THE SERVICES DIRECTIVE – A PAPER TIGER?

Jacob Öberg*

On the 4th of November 2009, the Swedish Parliament passed the government bill on the
implementation of the Directive 2006/123/EC of the European Parliament and of the Council of
12 December 2006 on services in the internal market (“the Services Directive1”).2 The
amendments entered into force on the 27th of December 2009. This means that a new act has
been introduced, intended to realize the much debated Services Directive.3 In this article, the
author wishes to offer a general description of the current legal situation concerning the free
movement of services, the significance of the Services Directive as well as a thorough analysis
of certain specific issues related to the legal consequences of the Services Directive. In order to
facilitate a deeper understanding of the legal development, I have also incorporated sections
describing the political debate and the financial considerations affecting the legal development
of the free movement of services. For the sake of clarity, the numbering, concepts and terms
employed in the new Lisbon Treaty4 are used throughout the article.

1. FREE MOVEMENT OF SERVICES AND ARTICLE 56 OF THE TFEU5

The free movement of services is one of the cornerstones of the European legal cooperation
and constitutes one of the four freedoms (goods, services, capital and persons), enshrined in
the original Treaty of Rome of 1957.6 Article 56 of the TFEU provides that: “Within the
framework of the provisions set out below, restrictions on freedom to provide services within the
Union shall be prohibited in respect of nationals of Member States who are established in a
Member State other than that of the person for whom the services are intended.” The prohibition
of discrimination as regards services in Article 56 is a codification of the equal treatment
principle in article 18.1 TFEU and has direct effect.7 Article 56 applies for public as well as
private affairs8 and shall be adhered to not only in the lawmaking process but also in legal and
actual practice. The prohibition in Article 56 against national restrictions concerning the
possibility to provide services does not only include rules directly or indirectly discriminating
foreign legal subjects from their domestic equivalence, but also rules that generally makes it
more difficult to access and perform the business activity at issue.9 A national measure

* LLM, associate at Delphi law firm. A special gratitude is directed to attorney Henrik Bengtsson which has given valuable comments
and opinions.
1
Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market
(EUT L 376, 27.12.2006, p.36, Celex 32006L0123).
2
See http://www.regeringen.se/sb/d/11856/a/135049. Web site verified 13th of December 2009
3
Lag 2009:1 079 om tjänster på den inre marknaden.
4
Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon,
13 December 2007 (EUT 2007 C 306/1)
5
Treaty on the Functioning of the European Union (TFEU)
6
See Bernitz, U, Kjellgren; A, Europarättens grunder, 2007, page 254, Bernitz
7
See Case C-33/74, Van Binsbergen v Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid, [1974]; ECR 1299. The principle
of direct effect, i.e. that EU law may provide individuals with rights which they may invoke before national courts, is not explicitly
mentioned in the TFEU. The principle of direct effect was first stated by the European Court of Justice (ECJ) in the Van Gend en
Loos case of 1962. The ECJ found that “the spirit, general scheme and wording” of the relevant provision in the EC Treaty implied
that the provision could be acknowledged direct effect and hereby create individual rights which the national courts must protect.
See Case 26/62, NV Algemene Transporten Expeditie Onderneming Van Gend en Loos v. Nederlandse Administrate der
Belastingen [1963] REG 1, paragraph 5. See the discussion on direct effect below in section 7.
8
See Case C-36/74, Walrave and Koch, [1974], ECR 1405.
9
See Case C-384/93, Alpine Investments [1995] ECR I.-1411, paragraph 35

Electronic copy available at: http://ssrn.com/abstract=1686995

constituting an obstacle to the free movement of services may thus be prohibited irrespective of
whether the measure is discriminating or non-discriminating.10

2. WHAT OBSTACLES ARE THERE FOR THE REALIZATION OF A TRUE INNER MARKET
FOR SERVICES?11

Despite the fact that the ECJ on several occasions has rejected national rules obstructing the
free movement of services, the general opinion is that the achievement of the internal market is
still far away.12 There are still trade barriers for services providers, preventing them from
providing services or conducting trade across the borders, as well as barriers preventing service
recipients from receiving the service in another state than the state of residence.13 Even though
previous programs for the internal market have rendered it possible to successfully set aside
physical and technical barriers, these have been superseded by legal impediments consisting of
national, regional and local rules and regulations. In addition, new restrictions arise from the
actions of local authorities, particularly from its unlimited exercise of authority or cumbersome,
non-transparent procedures primarily favoring local operators. The governments of the EU’s
Member States have, inter alia, employed the following measures in order to protect national
service providers from the competition of foreign service providers:
i) excessive health standards or bureaucratic controls which in different ways discriminate
against foreign goods and services,
ii) quantitative restrictions (on consumption)
iii) market shares reserved for national producers,
iv) selective tax policies,
v) unreasonable competence requirements within certain professions,
vi) restrictions on foreign enterprises’ possibility to set up branches and/or take control over
national enterprises and
vii) exclusion of foreign enterprises from certain types of activities.14
This does not only prevent or obstruct permanent establishments in national markets (direct
investments within the service sector) but also occasional trade in services between the EU’s
Member States. According to the Commission’s report of 200215, the Member States appear to
lack confidence in the quality of the legal systems of other Member States and are sceptical
about amending their own systems, even when this is necessary, in order to facilitate operations
across the borders. Several of the mentioned obstacles are horizontal, thereby influencing
various service sectors. A common trait for these obstacles is that the Member States sets up a
uniform system for service providers wishing to establish themselves in the country and for
those intending to provide their services from their country of origin. For these service providers

