ETUC position paper: The proposal for a Directive on services in the internal market

Brussels, 17-18 March 2004

The ETUC demands one precondition: stronger social guarantees for workers
1. The proposal for a Directive on services in the internal market issued by the European Commission on 13 January 2004 [[]] aroused lively interest on the part of trade union organisations, not only because it would affect a key sector in terms of employment, but also because nowadays services are essential to the smooth functioning of the European economy as well as being of importance in determining the well-being of the general public. The European Trade Union Confederation (ETUC) believes that apart from being determined by a high level of social security, the development of the internal market has to go hand in hand with sufficiently strengthened social protection and adequate workers' rights and working conditions embraced with a view to maintain social cohesion within the EU.

2. ETUC has examined the proposal for a directive and recognises the major growth potential in terms of employment in these sectors, especially in the future Member States, which could help the Union to achieve the objectives set out in the Lisbon Strategy in 2000. At the same time it takes account of the growing trend towards outsourcing, especially by manufacturing companies, and of the negative effects this is having on collective bargaining and the intensification of work.

3. ETUC welcomes the measures aimed at making the internal market function more efficiently and promoting the free circulation of services, as well as measures that are in the interest of workers, companies and consumers alike. Accordingly it can support:
• the measures aimed at reducing administrative costs and simplifying procedures;
• establishing 'single points of contact' to help service providers secure authorisations and with other formalities;

• the establishment of transparent, predictable procedures that are not overly time-consuming;
• measures designed to protect workers, consumers, the recipients of services or the urban environment;
• the provision of safer services of a higher quality.

The ETUC is worried by the country of origin principle
4. However, the proposals set out in the proposal for a directive are far more complex and cover a much broader range than that. This is caused by the application of the 'country of origin principle' that set down that providers are subject only to the national provisions of their Member State of origin, even though it is extremely difficult to predict all the consequences that may result. In particular, there appears to be a real risk of abuses of competition in those areas that are not harmonised Europe-wide, with negative economic and social consequences in several sectors, just as turned out to be the case in the maritime transport sector following the choices in favour of so-called 'flags of convenience'. In actual fact, these types of measures would encourage service providers to move their headquarters to the EU Member States with the lowest tax rates and social and environmental requirements. The authorities in countries with high standards would then be under pressure to lower them, with negative consequences for the environment and social cohesion. This danger is increased by the fact that the definition of Member State of origin is defined in Article 4 as the Member State "in which [the provider concerned] is established", without any further qualification. In the view of the ETUC, additional conditions are needed to prevent abuses, such as defining the country of origin in terms of the habitual residence of the enterprise and/or the place where its central administration is established or the place where the principal place of business is situated (for a similar approach see Article 4 of the 1980 Rome Convention on the law applicable to contractual obligations).

5. Furthermore, the provisions of the proposal for a directive seem to contravene not only Article 50 of the Treaty (which states that service providers may temporarily conduct their business in the country where the service is provided, under the same conditions as those imposed by the country in question on its own nationals), but also Article 2 of the same Treaty, which stipulates that the Community should endeavour to promote a high level of employment and social protection. The provisions of the proposal for a directive also run counter to the case law of the European Court of Justice which recognises the right of Member States to adopt restrictive measures if doing so serves the general interest.

The ETUC is opposed to a calling into question of the national healthcare systems
6. Against this backdrop, ETUC reiterates the importance of Services of General Interest (SGI) for the development of the European Social Model in terms of equal opportunities for citizens, social cohesion and the implementation of the Lisbon Strategy. The Commission failed to support a framework directive on SGI, contrary to the ETUC's demands. Yet now, paradoxically, with the new proposal for a directive, the Commission now appears to find itself able to write a wide-ranging directive of vast scope on services in general in the internal market that imposes certain basic, harmonised, high-quality requirements at European level. In the absence of a clear definition of SGI, this project is certainly premature and risks the serious hindrance of their running in those countries where they are the most developed. In short, for ETUC there is no longer any reason to oppose the demands it has been making regarding a legal framework, which the European Parliament also demanded on 14 January 2004. If the European Commission is not able to deliver this, the ETUC demands a legislative moratorium concerning liberalisation until the European Commission is in a position to deliver a framework proposal on SGI.

