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Services Directive

16 November 2006 - 11:20am

The European Parliament yesterday passed the Services Directive, and thanks to some good compromises the fears of the trade union movement have largely been addressed

The European Commission's draft Services Directive, intended to eliminate existing barriers to the freedom of establishment and movement of services between EU Member States, could have had a negative impact on physiotherapy services in the UK. Find out more about the Services Directive on this page. This page has information about:

  • Background information on the Services Directive - what was the Directive about?
  • The UK Government's original negotiating lines
  • Developments for March and December 2005
  • Links and document downloads
  • News update: November 2006

On 15 November 2006 the European Parliament passed the Services Directive at their second reading. Now the process of implementation can begin, which gives rise to two main areas of concern for the trade union movement:

  • One is the screening process that all Member States will now need to undertake to ensure that regulations with which service providers from other Member States are required to comply are proportionate, necessary and non-discriminatory.
  • Secondly, all Member States are required to set up points of single contact where service providers from other Member States can find out what they need to do to offer services in the UK. Employment laws will need to be clearly spelt out.

The European Trade Union Confederation has welcomed the approval of the revised Services Directive as "a success story for the European trade union movement". In a press release, the ETUC says:

"When the EP approved a package of compromises reached by the main political groups in February 2006, the ETUC regarded this as a major victory for European citizens and workers, because the majority of trade unions' are met: the country of origin principle is abolished, enabling Member States to exercise better supervision and to apply national rules to protect the public interest; labour law is excluded, and in particular issues linked to the posting of workers; fundamental rights to collective bargaining and action are to be respected; services of general interest and some services of general economic interest, such as healthcare and social services are excluded. The ETUC will continue to fight for improvements in several areas: campaigning for better European regulation of public services and pushing for urgent adoption of European regulation especially in sensitive sectors such as temporary agencies."

 

Background

In January 2004 the European Commission introduced a proposal for a Directive of the European Parliament and Council on services in the internal market (the draft Services Directive - also known as the 'Bolkestein Directive'). The Directive's aim is to create a legal framework in order to eliminate existing barriers to the freedom of establishment for service providers and the free movement of services between EU Member States. The Directive is controversial as it has a broad scope and appears to be incompatible with a raft of current or proposed legislation to protect workers and consumers. The Department of Trade and Industry (DTI), which is leading for the government in the negotiations, sees the Services Directive as being of great importance in opening markets for British business. The UK government therefore sought to make progress on the Services Directive a big item on the agenda during the UK's Presidency of the EU in the second half of 2005. The Directive causes concerns for unions because of its emphasis on opportunities for business, not protection for workers or consumers. The UK government has a number of "negotiating lines". What these are and what they might mean are discussed below.

UK Negotiating Line 1

'Strongly support the market opening objectives of the proposed Directive, particularly through:

  1. simplified and better regulation
  2. support for the country of origin principle
  3. ensure the Directive does not cover "publicly funded health services" and occupational pensions'

Simplified and better regulation

Simplified and better regulation is seen as key in creating a genuine internal market in services: simplification of rules will encourage business to enter a market they would otherwise be deterred from, thus promoting competition. This means breaking down barriers to business, which includes "burdensome national regulations". Regulations covering professional qualifications may feasibly come under this. The Mutual Recognition of Professional Qualifications is a concern of the European Council Working Group. Mutual recognition is seen as essential to allow business to operate under one set of rules. An aim of the Directive is to ensure a "one-stop-shop" where businesses can go to a single point in their host country to satisfy all the administrative and regulatory requirements of working in another Member State. There is, then, potential scope for regulations covering physiotherapy qualifications/standards of practice to be weakened. It is unclear whether this is an intention but it could be a consequence. A possible scenario might be that a physiotherapist working in one Member State for a healthcare company established in another Member State, may not be subject to the same rules or same code of conduct. If some healthcare providers operate under lower standards/conditions this could lead to them having an advantage over other healthcare providers who have to comply with more stringent legal requirements in a particular Member State. This could put pressure on the regulatory authorities to relax their standards and "provoke a spiral of deregulation" or "race to the bottom". There may also be implications for regulations that affect healthcare planning and geographical coverage of healthcare provision; and price fixing mechanisms between state and voluntary sector (not-for-profit) providers of care.

