EU Law, Scope Of The Service Directive


Starting and running a business in the European Union had been quite a complex process especially for small and medium sized businesses until the Services Directive of 2006 was approved. For example, entrepreneurs were required to have more than 40 authorizations as well as other formalities from the local, regional and national bodies. Even though the documentation was different, they would almost more or less the same purpose since they largely overlapped in their requirements and regulations as far as the start and management of any given entrepreneurship was concerned. This explains where there was a need to change the way businesses operated within the EU to ensure that there were no unnecessary barriers, either administrative or legal, to trade. For this reason, the Services Directive 2006/123 was introduced in 2006 to take care of such problems, with a sole aim of ensuring that services markets within the jurisdiction of the European Union had full potential. Such objective would be achieved because the Directive championed for the elimination of any administrative and legal restrictions that affected free trade. By such actions it would have been possible for consumers and businesses to offer, as well as use services within a single market scenario. The essay provides an in-depth analysis of the EU law, and the scope of the Service Directive.

Background to the Services Directive

The Services Directive was established with the aim of ensuring that there was effective facilitation of freedom of providing services and freedom of establishment, as well as to offer service providers the opportunity to enjoy legal certainty as provided for in the European Community (EC) Treaty. Generally, the Directive expounds on the case law that surrounds the above freedoms. However, there are a few laws introduced by the Services Directive that touch on the need to use point of single conduct to communicate between applicants and all involved authorities, the requirement to abide by all the formalities and other related procedures by electronic means, as well as new rules to govern the prohibitions of advertising. Even though the adoption and implementation of the Services Directive 2006/123/EC was faced with a lot of controversies, careful consideration of its deliverables has showed that such criticisms are unwarranted because the Directive did not bring any new innovations.

The implementation and background of the Services Directive can be traced back to the economic reform process that was instigated by the Lisbon Strategy, which was focused on making Europe a very competitive knowledge-based economy by the year 2010. The strategy targeted change in the delivery of service and the freedom of the delivery among the services provider because services contribute a large percentage to the economy of the European Union, with much of such contribution believed to result from competitive service markets. Therefore, the creation of a single market that was genuine and that would help in the achievement of a completive Europe, there was need for guidelines that would be followed to ensure that certain freedoms were granted. For this reason, a direction by commission was proposed that sought to do away with any barriers that tended to prevent businesses from providing different services or even getting established in other states that had the EU membership. As such, it can be seen that there was a need for competition stimulation, and cross-border economic activity’s fostering for purposes of providing a wide range of choices, improving quality of services and products, as well as reducing the prices offered on services both for enterprises and consumers. In addition, such objectives sought to open avenues of innovation as a way to improve competitiveness in the area and create jobs that were of high quality. Initially, numerous barriers within the internal market prevent many businesses in the services industry from expansion nationally, especially the small and medium sized enterprises. In effect such barriers not only undermined the specific enterprises providing services within EU, but also the growth and development of European Union given that the manufacturing sector of the region given that it depends largely on quality services. Such barriers and lack of freedom adversely affects the economic growth of EU in that the barriers make the region lesser attractive as far as foreign investment is concerned. In addition, such barriers tend to push consumers to seek for services from potential offers outside of EU.

Scope of the Service Directive

The Service Directive which was a collaboration of the Council and the European Parliament with the aim of improving the operations of the internal market was introduced in 2006. According to the Commission the Service Directive would help in realizing a genuine situation in the Internal Market as far as services were concerned. Based on the provisions of the Service Directive, a lot of criticism arose since there were high expectations on the scope and deliverables of the Directive. However, the Service Directive has been considered to apply to an insignificant part of EU as far as service provision and the subsequent freedom of services movement is concerned, with the rest being left under the governance of the EC Treaty especially articles 49 and 43. One of the areas strongly criticized about the Service Directive is the fact that it does not lay out strategies towards harmonization of the national laws in the context of services provision. Instead, the Directive only sets out conditions that can be used in the future to harmonize the national laws governing services in EU.

