European Parliament Holds Public Hearing on Services Directive

11 November 2004

The European Parliament on Thursday held a public hearing in Brussels regarding the Proposal for a Directive on services in the internal market.

The proposal would liberalize services in the internal market and allow free movement of services and service providers within all the 25-member states.

The proposal would pave the way for cross-border betting by allowing licensed Internet-based bookmakers and casino operators to offer their services in other member states without needing additional licenses or regulatory approval.

Opponents of the proposal complain that countries and sectors (for instance the monopolistic gambling operators) have no collective agreements to protect worker's rights, job security and health care.

In March 2000, the European Council in Lisbon set out a ten-year strategy to make the EU the world's most dynamic and competitive economy.

The OELisbon Strategy is a commitment to bring about economic, social and environmental renewal in the EU. Under the strategy, a stronger economy should drive job creation alongside social and environmental policies that ensure sustainable development and social inclusion.

As part of the response to the Lisbon Strategy, the EU Commission published a two-part report on how to implement the plan. In its "An Internal Market Strategy for Services" report the commission identified barriers to cross-border trade in services and then developed appropriate solutions to the problems identified.

In July 2002 the Commission published its report on "The State of the Internal Market for Services." With the report the commission completed the first stage of the process and gave an extensive list of barriers that exist in the internal market for services.

In May 2003, the European Commission launched its 2003-2006 Internal Market Strategy.

The public hearing conducted on Thursday was the beginning of the second phase of the internal market strategy for the commission.

The freedom of establishment and the free movement of services are guaranteed by Articles 43 and 49 of the EC Treaty but the Commission believes that actual implementation is not ensured in all cases.

The directive covers most industries, which are defined under Community law as "economic services" except those services where there are already specific initiatives to complete the Internal Market (e.g. financial services, transport services, services and networks for electronic communication).

It does not cover "non-economic" services of general interest provided directly and without remuneration by national or local government authorities in furtherance of their social, cultural, educational or judicial functions.

The objective of the proposed directive is to provide a legal framework that will eliminate the obstacles to the freedom of establishment for service providers and the free movement of services between the Member States.

In order to eliminate the obstacles to the free movement of services, the proposal calls for:

  • The application of the country of origin principle. This principle calls for a service provider to be subject only to the law of the country in which it is established and Member States may in general not restrict in a discriminatory way services from a provider established in another Member State.

  • The right of citizens to use services from another Member State without being hindered by restrictive measures imposed by their country.

  • A mechanism to provide assistance to citizens who use a service provided by an operator established in another Member State.

  • In relation to posting of workers, the allocation of tasks between Member State of origin and the Member State of destination.

    For the Gambling industry the following economic aspects were brought up during the public hearing:

  • Scope of the directive and balance between the internal market and other policies (health, consumers, and employment).

  • The country of origin principle and how rulings of the European Court of Justice impact legislation.

    The Parliament nominated Evelyne Gebhardt (PS) from the Committee on Legal Affairs and the Internal Market as its reporter in this issue. Anne Van Lancker (PS) is the reporter for the Committee on Employment and Social Affairs.

    According to Gebhardt the draft directive goes much further than just eliminating the obstacles in the way of a genuine internal market for services. It even questions national provisions and practices.

    Gebhardt wondered if the proposed directive is not concentrating too one-sidedly on the elimination of national provisions. She said the creation of regulatory mechanisms at the community level that enforce minimum standards and guarantee public safety, are as important as removing barriers to promote the development of the internal market.

    Such a regulatory framework could fix European minimum standards within which freedom of establishment and free movement of services is guaranteed, she said.

    Principle of origin

    According to the draft directive, a service provider is in general, and as a guiding principle, subject only to the legislation of the Member State of origin in terms of access and the exercise of a service. Rules regarding the conduct of service providers, the quality or content of services, advertising, contracts and liability of service providers is covered in Article 16 of the directive which allows EU legislation to supercede local laws.

    Gebhardt is critical towards this proposal particularly as it states that the Member State of origin is responsible for supervising the provider but actual access to means of supervision and information is guaranteed by the State where the service is provided.

    Gebhardt is skeptical of the ability of a Member State to perform its supervisory duty effectively without suitable inspection facilities in other jurisdictions. Even more importantly, the country of origin principle is clearly in contradiction with art. 50 TEC, which states:

  • Without prejudice to the provisions of the Charter relating to the right of establishment, the person providing a service may, in order to do so, temporarily pursue his activity in the State where the service is provided, under the same conditions as are imposed by the State on its own nationals.

    More hearings are scheduled and the directive will likely see many changes as labor unions and business associations clash over the exact wording of the directive.

  • Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.