Support for the country of origin principle

The Country of Origin principle means that an organisation wanting to operate in another Member State need only satisfy the regulatory requirements of its own country (where it is established) in order to do so. The rationale for this is to encourage companies to "test the water" in a new market to see if it is worth establishing a permanent presence. The distinction between whether an enterprise is "temporary" or "permanent" will be an important one as the Country of Origin principle may be subject to derogations depending on this status (as it stands it applies to temporary healthcare provision only). It is possible that issues could arise over access to care, continuity of treatment, the behaviour of the care provider, quality of care and means of redress for the patient if things went wrong (and representation of members by professional bodies with a Trade Union function) with a temporary healthcare provider from another Member State operating at lower standards. At least one commentator (Gekiere, from the Institute for European Law at the Catholic University Leuven, in a report commissioned by the Rapporteur Committee Employment and Social Affairs of the European Parliament) has said "the country of origin principle substantially reduces the right of national health authorities to regulate the access to, the affordability and the quality of health care services on their own territory."

Scope of cover

The UK wants to exclude "publicly funded health services" from the Directive (not all Member States agree). There are a number of issues here:

  • Firstly, what does this mean? How is this phrase to be defined? For example, if (as in the UK) Member States operate health care systems with an influx of private capital (PFI), what is the dividing line between private and public health in the UK? The dividing line between public and private healthcare will not be clear-cut. The differences in health provision between the UK countries might also complicate this, with the devolved administrations having different approaches to their health services.
  • Secondly, this phrase would not appear to apply to personal social services where patients have to pay for personal care but not for the health part of their care package.

Private sector health care providers would not appear to be covered by this phrase, so would not be excluded from the Directive. A possible scenario here, then, might be a private healthcare company from another Member State setting up a temporary (possibly eventually permanent) presence in the UK and using the Country of Origin principle to avoid complying with physiotherapy professional qualification requirements/regulations. This is probably an overly simplistic example but the stated aims of the Directive are to remove barriers to establishment (of a business) and the free movement of services. If health care stays in the Directive, there may be issues for national health care systems regarding reimbursement of healthcare costs for care received in another Member State, for example, and issues of access/universal coverage. Even if publicly funded health services remain outside of the Directive, there could be implications for public health from the impact of consumer choice in a deregulated, pluralistic private healthcare market with differing standards.

UK Negotiating Line 2

'Ensure the proposed Directive does not impinge upon...immigration policy' (it may make free movement of workers easier or harder, depending on the success of this negotiating line). "Clarify the relationship with sector-specific legislation" This may have an impact on any legislation on the recognition of professional qualifications. The UK government's view is that sector-specific legislation should take precedence over the Services Directive where there are areas of potential conflict, as the sector-specific rules will be more sympathetic to the particular needs of the sector. This may be a positive development in terms of offering protection against any watering down of regulations as referred to above. "Uphold UK standards on health and safety in all circumstances and maintain high standards of protection for workers, consumers, the environment..." The DTI has stated that it has concerns over health and safety and is committed to upholding British safety standards, protecting the vulnerable in society and protecting the UK's high standards. However, the DTI has also said there is a need to "strike-a-balance" between maintaining essential standards and supporting choice. Member States will all have their preferences for derogations. Under the UK Presidency the DTI will attempt to limit derogations to the minimum necessary. How this fits with the above negotiating line remains to be seen.

UK Negotiating Line 3

"Ensure that the proposed Directive does not affect sensitive policy areas where regulation is principally not for economic motives." Professional regulation and standards may come under this and may therefore be protected, but it is unclear what the outcome would be if there is a conflict between this negotiating principle and the one to ease "unnecessary burdens on business." The DTI has said that the Directive is likely to cut across regulatory standards and that there are bound to be changes.

Other points

The European trade union movement (ETUC and EPSU) have some serious concerns that the Directive threatens workers' rights and the supply of essential services to Europe's citizens. They feel the pendulum has swung too far in favour of deregulation and that the Directive fails to uphold the social dimension of the EU's Lisbon strategy: basically the premise of the primacy of the internal market over the social elements of Community law is rejected. The ETUC's statement on the Directive said forthrightly: "The European trade union movement is opposed to the method proposed for creating an internal market for services in the EU." This is for the following reasons:

  1. The Country of Origin principle is a threat, particularly to services of general interest (public services + the utilities) which rely on extensive regulation to guarantee high quality care for all and which redress inequalities of access.
  2. Labour laws and collective agreements could be treated as obstacles ("unnecessary burdens") to be eliminated, thus weakening employment security and industrial relations.
  3. Market forces must not take priority: increased competition is seen to endanger the public service role of SGIs, which should be protected by European legislation. Health services need state intervention to guarantee good quality care and to protect patients from excessive charges.
  4. No serious or adequate impact assessment has been made of the likely results of the Services Directive, and this should take place as a matter of urgency.

