Article 56 TFEU. Definition of service. Free movement of services Jörgen Hettne

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1 Free movement of services Jörgen Hettne Article 56 TFEU Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended (Article 56 TFEU) Definition of service No definition in the Treaty! Normally provided for remuneration Not governed by the provisions relating to freedom of movement for goods, capital and persons (Article 57 TFEU) Transport services are covered by special provisions (Article 58.1 TFEU) Banking and insurance services are liberalised in steps (Article 58.2 TFEU) 1

2 Remuneration The service must be economic in nature No strict interpretation Lotteries (gambling seminar) Professional sporting activities The remuneration shall constitute consideration for the service in question (263/86, Humbel, point 17) Not national education system (private funds different) The service shall be lawful If the remunerated activity constitutes a service that is lawful in some Member States, other Member States may only regulate and restrict it, so long as they do so proportionately and without arbitrary discrimination on grounds of nationality or place of establishment (for example prostitution and abortion). Principle of mutual recognition? The principle of mutual recognition The provider of service should be able to pursue his activities in the Member State where the service is given without suffering discrimination in favour of the nationals of the state. The freedom of service may only be restricted by provisions that are justified by the general good and which are applied to all persons or undertakings in that state. The same interest should not be safeguarded in the Member State of establishment. 2

3 Cross border (inter-state) element Three situations The provider is not established in the state where the service is supplied The recipient has travelled to receive service in an other Member State than that he is established in Neither the provider nor the recipient moves only the service moves First situation: Case 33/74, van Binsbergen Dutch national acting as legal adviser Transferred his place of residence from the Netherlands to Belgium He was told that he could no longer represent his client Direct effect of Article 56 and 57 TFEU (59 and 60) A general programme had been developed in 1961 to be implemented by several directives The necessary directives were not adopted Article 49 and 50 contain a well-defined obligation Article 49 and 50 became unconditional on the expiry of the transition period They abolish all discrimination based on nationality Vertical/horizontal cf. C-438/05 Laval 3

4 Restriction on the freedom to provide services possible exceptions? Professional rules justified by the general good Rules relating to organization, qualifications, professional ethics, supervision and liability which are binding upon any person established in the state Should not be possible to avoid professional rules of conduct However, not if the service is not subject to any sort of qualification or professional regulation Inter-state/cross border element? Was it a problem in van Binsbergen that the dutch lawyer tried to rely in the Netherlands on the provisions of Article 56? According to Article 56 TFEU who are established in a State of the Community other than that of the person for whom the service are intended Internal situation? No strict interpretation ECJ focuses more on the mobility and availability of the service than on the establishment of the persons involved Few situations are wholly internal The requirement of Inter-state element is not strictly defined 4

5 Second situation: The freedom to receive services (186/87, Cowan) British tourist Attacked and robbed while visiting Paris French criminal compensation scheme Compensation refused because of his nationality Tourists are recipients of services Right to equal treatment Placed on a completely equal footing with nationals of the Member States Third situation: services comparable to goods Neither the provider nor the recipient moves only the service moves Restrictions on access to the market is enough? Must be objectively justified Principle of mutual recognition? C-384/93, Alpine Investment Provider of financial services Prevented by Dutch rules from contracting potential customers by telephone without their prior written consent ( cold calling ) Keck (C-267 and 268/91)? Cf. C-544/03 Mobistar The prohibition prevents offers to potential recipients in another Member State. Directly affects access to the market in services in the other Member State (38) 5

6 Justification Maintaining the good reputation of the national financial sector imperative reason of public interest The prohibition of cold calling from which the telephone call is made cannot be considered to be inappropriate (49) Limited in scope (54) Need for harmonisation or is the diversity between the Member States acceptable? Exceptions Official authority exception (Article 51 TFEU) Public policy exception (Article 52 TFEU) Objective justifications (Case Law) Article 52 TFEU Not prejudice the applicability of provisions laid down by law, regulation or administrative action providing for special treatment for foreign nationals on grounds of public policy, public security or public health 6

7 Objective justification test Not (directly) discriminatory Justified by imperative requirements in the general interest (cf. Cassis de Dijon) Not legitimate if it pursues an economic aim Proportionate Suitable/appropriate Not possible to satisfy by less restrictive means» van Binsbergen (address for service residence)» 205/84 Commission v. Germany (authorization procedure/requirement of establishment)» Assessment by ECJ or national courts The problem with the service sector reasons for a service directive To a large extent a closed market Open up the market in Services accounts for two thirds of Europe s GDP. Important measure in the Lisbon strategy Commission two stage approach Identifying difficulties obstructing the smooth functioning of the internal market for services (COM (2002) 441) 90 barriers where competition was restricted Proposing appropriate solutions horizontal legal instrument (COM (2004) 2). 7

8 The Proposed Service Directive (The Commission Draft) Establishment & Services Simplification of procedures and formalities Points of single contact Authorisation schemes and procedures List of forbidden requirement (black list) List of possibly forbidden requirement (grey list) Country of origin principle Health care Posting of workers Mutual assistance Conditions for harmonisation (gambling) Country of origin principle Article 16 Country of origin principle (1) Member States shall ensure that providers are subject only to the national provisions of their Member State of origin which fall within the coordinated field. (2) The Member State of origin shall be responsible for supervising the provider and the services provided by him, including services provided by him in another Member State. Codification of Case Law Exemple: Reimbursement of costs of health care. Article 23 of the proposal incorporates the distinction between hospital and non-hospital care that has been clearly established by the consolidated case-law of the Court of Justice. As regards the circumstances in which such prior authorisation is justified, the proposal clarifies the specific conditions for authorisation, in accordance with the case-law of the Court of Justice. 8

9 Authorisation schemes codification? Article 10 Authorisation schemes shall be: (a) non-discriminatory; (b) objectively justified by an overriding reason relating to the public interest; (c) proportionate to that public interest objective; (d) precise and unambiguous; (e) objective; (f) made public in advance. Any refusal shall be fully reasoned and shall be open to challenge before the courts Social dumping? The country of origin principle would pave the way for social dumping? Enlargement 2004 Polish plumber European Social Model? Trade union based demonstrations in Brussels The first draft was fundamentally changed The adopted Service Directive (2006/123) Narrower in scope (removal of several sectors and activities) Health care Posting of workers Gambling No country of origin principle Reduced obligations of Points of Single Contact Regulatory comitology procedure (not advisory) Three years implementing period (not two years) Screening obligations for the Member States 9