10
See Craig, P and De Burca, G, EU Law, Text, Cases and Materials, 2002, Oxford University Press, pages 819–823, Craig.
11
See Report from the Commission to the Council and the European Parliament, Brussels, 30.07.2002, COM(2002) 441 final. For a
comprehensive description of the obstacles, see pages 14-60, COM 2002/441. http://eur-lex.europa.eu/LexUriServ/LexUri-
Serv.do?uri=COM:2002:0441:FIN:SV:PDF. Web site verified 30th of December 2009. Section 2 of this article is mainly based on
the Commission’s report, COM 2002/441.
12
See St Clair Renard, “ Fri rörlighet för tjänster, tolkning av Artikel 49 EGF, 2007, page 19, Clair Renard.
13
See COM 2002/441, pp. 57. concerning additional examples of negative consequences of the trade barriers.
14
See the working report R2008:005 from ITPS, ”Institutionella hinder för tillväxt i tjänstesektorn”, page 35, Working report by ITPS.
http://www.itps.se/Archive/Documents/Swedish/Publikationer/ Rapporter/Arbetsrapporter%20(R)/R2008/R2008_005_webb.pdf. Web
site verified the 28th of December 2009 Report by ITPS, page 35.
15
See COM 2002/441

Electronic copy available at: http://ssrn.com/abstract=1686995

already adhering to the rules and controls of their country of establishment, this obviously
constitutes a heavy burden, whereas it duplicates the applicable rules and leads do unjustified
requirements. An additional common feature is the legal uncertainty originating from the case-
to-case application of diffuse and vague requirements with often unforeseeable results.16 These
barriers have a particularly negative influence on the possibility for service providers to offer
cross-border services.

3. THE SERVICES DIRECTIVE – SHORT HISTORICAL ACCOUNT AND INTRODUCTION

In the Commission’s Report on the state of the Internal Market for services of 2002 it is
observed that the current situation, a decade after the envisaged achievement of the Internal
Market, still manifest substantial differences between the vision of an integrated EU economy
and the reality that EU citizens and service providers finds themselves in.17 In order to
accomplish a genuine Internal Market for services and considering the slow development, the
Commission found it necessary to seriously investigate the need for a framework legislation on
the free movement of services, in order to achieve an integrated service market. Subsequent to
a thorough investigative process, the Commission presented, in January 2004, its original
proposal for a services directive, as a part of the Lisbon strategy. The reactions following the
proposal were however not entirely affirmative, rather many Member States were sceptical to
several parts of the Commission’s proposal. Two main issues initiated extensive debates in
many Member States – the controversial country of origin principle and the Directive’s scope of
application.18 The much-debated country of origin principle, stated in article 16 of the
Commission’s proposal, essentially means that a service provider offering services is only
required to comply with the rules of his country of origin. This applies regardless whether the
service provider perform the service in the country of origin or in another Member State. Thus,
the country of origin principle compels Member States to accept the rules of the service
provider’s country of origin and that the service is performed in the host state pursuant to the
rules in the country of origin, and not the host state. The host state shall automatically recognize
that a service provider from a different Member State complies with the rules of the country of
origin.19 In an incisive meaning, it is a rule on applicable law which in a conflict between the
rules of the host state and the country of origin in certain situations gives the rules of the country
of origin precedence. The employment of a country of origin principle would have constituted a
controversial and fundamental change of the previous state of affairs concerning the free
movement of service, i.e. the principle of mutual recognition, formulated by the ECJ.20 At this
point of time, many Member States expressed their concerns that the country of origin principle