  For the European union movement, the Directive is the latest example of the way that 'competition' is the yardstick against which 'progress' in Europe is measured, rather than social and environmental concerns. In the absence of a European legal framework on public services (Services of General Interest) a fear exists that the Directive will undermine public services and these services will become commodities, more removed from the needs of the citizen. The Directive appears contrary to Article 152 of the EU Treaty which puts healthcare firmly under the responsibility of the Member States. The fear is that it will weaken national regulatory control, lead to more legal uncertainty and encourage deregulation and privatisation of healthcare services.

Conclusion

There are many issues that need to be clarified but the Directive constitutes a big issue for both business and unions. Its too early to say with any certainty what impact the Directive will definitely have on physiotherapy, but it does contain the potential for quite negative implications for individual physiotherapists and the profession in the Member States (as well as health and social care and public health generally). It is a controversial Directive as it appears to be incompatible with a raft of current or proposed legislation to protect workers and consumers and it is not clear how it fits in with the definition of Services of General Interest (public services) or with other international agreements affecting health services, such as the World Trade Organisation. Because the Services Directive will be decided under the Co-Decision Procedure, there will be a role for the European Parliament (EP) in the final outcome. The EP has engaged with the Directive and the Employment & Social Affairs Committee has indicated it wants to contribute. The EP may have differing views from the Council on issues such as public health and the influence of the market, so intense lobbying of MEPs is bound to form a big part of both business and unions' lobbying strategies.

News Update: December 2005

The draft Services Directive will enter a critical stage in February 2006 with the first plenary reading in the European Parliament. Within the EP's Internal Market and Consumer Protection Committee the majority voted in favour of maintaining the Country of Origin principle. According to the European Federation of Public Service Unions (EPSU), this would mean 25 different legal systems would have to compete with each other, with potentially dangerous social dumping effects for quality of service provision, collective agreements, social protection and taxation systems. Together with the European Trade Union Confederation (ETUC), EPSU is co-ordinating a demonstration against the draft directive on 14 February at noon in Strasbourg. More information can be found at www.epsu.org. For more information on the political debate surrounding the Directive see the ETUI document that can be downloaded at the foot of this page.

News Update: March 2005

Saturday 19 March saw thousands of trade unionists protest against the Services Directive in Brussels. Speaking at the European Trade Union Confederation (ETUC) demonstration, TUC General Secretary Brendan Barber said:

'The game's up for the Services Directive in its current form. Rather than draw out the slow death of the Directive, the Commission must accept the inevitable and go back to the drawing board. The people of Europe didn't sign up to the EU for wages to fall, health services to go private or workplace protections to disappear. The EU's job is to help us survive and thrive in a global economy. Unions can support the free market, but only if it's fair too. That's why we want a social and environmental Europe as well as a common market. The Services Directive would fire the starting gun on a race to the bottom. It would create flags of convenience across the whole of Europe, in every part of the service sector. It would undermine the very point of the European social model.'

On 3 March, the European Commissioner for the Internal Market and Services, Charlie McCreevy, issued a statement calling for a new approach to the Directive. The Commissioner's statement can be downloaded by clicking on the link at the foot of this page. At a TUC seminar on the Directive held on 22 March with the DTI, the CSP asked the DTI's chief negotiator to clarify the position of the Directive with regard to the recognition of professional qualifications. The DTI's view is that the forthcoming Mutual Recognition of Professional Qualifications Directive should take precedence over the Services Directive, although the wording of MRPQ has not yet been agreed. Other themes discussed at the seminar were the problems with the definition of 'establishment' in the Directive; the necessity to exclude from the Directive publicly funded health systems; differences in interpretation between the DTI and the unions on the implications for labour law and collective bargaining of the Directive; the Country of Origin principle and the potential relevance of the Directive to social care and consumer protection. For more information on the Services Directive, see:

  • the Department of Trade and Industry website:
  • EPSU:
  • The Commission proposal:

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