7. In particular, the proposal for a directive sets out regulations governing easier access to health care, especially care provided in another Member State. These arrangements are intended to constitute a response to the rulings of the european Court of Justice. However, the service relationship in the health care sector does not function on a simple 'client-provider' basis and cannot be reduced to such a simplistic scenario. It brings into play the State, which itself pays for such services as well as acting as their 'regulator', in the name of other fundamental priorities, such as public health. Following this proposal for a directive would amount to the de facto deregulation and privatisation of health services and create even greater legal uncertainty. Consequently, ETUC is asking the Commission to exempt health care services from this proposal for a directive and instead deal with them in a specific framework directive that affirms the principles of solidarity, accessibility, universality and continuity.

The ETUC demands priority to be given to the improvement of labour law }}
8. According to the draft text, all the ‘matters covered by the Posting Directive' are excluded from the country-of-origin principle. Moreover, the preamble states that the Directive does not aim to address issues of labour law as such. However, in the view of the ETUC the proposals do have repercussions in the area of labour law, and its monitoring and enforcement. It is of major importance that the Commission provides for an additional impact-assessment with regard to possible effects in different cases of cross border working, to be able to judge potential problems. It is especially important to clarify the possible interplay with the Rome Convention 1980 and the Posting Directive, as well as the relationship with the industrial relations and collective bargaining systems in the country where the worker habitually or temporarily carries out his work, if this is another country than the country of origin of the enterprise.

9. ETUC believes that, just as in the past, in future it is essential that Member States should be able to adopt reasonable measures to guarantee the smooth functioning of their labour market and prevent potential abuses by using intermediaries, such as temping agencies. ETUC has always advocated laying down the fundamental principles governing such reasonable measures in a European framework directive that would allow temping agencies to provide their services on a basis of fair competition, without having any detrimental effect on working conditions, pay or the social protection of the workforce. It regrets that the draft of this directive is still blocked.

10. In addition, ETUC proposes not only that temporary work and the posting of workers should be totally excluded from the scope of the directive (in the same way that other kinds of services or areas are excluded, such as financial services, owing to their particular nature and the fact that they are already covered - or are about to be covered - by other Community policies), but also that the Commission henceforth set the following priorities where the regulation of posted workers and temporary work is concerned:
- The evaluation and improvement of the existing Directive 96/71/EC, as asked for also by the European Parliament;
- the adoption of the proposal for a directive on temporary work;
- the ratification of ILO Convention 181 on the private employment agencies.
This would create a general framework of protection, which could provide for an adequate basis to discuss further steps in the direction of liberalising services.

The ETUC opposes the excessive limitations on the role of member states

11. ETUC is deeply concerned by the application of the 'country-of-origin principle' with respect to the consequences for the efficiency of monitoring and protection against abuses, especially in the domain of labour law. Consequently, it is calling upon the Commission to take a closer look at the potential impact of its proposals regarding this principle. ETUC has serious doubts about the feasibility of either directly or indirectly monitoring and effectively overseeing providers of cross-border services from their country of origin, particularly in respect of measures taken by Member States to protect workers within their territory, regardless of the their origin or nationality, irrespective of whether they are employed directly or via intermediaries, by subcontractors or by service providers themselves. ETUC is already concerned about the limited scope and effectiveness of the existing posting directive. However, the proposals in the draft services directive may increase the enforcement problems. With regard to posting of workers, the Directive on one hand explicitly acknowledges the duties of the Member State of posting to carry out on its territory the necessary checks and inspections to enforce the working conditions as laid down in the Posting Directive, and to take measures against a service provider who fails to comply with these. On the other hand however, the Directive prohibits to subject the provider or the posted worker with any form of authorisation, registration, keeping of documents, thereby depriving the Member State of posting from effective tools to prevent and monitor potential abuses. Although the Directive in addition obliges the Member State of origin to assist the Member State of posting to ensure compliance with the applicable employment and working conditions, which in itself is a positive proposal, this can hardly be seen as an equivalent substitute.