16
See COM 2002/441, pages 5–7.
17
See Ds 2008:75, Genomförande av tjänstedirektivet, the Ministry memorandum, page 13.
18
See Bernitz/Kjellgren page 268.
19
See Österdahl, Emma (2007) Ursprungslandsprincipen i tjänstedirektivet. Legal thesis, Handelshögskolan Göteborg university,
Österdahl.
20
Judgment of the 20th of February 1979 in the case 120/78, Rewe-Zentral, known as Cassis de Dijon, REG
1979, p. 649 and judgment of the 25th of July 1991 in the case C-76/90, Manfred Säger v Dennemeyer &
Co. Ltd., REG 1991, p. I-4221.
would lead to social dumping and distorted competition.21 The European Trade Union also
criticized the country of origin principle. Alike the Member States, it was concerned that the
principle would initiate social dumping and that it should be either removed or amended to a
considerable extent.22 The fear that the country of origin principle would create a “race to the
bottom” was noticeable. A common apprehension was that enterprises from Member States
with strict requirement would move to Member States with less strict requirement, in order to
perform services in the previous country of establishment with strict requirements. This would
require Member States with severe requirements to lower their requirements.23 In my opinion,
the actual issue was, as mentioned above in section 2, the limited mutual confidence between
the Member States concerning the regulation of the service sector. The Member States thus
preferred to lay down their own rules regarding the provision of services within their countries.24
Subsequent to intense negotiations, the EU Member States nevertheless reached an
agreement and on the 11th of December 2006, the Services Directive was adopted.25 In relation
to the Commission’s original proposal, the Services Directive was however revised and modified
to a considerable extent. The final proposal did not affect national minimum wages and
collective agreements and therefore, for performance of service in Sweden, e.g. Swedish
collective agreements shall apply. In addition, the content of the Directive was defined and
clarified.26 At the adoption of the Services Directive, an intensive and extensive political debate
arose, concerning which services were to be included within the scope of the Services Directive.
In the end several essential service sectors were excluded, such as staffing services, security
services, transport services, audiovisual services and radio broadcasts services, services
primarily financed through tax revenue, such as social services and health- and nursing
services.27

Consequently, the services not included in the Directive will be governed by the fundamental
provisions of the TFEU as well as other secondary EU legislation.28 Financial services were also
excluded, but this was due to the fact that relatively extensive EU legislation was already at
hand concerning such services.29 Labor, - tax- and criminal law is not affected by the provisions
of the directive.30 The most significant amendment made was however that Article 16, the
country of origin principle, was completely redrafted. The final proposal thus contained a
fundamentally diluted country of origin principle, with more exceptions than in the first proposal.
Every Member State is on the one hand required to guarantee foreign service providers access
to its territory, but on the other hand the Article only prescribes which principles that shall apply
when a state lay down certain requirements on a foreign service provider. Therefore one may

21
Proposal for a directive of the Europan Parliament and of the Council on services on the internal market, Brussels the 13.1.2004
COM(2004) 2 final, See COM 2004/2, see page 58.
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2004:0002:FIN:SV:PDF. Web site verified the 30th of December 2009.
22
Brussels Office, Europafacket fördömer beslut om tjänstedirektivet, newsletter of the Brussels Office, 23/11 2005.
23
See Österdahl, page 30.
24
De Bruijn, Roland, Kox, Henk, Lejour, Arjan (2007) Economic Benefits of an integrated European Market for Services. Journal of
Policy Modelling, page 11, De Bruijn. http://www.cpb.nl/ eng/pub/cpbreeksen/document/108/doc108.pdf. Web site verified the 30th
of December 2009.
25
See Ministry memorandum, page 13.
26
See Working Report from ITPS, page 35.
27
See Article 2.2 of the Directive.
28
See referred consideration from Svenska Institutet för Europapolitiska Studier (Sieps) concerning Ds 2008:75, of the 14th of
January 2009, Dnr 81/2008, referred consideration from Sieps.
29
See reason 18 of the Directive.
30
See Article 1.5-1.7 of the Directive.
concluded that it is the rules of the host state that shall apply. This essentially affects the impact
of the Services Directive, since it contributes to a reduction of the free movement of services
and thereby impedes competition. From a financial perspective, the dilution of the country of
origin principle will considerably reduce the trade of services between the EU Member States.31
The consumption of services as well as the export of services will decrease due to the country
of origin principle not being implemented into the Directive.32 Occasional performance of
services and the possibility to use comparative advantages are rendered difficult, for example
when an exporting undertaking from a low wage country in a work intense business is required
to pay wages, which substantially exceeds the national standard wages.33

4. THE SERVICES DIRECTIVE – CENTRAL PARTS

The purpose of the Services Directive is thus to facilitate undertakings’ establishment and
temporary provision of services on the EU internal market, whereas the quality of the services is
simultaneously enhanced.34 In order to support free movement on the internal market, the
Member States shall remove unnecessary rules and facilitate the administrative process for
service providers.

