Free movement of goods within the European Union (EU) has been long established and accepted. Free movement of services was also part of the plan for the EU. Despite accounting for 70% of the GDP of member states, it has not been so easily secured as free movement of goods. As a result, the European Parliament and Council have adopted the Services Directive.
Who is affected by the Directive?
In essence, the Directive applies to all services that are provided for remuneration. There are a few limited exceptions and these include financial services, healthcare and broadcasting. The Directive therefore applies to professional services and covers services provided by accountants, lawyers, actuaries and others.
What does the Directive aim to do?
The Directive is designed to tackle continuing obstacles to the effective exercise of two basic freedoms guaranteed by the EU treaties:-
- The freedom of establishment, i.e. the right to set up in business on a permanent basis in any member state in order to provide services to the consumers in that same member state; and
- The freedom to provide services to a consumers located in another member state, without having to be located in that member state.
Consumers have become increasingly used to purchasing goods from abroad. The Directive seeks to facilitate a similarly open market in the provision and purchase of services, including professional services, and to tackle some of the barriers to the cross-border development of the services market within the EU.
How does the Directive tackle these barriers?
A number of approaches are adopted by the Directive in an attempt to secure its twin aims.
Chapter 3 of the Directive, for example, addresses freedom of establishment by dealing with what are described as "authorisation schemes". It seeks to control the extent to which member states can impose legal or regulatory barriers to accessing or offering the services. All such "authorisation schemes" operated by member states are required to conform to certain basic standards, as to non- discrimination, transparency and proportionality.
The Directive also requires member states to review such requirements as they have in place applicable to the provision of services and, in certain cases, to ensure that these are non-discriminatory, necessary with reference to the public interest and proportional. These may include a requirement that service providers take a specific legal form, or a limitation imposed in terms of the minimum number of staff required in the provision of a service. Other specific types of requirement are prohibited by the Directive, including any requirement to take out professional indemnity insurance, where sufficient cover is already held in another member state.
How does the Directive impact on accountants?
The accountancy profession is not so geographically specific as, for example, the provision of legal services. It has therefore been able to develop multi-national practices more readily than some of the other professions. However, changes to be introduced by the Directive are aimed at opening up this market.
Article 24, for example, requires member states to remove limitations on professional firms to freely advertise their services. Article 25 is another example and it seeks to prohibit restrictions on the establishment of multi-discipline practices. This is particularly topical in the legal profession with the advent in the UK of the concept of Multi-Disciplinary Practices, in light of the Clementi review. It may be likely to have an impact on a range of professions across the EU.
When does the Directive become law?
Member states are required to implement the Directive by 29 December 2009. Each member state is required to adopt their own rules to comply with the Directive.
Where can I find out more about the Directive?
The European Commission and The Department for Business, Enterprise and Regulatory Reform.
Ben Kemp is an associate within the Professional Regulation Group at UK law firm Shepherd and Wedderburn