinder the development of advertisement on social networks, therefore obstructing the transition into a digital era. Reducing such regulatory barriers in business services has been shown to increase competition and sector dynamics, leading to greater allocative efficiency and lower prices for consumers.

The Commission has therefore decided to open an infringement against Malta, Poland and Slovenia for having in place a total prohibition on the advertising of lawyers’ activities contrary to the Services Directive.

• Barriers to the activities of real-estate agents

The Commission has decided to open an infringement against Cyprus for having in place prohibitions to team up with other professions in the real estate agency domain and Slovenia for fixing minimum tariffs for certain real estate intermediation services.

A circular issued by the competent Cypriot authority effectively prohibits natural persons not registered as real estate agents in Cyprus to hold shares in real estate agencies. Requiring 100% of shares to be held by real estate agents registered in Cyprus is a disproportionate measure which infringes the Services Directive.

The Slovenian Law introduced price restrictions for certain real estate intermediation services in violation of the Services Directive.

• Construction services

The Commission has decided to open an infringement against Belgium for having in place a disproportionate guarantee scheme obliging certain construction service providers to pay a financial guarantee to cover payments made by their clients.

The guarantee scheme imposed by Belgium on so-called non-approved contractors for the construction and sale of dwellings to be built or under construction has been set much higher (100%) than for approved contractors (5%). This restricts the freedom of establishment/to provide services of foreign building contractors as well as non-construction companies (like real estate developers).

According to the Commission, the Belgian law imposing this guarantee scheme violates several provisions of the Services Directive.

• Coastal concessions

The Commission has decided to open an infringement against Spain for having failed toto ensure a transparent and impartial selection procedure for the granting of concessions relating to coastal areas. In addition, according to the Commission, the possibility to extend existing concessions for up to 75 years without justification is against the EU rules.  

The Spanish Coast Act provides for the possibility of granting ‘concessions’ (authorisations within the meaning of the Services Directive) to build permanent premises (e.g. restaurants, agrofarms, paper or chemical industry, etc.) in the so-called ‘maritime-terrestrial public domain’, outside ports, without an open and transparent selection procedure. It also allows for the possibility of extending their duration for up to 75 years, again without a selection procedure. This law breaches the Services Directive.

Background

The need to tackle barriers in the area of services is particularly acute: 60% of the barriers businesses faced 20 years ago still exist, according to the recently published Annual Single Market Report. Barriers confirmed by business stakeholders include complex national procedures and lack of information on these; disproportionate national requirements in the area of services and burdensome administrative requirements for service provision, including as regards posting workers. Despite the fact that the legal framework for a smoothly functioning Single Market for services has been laid down in the Treaties and EU legislation, the failure to properly implement and apply these rules at national level continues to hamper the free flow of services. For this reason, the Commission has developed a multi-dimensional enforcement approach, which includes not only “classical” targeted and strategic enforcement action, but also collaboration with Member States in fora like the Single Market Enforcement Taskforce (SMET) and other dedicated expert groups; supporting Member States by detailed guidance documents; and preventing barriers by means of the Proportionality Test Directive as well as the Single Market Transparency Directive and Services Directive notification tools.