Accordingly, the Directive includes provisions on administrative facilitation, freedom of

establishment and free movement for service providers, rights of the service recipients and the
quality of the services, as well as regulations on administrative cooperation between the
Member States. The Directive only applies to service providers which temporarily exercise a
service in another country in the EU/EES-area and service undertakings intending to establish
themselves in another country within the EU/EES-area. The Services Directive requires Member
States to ensure that services providers are conferred with a right to provide services in a
country different than the one where they are established.35

The Member States are not allowed to lay down national requirements on service providers
temporarily performing a service, with the exception of conditions justified by public order, public
security, public health or environmental protection. The requirements must also comply with the
principles of non-discrimination, necessity and proportionality. In addition, the procedures for
authorization must be clear and unambiguous, made public in advance and designed in an
objective, impartial manner. In the Directive it is further set forth that the Members States shall
establish points of single contact in order to complete procedures such as a) all procedures and
formalities needed for access to his service activities, in particular, all declarations, notifications
or applications necessary for authorisation from the competent authorities, including
applications for inclusion in a register, a roll or a database, or for registration with a professional
body or association; b) any applications for authorisation needed to exercise his service
activities”. It is also clear from the Directive that “Member States shall ensure that all procedures
and formalities relating to access to a service activity and to the exercise thereof may be easily
completed, at a distance and by electronic means, through the relevant point of single contact

31
See De Bruijn, pages 23 and 40–44.
32
See De Bruijn, page 47.
33
See Working rRport from ITPS, page 32.
34
See Ministry memorandum, page 12.
35
See Article 16.1 of the Directive.
and with the relevant competent authorities.”36 The Swedish Act as well as the Directive imply
that the authorities shall give each other mutual assistance as to inspection, controls,
information etc.37 For this purpose, the IMI (Internal Market Information System), a web based
tool provided by the Commission, was established. All relevant authorities are to be registered
in this registry. The Swedish National Board of Trade is the coordinator for IMI in Sweden.38

In sum, the main objective of the Directive is, according to my view, to achieve administrative
simplification, facilitate cooperation between the authorities of different Member States by
means of IMI, enhance the quality of services and facilitate for foreign service providers to
obtain information regarding the legal requirements of a Member State. Consequently, the aim
is not to introduce a country of origin principle or to have any impact on single Member States’
rules concerning private international law. Thus, the Member States retain, in essence, their
authority to lay down rules concerning requirements on and authorization of service providers
envisaging providing services within the Member State concerned.39 The service provider is
thus not entitled to require that a host Member State shall automatically apply the rules on
authorization and requirements of the Member State of origin, regardless whether the service
provider fulfils these requirements.

5. ADVANTAGES RELATED TO LIBERALIZATION OF SERVICE MARKETS AND THE

FINANCIAL SIGNIFICATION OF THE SERVICE SECTOR WITHIN THE EU

A fundamental financial argument for the liberalization of service markets is that it gives
enterprises and states larger possibilities to use their comparative advantages by means of
specialization. Furthermore, liberalization allows enterprises to take advantage of economies of
scale.40 The most substantial efficiency gain probably originates from the undertakings’
possibility to use economies of scale and from the enhanced competition between the
undertakings.

It is a recognized fact that an effective service infrastructure is a prerequisite for financial

success.41 The EU is the most competitive actor in relation to trade in services and therefore it is
hardly controversial to assert that the EU has a considerable interest in ensuring that new
markets for goods, services and investments are created.42

From an employment perspective, the development of qualitative employment opportunities

within the service sector is directly connected to a quantitative increase in employment
opportunities, and more employment opportunities are created in this sector than in any other
financial sector. Moreover, it may be noticed that the service sector provides larger refinement
value than any other macroeconomic sector. It has the largest growth potential, the largest
number of new establishments of undertakings, and hereto the enterprise-related services

36
See Article 8.1 of the Directive.
37
See Articles 10-15 §§ lagen om tjänster på den inre marknaden and Article 34 of the Directive.
38
See http://www.skl.se/artikel.asp?A=63072&C=6669. Web page verified the 29th of December 2009.
39
See Österdahl, pages 45-48.
40
See Working Report from ITPS.
41
http://ec.europa.eu/trade/creating-opportunities/economic-sectors/services/. Web site verified the 29th of December 2009.
42
European Parliament resolution of 4 September 2008 on Trade in services (2008/ 2004(INI)). 67. 2009/C 295 E/18.
constitute the foundation of the knowledge-based economy. Thus, maintaining that the service
sector has enormous potential is hardly an overstatement.

