At the service of market liberalization in the EU: From Sacchi to Uber

Currently accounting for over 70% of employment and some 40% of the value of exported goods at the EU level, services markets have received astonishingly little attention in the literature. The same goes for the EU Services Directive (Dir 2006/123) (the Directive) which has largely been ignored by scholars, although its implementation by the EU Member States is in full swing.

In an article that has just appeared in the Yearbook of European Law, I critically review the evolution of services liberalization within the EU since its inception, including the first ten years of judicial interpretation of the Directive. The article offers a one-stop shop for scholars and practitioners who want to learn the most important constituent elements of the freedom to provide and receive services at the EU level. It takes stock of a fragmented regulatory pathway which is in stark contrast to the continuous thriving of European services industries and the increased ‘servicification’ of the global economy. In a previous article, I argued that a more considerate coordination between internal and external strategies for services would be beneficial for the EU.

In my Yearbook of European Law article, I advance three interconnected arguments. First, the Directive is an important legal instrument, which, if used wisely, could further boost integration in services and establishment of service providers. Second, the implementation of the Directive is bringing about a greater trust amongst regulators in different Member States the results of which we are yet to fully capture. Third, the effectiveness of the Directive will still depend on the discretion and capacity of public and private regulators to allow foreign competition amidst the remaining regulatory divergence that the Directive allows.

The article points to the long and winding road that led to the full recognition of the broad concept of ‘services’, starting with the famous Sacchi case in 1974, in which the Court decided to apply the freedom relating to services and that to goods to cover the transmission of television signals and trade in tangible objects such as equipment, respectively. Thus, while free movement of services was initially interpreted in a very narrow manner by the CJEU to only cover intangible assets, it was subsequently recognized as a first among equals; indeed, in cases like Schindler in 1994, the Court found that the freedom to provide services alone allows for the assessment of national measures (in this case, on the prohibition of lotteries) that touch upon both goods and services. Moreover, by blurring the boundaries between internal and cross-border situations, the Court has gradually created, to the benefit of for-profit services, an economic space that is protected from the distortions created by the market (through self-regulation) or Member States (via legislation or other administrative practices). Later, in Säger, the Court focused on whether there is a restriction on the free movement of services that hampers market access, which is a test very similar to the one that was applied in the area of goods at the time. This effects-based approach unfolded in the period that followed. By now, one can safely say that the Court considers commercial conditions in the home market as a benchmark against which the measure at issue is required to be examined. Having said this, absent (full) harmonization, the Court still leaves room for regulatory diversity when applying the proportionality test (for instance, in the case of health or gambling services).

The Services Directive tellingly pinpoints the plurality of tools, objectives and interests in the field of services which antagonize any call for regulatory convergence and the conventional wisdom of the common triptych of market access, mutual recognition or equivalence, and harmonization. The Directive acknowledges the presence of a complex landscape of services regulation, whereby market access, mutual recognition and harmonization (all three in their managed form), soft coordination mechanisms and delegated authority to private parties co-exist and co-shape the European services market. However, if the Directive is to ensure a seamless experience for consumers—as now seems to be the objective of flagship initiatives such as the digital single market agenda—then, in an increasingly transformed landscape where private and public trade restrictions abound, a new approach that takes into account new technologies, economic transformations and global dynamics is necessary.

In the last part of the article—and after discussing the connection between the Services Directive and the Professional Qualifications Directive (Dir 2005/36), something that existing literature largely omits—I offer an assessment of the Services Directive almost ten years after its implementation. At the outset, a clear pattern appears to permeate the CJEU’s case law (most of the times, delivered by the Grand Chamber), suggesting that a broad interpretation of concepts enshrined in the Directive is, in the Court’s view, consistent with its objective to remove restrictions on the establishment and supply of services thereby contributing to the completion of a genuine and competitive internal market for services. While such a stance may be understandable, I argue that, in many cases, the controversy surrounding basic concepts and rules of the Directive deserve a more thorough analysis than the one offered to date by the CJEU.

The X and Visser case is, arguably, the most well-crafted by the Court and of a high importance because it confirms that most, if not all, ‘selling arrangements’ as defined in Keck (in this case, a municipal zoning plan reserving an shopping area for retail trade in bulky goods only) would now fall under the Directive. More recently, the Uber case constituted a missed opportunity for the Court to embrace innovation since it failed to find that the service Uber offered was a disruptive, information society service. In doing so, it would have put pressure on EU Member States and the EU Commission to kickstart a comprehensive discussion relating to consumer protection and labour-related issues arising from disruptive models in supplying services. I conclude this discussion by noting that, while the Court takes a bold, expansive view in interpreting the provisions of the Directive, to date it has maintained a rather conservative view regarding social or healthcare services, thereby perpetuating legal uncertainty with respect to borderline cases. Still, I find that the first period of implementation of the Directive confirms that the controversial secondary legislation has sufficient ‘teeth’ to instigate increased market access.

Panagiotis Delimatsis is Professor of Law and Director, Tilburg Law and Economics Centre (TILEC), Tilburg University, the Netherlands.