The Directive is founded on the concept of free movement of services outlined in the European Court of Justice. As such, the significance of the Service Directive of 2006 is that it tries to identify a point of equilibrium as far as the EC Treaty and its Article 14 (2) is concerned that provides a definition of internal market, as well as social development and sustainable economy. This is evident in the Service Directive preamble whereby it outlines that any activities within the service industry ought to have a great contribution towards fulfilling tasks outlined in the EC Treaty 14(2) to achieve equality and social protection among men and women, and enhance competitiveness in the market.

A lot of concerns have been expressed with regard to the possibility of a regulatory policy achieving convergent economic performance, high degree of competitiveness, improved standards of living and quality of life, equality and social protection for men and women, sustainable development that is balanced, as well as effective social and economic cohesion for members of the EU . This explains why the Service Directive adopted an opened texture and provided conditions that can be used to resolve tensions regulated by the Directive. However, the Service Directive provides grounds in which contradictory interests among member states can be solved amicably through elimination of national barriers on trade.

Thus the scope of the Service Directive is based on a number of activities. First, the Directive provides delimitation on areas of free movement as far as services are concerned in the internal market based on sectoral and other specific areas. Secondly, the Service Directive provides coding to laws that have existed as provided for by the European Court of Justice, which is used to provide interpretation of different EC Treaty’s provisions. On the other hand, the Service Directive has been instrumental in creating an obligation that simplifies procedures of administration as far as free movement of services is concerned and provides an avenue to exercise transparency of such procedures. As such, the Directive introduces criteria that can be followed to introduce national authorization schemes within the internal market, and puts in place conditions and other evaluation methods that measure the effectiveness of such schemes on free movement of services. Lastly, the scope of the Service Directive allows the regulation of administrative cooperation and interrelation between member states and the European Union. Considering the above areas covered by the scope of Service Directive, it can be concluded that the scope is divided in material, personal and territorial scope.

Personal and territorial scope

The scope of the Service Directive 2006/123 takes consideration of the total member states along with other EEA States, which limits its application in third country nationals. In addition, the scope of the Directive focuses on any legal individuals according to the definition enshrined in Article 48 under EC Treaty, as well as established within a given state that has membership with the EU who is a service provider of recipient. In the context, legal persons refer to all individuals that are under the Member State’s laws without putting into consideration their legal form. The implication of this is that, the scope of the directive applies only to member states and does not take effect on businesses and providers of a third country but who have established businesses in member states. In addition, based on the provisions of article 4(3) the scope the of the directive extends to recipients-natural individuals with the nationality of member states or even recipient in this case can be used to refer to persons that are beneficiaries of Community acts’ rights.

Material scope

The concept of free movement of services as provided for in Article 2 (1) takes consideration of services that are offered by service provider within a member state. Thus, service providers outside the member states are not considered by the Directive. Service can be considered to be a system that satisfies a given public need as in the case of communications, utilities, or even transport, while it can also be used in the context of the act of help provided by one individual to another. Generally, a service refers to a worthwhile effort, deed or action that is carried out to provide satisfaction to a given need or even as a fulfillment of a demand. According to the provisions of the EC Treaty along with the European court definition, services in the context of the Services Directive can only termed as services if they are in line with the definition provided by the Treaty with respect to the fact that services are usually provided for remuneration. Service providers, on the other hand are defined as the individuals and/or business entities offering given services to other individuals and businesses. In this context, the crucial feature of remuneration is based on the fact that some amount of consideration is given as far as the service in question is concerned, and that it is usually based on the agreement of service providers and the recipients. However, according to article 50 of the EC Treaty there is no requirement that services ought to be paid for.

Nonetheless, it is important to put into consideration that while the Directive focuses on the free movement of services, it has no effect on goods. On the other hand, the Directive excludes non-economic activity from its scope, as well as non-discriminatory rules of the game. Based on the Directives Article 2(2) and 2(3), the directive has a number of services sectors that it does not cover including financial services, SGIs, temporary work agencies, networks and electronic communication services, private security services, as well as any other services within the transport sector, which are not covered by the EC Treaty’s Tittle V. Other exclusions include social services that deal with the provision of services such as childcare, social housing or even provision of support to individuals in need of either temporary or permanent needs.