As mentioned above, the service sector has for a long period been the most important source to
the creation of employment opportunities in the EU, however there are no guarantees that this
will be upheld. Unless the EU improves its ability to develop the human resources necessary in
a knowledge-based economy, the service sector will be deprived of its competitive impetus.43
This may lead to relocation of service based positions , as has been the case with the
production industry, and entail that markets are lost to the US and Asia.44 Financial analyses
suggest that the increase in production has recently been lagging behind in relation to the US.45
Simultaneously, the future occupation of the service sector is threatened by the relocation of
positions - from phone centres to IT-services - to the US and Asia. These challenges must be
dealt with immediately, otherwise risking that the EU service sector lose market shares. If the
EU is not capable of achieving improved terms and conditions for the service sector, which
remedy these problems, there is a threat that the employment opportunities escape in a rapid
manner - a development that parts of the sector have already experienced – to other parts of
the world, as has previously been the case in many production sectors.46 Hence, EU institutions
and the industry entertain apprehensions concerning the European economy’s future prospects,
and whether its competitiveness is sufficient to tackle the threats of an increasing strong
competition from low cost economies. In this regard it may be observed that the service sector
and the production sector within the EU have been deprived of several employment
opportunities to countries with comparative advantages in regards of costs, specialization and
knowledge (e.g. China concerning production and India concerning enterprise related
services).47 It is therefore of significant importance that the EU, even after the introduction of the
Services Directive, puts the freedom of movement for services as a supreme political priority, in
order to achieve the objectives of the Lisbon strategy.48

6. DOES THE DIRECTIVE BRING ABOUT ANY IMPACT IN THE LEGAL SITUATION IN
RELATION TO THE TREATY PROVISIONS ON FREE MOVEMENT OF SERVICES?

The Directive does not lead to any significant legal impact concerning the free movement of
services, but rather codifies the case law of the ECJ.49 However, the Directive does achieve an
enhancement concerning the free movement of services by limiting the possibilities for Member

43
See Working paper series from European Central Bank, No 625/May 2006, http:// www.ecb.int/pub/pdf/scpwps/ecbwp625.pdf.
Web site verified the 30th of December 2009.
44
Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee
and the Committee of the Regions, Brussels 4.12.2003, KOM(2003) 747, final COM 2003/747. http:/ /eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2003:0747:FIN:SV:PDF. Web site verified the 30th of December 2009.
45
Fördel Europa- http://www.svensktnaringsliv.se/multimedia/archive/00018/ F_rdel_Europa_18910a.pdf. Web site verified the 29th
of December 2009.
46
COM 2003/747, pages 23–24.
47
Opinion of the European Economic and Social Committee on”Services and European manufacturing industries: Interactions and
impacts on employment, competitiveness and productivity” (2006/C318/04),http://eurlex.europa.eu/LexUriServ/LexUri- Serv.do?
uri=OJ:C:2006:318:0026:0037:SV:PDF. Web site verified the 30th of December 2009.
48
See AdvertisingInformationGroup EU Internal Market: Benefits & Challenges, March 2005.
http://www.eaca.be/_upload/documents/publications/AdvertisingInformationGroup%20Internal%20Market%20Research%20March0
5.pdf. Web site verified the 30th of December 2009.
49
Compare Bernitz/Kjellgren, page 268.
States to introduce exceptions in terms of national protective measures.50 In addition, the
national protective measures which the Member States still are allowed to lay down have been
limited so that, e.g., requirements on authorization and establishment are no longer considered
as lawful protective measures. Of significant practical significance for service providers and the
undertakings are the above mentioned provisions concerning more institutionalized
administrative procedures, and the requirements on so-called national single points of contact,
where undertakings are to be given the opportunity to be informed of relevant requirements and
apply for authorization. The Directive should also be considered from a political perspective
whereas it manifest the common political will of the Member States to facilitate free movement
of services. This aspect of the Directive shall not be underestimated. Another central part of the
Directive’s practical legal significance is obviously concerned with the issue whether service
providers and service recipients may invoke the Directive in national courts, and initiate legal
proceedings against Member States who have failed to introduce the directive or alternatively
introduced the Directive in an incorrect manner. This matter will be discussed in detail in section
7.

In relation to Article 16 of the Directive, one should bear in mind that this provision largely
overlaps the right of free movement pursuant to Article 56 of the TFEU. A question in this
context is whether Article 16 provides any additional rights, or otherwise adds something to the
provisions of the TFEU. The answer to this question ought to be affirmative, since Article 16 in a
more extensive and far-reaching manner limits the Member States’ possibilities to lay down
exceptions from the free movement. Within the scope of Article 56 TFEU, a quite
comprehensive case law has been established with respect to the possibilities for Member
States to stipulate exceptions from the free movement. These grounds of exception have been
removed from the Directive so that solely the original grounds of exception from the TFEU
remain.51 The general exceptions in relation to Article 16 are therefore considerably more limited
than the grounds of exception that may be invoked to restrict the free movement within the
scope of Article 56 TFEU.

