Advance veto power would affect a huge range of services

If it were up to the Commission, it would have advance veto power over new draft motions made by national parliaments and city councils that affected ‘services’. An extraordinary range of sectors – at least 79 – are included, covering areas as diverse as child care, chimney sweeping, legal advice, and ‘prostitution services’. This is the essence of the Commission’s proposal on a new ‘notification procedure’, an initiative to secure implementation of the services directive (aka ‘the Bolkestein Directive’ after the Commissioner who drafted it).

The proposed EU directive would strengthen the procedure by which local and national governments send information to the Commission about new laws and measures. While an older and less restrictive notification procedure already exists, the Commission now wants this to happen three months in advance. Corporate Europe Observatory sent a formal request for more information and though the details remain secret, we do now have a list of the sectors covered by ‘notification’ between 2010 and 2015.[1] Below we look in more detail at the tremendous impact a Commission wielding veto powers could have.

Crucial sectors affected

Public services that all citizens rely on and whose functioning is often crucial to everyday life would be affected. These include child care services, water distribution, educational and training services, health services, gas and electricity distribution.

Also affected are services that play key roles in the legal system, such as lawyers, auditing, tax consultancy, liquidation, and accounting; sectors relating to jobs, such as employment and recruitment agencies would also come under the procedure. Other notifications concern matters relating to jobs, such as employment agencies and recruitment agencies.

But our information is limited. While Corporate Europe Observatory has requested to see the actual documents, not just a list of sectors, so far the Commission has refused.[2] However, it is still worth taking a look at what impact a veto power by the Commission could have over measures and laws in services. To do we need to examine articles 15 and 16 in the Services Directive.

Vaguely defined limits

According to article 15, member states should be careful about taking measures such as imposing a minimum number of employees, fixing a maximum price, requiring a company to have a specific legal form, or to impose a quantitative or territorial limit.

Article 16, the most far reaching paragraph in the directive, is a different animal. According to this article, member states simply cannot make the exercise of a service activity “subject to compliance of any requirements”, unless they are “necessary” and “proportionate”. And the definition of ‘necessity’ is limited, so to invoke this clause the measure would have to be about “public policy, public security, public health or the protection of the environment”. These would be open to the Commission’s interpretation, of course. And should a new law or measure be created in the name of say, mere ‘social justice’, it would be more difficult to make the argument.

What this could lead to

It can be difficult to assess whether single market rules on services are being adhered to in full, and there are many examples of disputes between member states and the Commission on this very issue. What the proposal on a new notification procedure does is shift the balance of power decisively in favour of the Commission.

The Commission is unwilling to release information on what specific decisions they would be about. We can get a list of sectors concerned but information on what decisions were made and on what topic.  This is not conducive to transparent decision-making and difficult to accept in that the directive could be decided on soon. But looking at the legal text and the list of sectors covered, we can construct a few hypothetical but realistic examples to give a sense of what is at stake:

• A municipality wants to impose a limit to giant supermarkets to secure small shops in the city. The Commission turns it down as it believes this constitutes an unjustified ‘quantitative limit’.

• A member state decides not to allow more hotels on the coast to protect a common good. The Commissions blocks it as this would constitute a ‘territorial limit’.
• A municipality is concerned about private childcare companies running cheap services thanks to using minimal staff. It adopts a measure requiring a minimum ratio between teachers and children – but the Commission rejects it because setting a minimum number of staff is not allowed.
• A city council wishes to prevent the spread of energy poverty by creating maximum electricity prices for vulnerable citizens. The Commission responds without hesitation that putting a cap on prices is not allowed without proper justification and believes no such justification has been presented.
• A gas company is responsible for a significant proportion of a major European city’s greenhouse gas emissions. The city council opts to strengthen a handful of standards to reduce emissions. But the Commission says no. While it acknowledges something along these lines might be permitted, the Commission believes these specific measures are ‘disproportionate’.
• A member state is seeking a way of securing its water supply and the reasonable price of drinking water: it has identified ‘non-profit companies’ owned by citizens or several municipalities together, as the most practical and just way to deliver this. But the Commission says no, as they are not allowed to require a specific legal form of a company.

Better not let the Commission decide

In our hypothetical scenarios, while it might be the case that some would be allowed, the key point is that it shouldn’t be for the Commission to decide in the first place. The Commission is extremely eager to sideline any other criteria beyond concern for the single market, and giving it the power to veto in advance is very dangerous. Moreover, the Services Directive was never supposed to be implemented in this top-down manner. Let’s keep it that way.