After two years of debate in the European Parliament, the Services Directive finally came to a successful first reading when it was adopted at last week’s Strasbourg session by 391 votes in favour and 213 against, with 34 abstentions.

What saved the day for this controversial directive was a compromise between the two biggest parliamentary groups – the EPP-ED and the PES. This secured the simple majority needed for it to go through to the next stage, even if around 70 MEPs from these two groups still voted against it.

But with over 400 amendments the adopted text has been described as a “watered-down” version of the original draft. Or as one socialist MEP pointed out, it was “turned upside down”.

Or was it?

But, what is the Services Directive?

The Bolkestein Directive

The ‘Directive on Services in the Internal Market’, infamously known as the Bolkestein Directive (after the internal market Commissioner who proposed it), was originally meant to boost the Lisbon Agenda of 2000. This, you might recall, is the agenda that aimed to make the EU “the world’s most dynamic and competitive economy” by 2010. With four more years to go, one can hardly wait.

The directive’s principle aim is to create a single market for services. It does this by minimising the regulatory authority of the host countries over service providers from other countries. In other words, a company or individual that provides a service in one member State can provide the same service in any other member State. This is what the so-called principle of “freedom of establishment” means.

A more contentious principle is that of “country of origin”, which means that service providers are temporarily allowed to “test the market” and operate in another country under the labour laws of their own country. To give a simple example, a Slovak electrical engineer would be able to set up shop in Malta and operate under Slovak labour laws without the need to register with the Maltese authorities; and vice-versa, of course.

ECJ rules over ‘country of

origin principle’

We are now assured, however, that the “country of origin principle” has been removed by the parliamentary amendments.

But is this actually true? Is the “country of origin principle” really gone for good?

As pointed out by several MEPs who voted against the directive, if the “country of origin principle” is gone, why was it not replaced by the “country of destination principle”?

Indeed, if neither of these principles applies, which country’s laws should apply?

That decision would be left to the wisest of EU institutions: the European Court of Justice (ECJ). And if precedence is any measure of the future, the ECJ would largely decide according to the ‘country of origin principle’. The ECJ, lest we forget, cannot decide in any other way but “in the spirit of the Union”; and so it does. National laws become illegal whenever the ECJ decides.

So this takes us back to square one. The “country of origin principle” is not gone after all, simply hidden within the realm of the EU judicature. It would be up to the judges to liberalise the already federalised internal market.

‘A race to the bottom’

By disallowing member States to regulate service providers coming from other countries, even if for a definite period, the “country of origin principle” effectively prohibits the host country from executing its laws on an omnipresent segment of the services that are provided within its market. In other words, different laws would apply to different people in the same country, and this applies to both employers and employees. So a Slovak company may operate and provide a service in Malta, but its workers and their rights would be governed by the labour laws of Slovakia, not of Malta.

This directive encourages competition among workers across the EU for lower wages, less rights and lower working conditions.

This is what leftist critics of the Bolkestein Directive meant when they described it as “a race to the bottom”. In other words, it would be a case of “social dumping” on a pan-European scale.

For a small island-state like Malta the benefits are anything but clear. Given that no social impact studies were made, our government must be acting on pure faith and hope (no charity here).

Otherwise, I have yet to witness a flicker of EU inspiration from this government.

The amended directive

So, what is still in and what goes out from the Bolkestein Directive after Parliament’s adopted amendments at this first reading?

Struck off from the original draft were social services and services relating to culture, education and public health care (not private). Exemptions were also made for electronic communication, public transport, legal services, lotto, public authorities, broadcasting, employment agencies, financial services, gambling, tax services, professions and services of economic interest.

The adopted text retains services relating to water supply, electricity, sewage and waste management, postal services, all types of consultancy, car rentals, taxi service, funeral services, trade fair organisation, certification, business services, tourism, leisure, sport centres, real estate, entertainment, advertising, commercial agents, maintenance, repairs, security services, construction, architecture, distributive trades, and the rest of all minor services.

Significantly, an amendment that aimed to allow member States to restrict service providers on grounds of consumer protection and social policy was rejected. So whereas the professions, such as lawyers and doctors, are protected, ordinary entrepreneurs and workers are not.

This is no surprise. As one MEP from the centre-right EPP-ED was quoted by euobserver.com, “three quarters of the amendments that reshaped the (Commission’s) proposal came from our side, in close cooperation with our (liberal) ALDE and (right-wing) UEN allies.”

Indeed, the Bolkestein Directive remains an anti-socialist directive. It promises economic growth, but fails to consider the social impact. It declares itself for free trade, yet it is definitely not for fair trade.

It is now up to the Council, made up of the governments of member States, to adopt the European Parliament’s amended version. If not, any amendments by the Council would require a second reading by Parliament.

It is at the Council stage, therefore, that our government should be seen to act and make a stand. But to make a stand one needs to have studied the EU. A sense of direction would also greatly help. As matters stand, our government can neither stand nor sense.

[email protected]

Sharon Ellul Bonici is currently working in the European Parliament in the political field.