The Directive’s provisions concerning the rights of the service recipients do not in themselves
imply any change of the legal situation, given that these rights previously had been recognized
by the ECJ. In the case Luisi et Carbone, the ECJ held that Article 56 also includes the right of a
service recipient to travel to another state in order to receive services.52 In this respect, the ECJ
opined that the reception of a service is the mirror reflection of the exercise thereof entailing that
the reception of a service hereto must be included in the concept of a “service”. In the light of
the aforementioned, one may raise the question whether the Directive in fact adds any value for
service recipients. Yet again, it may be observed that the advantage and practical importance of
the Directive is based on the fact that the possibilities to introduce national protective measures,
which previously existed, have been limited by the Services Directive.

50
See St Clair Renard, page 314. Section 6 of this article is to a large extent based on Clair Renard’s presentation in the
dissertation referred to above.
51
See St Clair Renard, page 267.
52
See joint cases 286/82 och 26/83, Graziana Luisi and Giuseppe Carbone versus Ministero del Tesoro., Rättsfallssamling 1984 s.
00377, Svensk specialutgåva s. 00473, paragraphs 15– 16.
7. DOES THE PROVISIONS OF THE DIRECTIVE HAVE DIRECT EFFECT?

A practically important aspect of the Directive’s effet utile is the question whether its provisions
have direct effect. The fact that a provision has direct effect is of crucial significance to EU
lawyers, while national courts in this case are not only required to apply the EU law provision at
issue but, pursuant to the principle of supremacy, they shall also apply the EU provision shall
take precedence before national conflicting and incompatible national provisions.53 This imply
that an individual may invoke the provisions of an EU directive should the Member State have
failed to introduce the directive alternatively implemented it incorrectly. In its aim to safeguard
the efficacy of EU law and in order to achieve legal integration, the case law of the ECJ has
extended the doctrine of direct effect to directives, in those cases where a directive has not
been timely implemented or in cases where it has been implemented in an incorrect
manner.54Pursuant to the case law of the ECJ a directive may, as a main rule, only be deemed
directly applicable in legal relationships between the authorities and bodies emanating from the
Member States and individual legal subjects (vertical direct effect)55 but not between individual
legal subjects (horizontal direct effect56).

Recognized as “bodies emanating from the state”, are body, whatever its legal form, which has
been made responsible, pursuant to a measure adopted by the state, for providing a public
service under the control of the state and has for that purpose special powers beyond that which
result from the normal rules applicable in relations between individuals.57 As mentioned, this is
only the main principle, and there are several judgments where the ECJ has reached “similar
results” as if the provisions of the directive would have had horizontal direct effect.58 The case
law of the ECJ thus appear to demonstrate that a directive may have a legal effect in litigations
between two individual legal subjects, in the sense that the directive can impede the application
of national legislation which contradicts the directive.59 The directive has a so-called
“exclusionary effect” in the sense that it excludes the application of national law which is
incompatible with EU law without substituting the national rule with the provisions of the
directive.60 In an incisive wording, the excluding effect of directives entails basically the same
result as if the directive would have had horizontal direct effect.61 In order for a directive to have
direct effect, it is required:

i) that the directive was not implemented by the Member State within the prescribed period
ii) that the provisions of the directive as regards the contents are sufficiently clear, precisely
stated and unconditional,

53
See EU law; Steiner, J Woods, L, Twigg-Flesner, C, 2006, Oxford University Press, page 90.
54
See Case 41/74, Van Duyn versus Home Office (REG 1974, s. 1337; svensk specialutgåva, volume 2).
55
See Case 41/74, Van Duyn.
56
See Case C-91/92 Faccini Dori versus Recreb S.r.l (REG 1994, s I-3325; svensk specialutgåva, volume 16).
57
See Case C-188/89, Foster versus Brittish Gas plc [REG 1990, s 1-3313; svensk specialutgåva, volume 10], point 20.
58
See Craig, pages 211–227.
59
See Case C-443/98 Unilever Italia SpA versus central Food SpA, [2000] REG 2000 p. I-07535. See also judgment of the
European Court of Justice of the 19th of January 2010 in case C-555/07, Seda Kücükdeveci versus Swedex GmbH & Co. KG, points
38-43
60
See opinion of the Swedish National Board of Trade, 2001-11-06, dnr 150-2344-2001. www.kommers.se/
upload/…/EUs…/Utredning_om_Securitelverkan.doc. Web site verified the 30th of December 2009.
61
See The Direct Effect of Community Directives: The Effect of the Unilever Judgment, Org un SENYÜCEL, Ankara Law Review,
Vol.2 No. 1 (Summer 2005), pages 81–88. http:// auhf.ankara.edu.tr/journals/alr-archive/ALR-2005-02-01/ALR-2005-02-01-
Senyucel.pdf. Web site verified the 30th of December 2009. The theoretical discussion concerning directive-conform interpretation
and indirect horizontal effect will however not be dealt with in this article, whose main focus is the Services Directive.
iii) that the provisions of the directive confers individual rights for the citizen and
iv) that the Member State is not left with any room to exercise discretion as regards to the
implementation of the directive.62