While the Services Directive has restrictions and exclusions, its application is limited to a given scope. For example, the Directive does not apply to cases involving general economic interests or the liberalization of such services. Second, the Directive does not apply for services that are meant for the private or public parties, or even in the process of privatizing public entities that offer given services to various recipients in the market. The Directive does not interfere with monopoly businesses that have been mandated to offer different services by a member state. Additionally, the Service Directive does not interfere on matters and measures directed by Community law either at national or community levels with regard to protection of linguistic and/or cultural diversity. According to provisions of Article 3(2), the Services Directive of 2006 does not interfere with private international law or their application in the internal market.

Evidently, the application of the Service Directive 2006/123 largely depends on the provision of the EU law. Usually, in any setting directives are often subordinate when compared to the primary law. Schauer attributed this to the fact that directives act as sources of secondary community laws as provided for by the Treaties. For this reason, the Service Directive necessitates the application with accordance to the provisions of the EC Treaty as well as with respect to any other provisions that are relevant to the subject of free movement of services addressed by the Service Directive 2006/123. In addition, the application and interpretation of the Service Directive should be based on the EC Treaty’s provisions and the European Court of Justice’s case law.

In addition, if services are outside Service Directive’s scope, they are also considered within the context of free movement according to the provisions of EC Treaty (Grassie, 2006). The implication of this is that member states ought to put into consideration the provisions of both the EC Treaty and the requirements of the Service Directive. As such, even if scenarios fall within the Service Directive’s scope, the applicable case law and the EC Treaty ought also to give the relevant interpretation of the provisions of the Service Directive to ensure that it is within the recommended course of the law. To clarify the contradictions that might occur from the requirement to consider the case law, the EC Treaty provisions alongside the Service Directive, article 3 (3) of the Directive points out that member states are obliged to abide by the provisions of the Service Directive 2006/123 in line with the appropriate requirements of the EC Treaty.

In a case where some scenarios are not found within scope as required by the Service Directive of 2006, it would be legally binding to apply Articles 43 and 49. The implication is that there will be creation of personal rights, which require protection from the national courts in all aspects. Thus, the mechanism used by the judicial service as far as the free movement of services is concerned provides that situations that fall within the EC Treaty’s scope are outright not legal as far as the Community Law is concerned. However, the ECJ’s practices point out a national measure can only be considered to fall within the jurisdiction of the national law as mentioned above if the measures are likely to cause hindrances to the financial freedom according to the provisions of the EC Treaty. However, for cases that do not fall within the scope of the Service Directive, mechanism provided for by the EC Treaty and case law of Justice is applied without changing anything.


From the above analysis, it is evident that the Service Directive 2006/123 has been highly controversial. However, based on a general perspective, the provisions of the Service Directive as well as the subsequent impacts that the provisions might have on the national law have no difference to any other directives. The service Directive has several effects on the member states such as the general obligations where a lot of consideration is based on two periods-one that follows the directive’s effective date though prior to the expiry of implementation period, and another period that follows the expiry of the period set to implement the directive. These two periods are defined differently within the scope of the Directive. For example, the scope of the Service Directive obliges member states not to interfere with the process of achieving the directive’s objectives during the first period. In addition, such obligation has also been provided by the ECJ and takes into consideration the national courts also whereby they are required to interpret the law as it should irrespective of whether or not a member state has honored the implementation request within the provided implementation period.

Generally, the application of the Directive has been limited in terms of scope due to the interference and requirement to consider provisions of the EC Treaty. In addition, the Directive does not apply to a number of sectors and situations. For example it excludes coverage on goods and non-economic activities. Evidently, the Directive only applies to scenarios that are not governed by any other sectoral rules.