12. The proposal for a directive suggests that it is the country of origin which will have to check that nationals from third countries deployed by service providers - regardless of whether or not they are EU citizens - fulfil residency requirements and are legally employable as stipulated in the legislation of the country of origin (for example, a Polish agency posting Ukrainian workers to Belgium). The host Member States cannot force the worker or service provider in question to undergo any preventive checks! These proposals will seriously hamper those Member States which wish to take steps against the abuses associated with the posting of undocumented migrant workers on their own labour market. Moreover, a global shortage of financial, logistical and human means dedicated to the labour inspection services persists.

13. ETUC holds the view that systems of authorisation cannot be discriminatory and must be objectively justified. All the same, it is essential to proceed with caution when revising existing regimes, because their reduction would call into question both regulated activities and activities that are subjected to approval or licensing procedures in several countries. Moreover, care must be taken to respect the general interest and public health, for example regarding the sale of drugs over the Internet and the manner in which pharmacies work.

14. Where the nature of market services is concerned, especially those aimed at consumers, ETUC stresses the key role played by the Member States in adopting legislation to guarantee the quality of services in terms of their access, safety, contracts and information about the prices and features of the service on offer. In this connection there is no justification behind the general proposal to limit the role played by the Member States to those aspects concerned with information. Furthermore, ETUC believes that voluntary instruments can play a supporting role solely with respect to legislative requirements and that their wording cannot be left entirely up to the service providers; instead, the needs of all service recipients and the opinion of the workforce representatives in the sectors concerned must be taken into consideration.

The ETUC is in favour of quality employment
15. What is more, ETUC underlines the considerable extent to which services depend on the quality of employment, not just with respect to workers' skills, but also in terms of job security. The quality of services can be improved by developing a conventional and legislative framework at European level that guarantees temporary workers the same treatment as that received by the employees of the company in which they are deployed.

16. ETUC is happy that the Commission, in its Communication dating from December 2003, recognises the importance of lifelong learning and the updating of workers' skills as key parameters determining the competitiveness of service providers. In this connection, it expects from such a proposal for a directive guidelines that foster and stimulate the learning process and boost the value of the contribution made by workers.

The ETUC demands proper consultation and a more in depth impact analysis
17. The proposal for a directive is based on the potential for growth and the creation of jobs, which are deemed both substantial and attainable thanks to the introduction of the proposed measures. However, the real consequences of previous liberalisations have fallen far short of the projected promises associated with them. Indeed, trade union research shows that they have led to the destruction of existing jobs and the erosion of social cohesion. The Commission must, before adopting the directive, prepare a more in depth assessment of its impact in these areas, working with trade union participation.

18. The directive will have major socio-economic consequences for employers and workers in several sectors. It is highly regrettable that their representatives were not consulted when the draft was drawn up, even though several articles of the text refer to the "interested parties" who ought to be consulted. ETUC demands that the unions be specifically included in these consultations. It is inadmissible that the social dialogue should be totally ignored in areas that are especially vulnerable to restructuring.

19. The analysis of the impact of this proposal for a directive does not sufficiently address the issues raised above. In any case, many items still need to be clarified. Consequently, ETUC cannot support the draft directive as it stands. In addition, via the consequences that the proposal for a directive will have (some of which were mentioned above), the proposal for a directive would threaten both to call into question existing collective agreements, including those concluded at the sectoral level, and question the provisions of existing national labour codes. Consequently, in a nutshell, it would lead to even more 'deregulation' and 'social' insecurity, and all in the name of a hypothetical benefit in terms of jobs. The ETUC demands stronger social guarantees for the workers (in particular through the directives on posting or temporary work) and the quality of services of general interest for the european citizens before continuing with this project. ETUC therefore expects its concerns to be taken more seriously and a clearer answer to be given to its demands.