Regardless whether the directive leaves the Member State with a certain discretion the
directive may be deemed to have direct effect should the Member State already have exercised
its margin of discretion or elected not to employ it or if a clear and precisely stated obligation
may be derived from other parts of the directive. According to some commentators, the ECJ has
in fact applied the criteria for direct effect in a generous manner, entailing that many provisions
which seemingly are not particularly clear or precise, in particular as to their scope of
application, have been recognized as having direct effect.63

According to Craig, the requirements on direct effect are in fact related to the assessment
whether the provision at issue is sufficiently clear in order for a court to apply the provision
without triggering excessive uncertainty and too many complex considerations at the actual
legal application.64 The fact that an EU law instrument or provision have been deemed as very
broad and general has not hindered the ECJ from attributing certain provisions, which contains
unconditional obligations for the Member State, with direct effect.65

From the above mentioned it follows that the prescribed period for the implementation of a
directive is decisive for the issue whether the directive has direct effect.66 Whereas the Services
Directive should have been duly implemented on the 28th of December 2009 the question
thereby arises whether individual undertakings and service providers are entitled to invoke the
directive against Member States which have not timely implemented the Directive or have
implemented the Directive in an inadequate manner. As of this date, the Member States are
namely unable to refer to their margin of discretion as regards the choice of instrument for the
implementation of the Directive and are as a consequence not allowed to rely on national
opposing provisions.67 Thus, one must examine whether the provisions of the Services Directive
are sufficiently clear, precisely stated and unconditional as being capable of conferring to lay
rights for individual legal subjects. Evidently, this question cannot be answered in a general
manner but instead one must in fact scrutinize every provision in detail to provide a conclusive
response.

In my opinion, the Directive contains several provisions which in fact confer rights to individuals;
among them, the above discussed Article 16 relating to the right to provide services. Article 16
prescribes that “Member states shall respect the right of providers to provide services in a
Member State other than that in which they are established. The Member State in which the
service is provided shall ensure free access to and free exercise of a service activity within its
territory…” In my opinion, this constitutes a clear and unconditional right for service providers to
provide services in a different Member State than the Member State in which the service

62
See Steiner, page 92 och Craig, page 185.
63
See Steiner, page 92 och Craig, page 186.
64
See Craig, page 186.
65
See Case 2/74, Jean Reyners vs Belgian state, Rättsfallssamling 1974 s. 00631, Svensk specialutgåva p. 00309, in particular
paragraphs 24–30.
66
See Craig page 205.
67
See Craig, page 205.
provider is established. Another provision which ought to be deemed as directly applicable is
Article 20, which concerns the rights of service recipients. In this Article it is stated that “1.
Member States shall ensure that the recipient is not made subject to discriminatory
requirements based on his nationality or place of residence. 2. Member States shall ensure that
the general conditions of access to a service, which are made available to the public at large by
the provider, do not contain discriminatory provisions relating to the nationality or place of
residency of the recipient, but without precluding the possibility of providing for differences in the
conditions of access where those differences are directly justified by objective criteria…”

I am of the opinion that this provision also prescribes a clear, precisely stated and unconditional
right for service recipients not to be subject to discriminatory treatment based on their
nationality. In the light of the case law of the ECJ and its generous application of the
requirements for direct effect, the requirements for direct effect ought to be satisfied in relation
to Article 16 as well as Article 20. The Member States’ obligations pursuant to Articles 16 and
20 do not contain any reservation implying that the Member State may condition the discharge
of this obligation on a confirming national legislative act. The implementation of Articles 16 and
20 does therefore not require the Member States to take any legislative actions.68 By virtue of its
legal character, spirit and purpose, the provisions of Articles 16 and 20 are therefore clearly
capable of having direct effect in legal relations between the Member States and its citizens.

An additional argument for recognizing the direct effect of the mentioned provisions is that the
ECJ in the Van Binsbergen-case69 held that Article 56 of the TFEU, concerning the free
movement of services, has direct effect, despite its general wording. In the light of this it would
appear inconsistent if the provisions of the directive embodying the TFEU provisions on free
movement would lack direct effect.

Another argument for recognizing the direct effect of the above mentioned provisions is that this
obviously would strengthen the effet utile of EU law and the rights of service providers and
recipients.70 If Articles 16 and 20 were to lack direct effect, the practical effect71 of the Directive
would be fundamentally weakened. The Member States shall not, by means lacks of untimely
implementation or incorrect implementation, be able to escape from their obligation to loyally
apply EU law or oppose the binding effect of the directive when it is invoked against the Member
State.72

Furthermore, the above mentioned provisions in the Directive may, most likely, be deemed as
invocable in litigations between two individual subjects, in order to prevent the application of
national rules which are incompatible with the Directive, in accordance with the principles
recognized by the ECJ in the Unilever-case.73 This assertion is not only of theoretical interest,
where situations and disputes may occur between competing national and foreign service
providers (established in the EU), where the national service provider alleges that the foreign
service provider has not complied with national requirements. In such circumstances, the

68
See Case 26–62, Van Gend En Loos.
69
See Case C-33/74, in particular paragraphs 24–26.
70
See Craig, page 202.
71
See Steiner, page 96.
72
See Craig, page 204.
73
See Case C-443/98 Unilever Italia SpA versus Central Food SpA, Rättsfallssamling 2000 p. I- 07535.
foreign service provider ought to be able to invoke the provisions of the Directive in order to
evade the application of disadvantageous national rules. It may be questioned whether the
remaining provisions of the Directive may be ascribed direct effect. The provisions on national
points of contact and cooperation between authorities provide the Member States with certain
discretion as to how these provisions shall be realized. It is also doubtful whether these
provisions in fact could be deemed as capable of conferring rights to individuals. These
questions cannot be answered in this article, but must be analyzed in more detail. The issue of
the legal effect of the Directive is evidently difficult to scrutinize and complex, but it does not
seem unlikely that the above mentioned questions may be elucidated within a near future. The
reason for this is that service providers and service recipients affected by an incorrect or
delayed implementation of the Directive may be inclined to initiate litigations in order to examine
their case. A typical situation would potentially occur should the Member State’s requirements
on a service provider not falls within the scope of the Directive’s general grounds for exception.
In this case, the individual legal subject ought to be entitled to invoke the provisions of the
Directive in a national court, in order to assert his or her rights against the Member State.
Nevertheless, the question whether the Directive’s provisions have direct effect will ultimately be
answered by the ECJ.

8. THE IMPLEMENTATION OF THE SERVICES DIRECTIVE IN SWEDEN74

Pursuant to Article 288 of the TFEU, a directive is binding upon the Member State in relation to
the result which is to be achieved through the directive. The actual implementation of the
directive is however left to the individual state. The Swedish implementation of the Directive has
taken place by means of introducing of a new horizontal act on services in the internal market,
as well as an adjustment of the Swedish rules that were not consistent with the content of the
Services Directive.75 In order to ensure that the Swedish rules complies the requirements of the
Services Directive with respect to freedom of establishment and the free movement of services,
the Swedish Government Office and the authorities concerned has carried out an extensive
review of the rules and requirements governing the service sector. Sieps, which has analyzed
the Swedish implementation, deemed the results in relation to the Swedish implementation of
the Directive to be satisfying.76 With regard to the issue of a single point of contact, the
Government was of the opinion that only one common point of single contact should be
established for Sweden. The National Board of Trade is assigned with the main responsibility for
the Swedish point of contact whilst the Swedish Agency for Economic and Regional Growth is
responsible for developing the part of the single contact point that concerns the web functions.
In Sweden, there nevertheless remain unresolved questions, relating to the current level of
implementation with respect to municipalities and local authorities, in particular as to the issue of
support to these authorities from central organizations, i.e. the central point of contact Helpdesk.
The response to the question whether Sweden has implemented the Directive correctly
depends on how the notion of exercising procedures by “electronic means” in Article 8 of the
Directive is to be interpreted. With reference hereto, there are some uncertainty as to whether

74
See Ministry memorandum.
75
See prop. 2008/09:187, Genomförande av tjänstedirektivet.
76
See referred consideration from Sieps, page 1.
the electronic administration of Swedish authorities (and in other Member States) is sufficiently
elaborated to comply in reality the requirements of the directive.

9. SUMMARY

In my opinion, the Directive does not entail any significant legal changes in relation to the free
movement of services, but is rather a codification of the case law established up by the ECJ.
Nonetheless, the Directive does result in an improvement for the free movement of services by
limiting the possibilities for Member States to lay down exceptions for national protective
measures. In this article, it has also been argued that Article 16 as well as Article 20 of the
Directive should be capable of having direct effect, whereas these provisions confer clear,
unconditional and precisely stated rights on individuals. This may reinforce the practical impact
of the Services Directive within the Member States and benefit service providers and service
recipients.

Nevertheless, it may be concluded that it remains a substantial amount of work in the Member
States in order to complete the Services Directive in reality and in order to achieve a true
internal market for services. The fact that a country of origin principle was not introduced
considerably reduces the impact of the Directive, while it contributes to the impairment of the
free movement of services and thereby impairs competition. The reason for this is that the
Member States lack mutual confidence in each others’ legal systems and therefore wish to keep
their self determination concerning national regulation of cross-border services. Still, the
adoption of the Services Directive is a first step in the right direction, and if the provisions of the
Services Directive are fully implemented and operationally introduced in the commercial world,
the EU Member States are heading in the right direction.