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 © ANDREA USAI
Published in Maastricht, April 2014

Faculty of Law
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 “Today’s Softness is Tomorrow’s Nightmare”: The Services Directive Between a
Messing and Fragmented Integration and the Urgent Need of Completing the Single
Market

Andrea Usai*

Abstract: This paper aims at analysing the current state of the Internal Market of
Services from a general perspective. Indeed, after recalling what was the main task of
the “Services Directive”, that is that of opening up the market of services through a
new horizontal approach, it acknowledges how things went wrong and how we ended
up with a messing and fragmented market integration instead of having gone further
in the completion of the Single Market. It is argued that the subtle fragmentation
process started with the troubled genesis and with the reduced scope of application
that followed up. Moreover, as it would have been foreseeable, the “messing and
fragmented integration” went even further when the Member States had to transpose
Directive 2006/123/EC into their national legal orders. A few examples are made of
how the abovementioned piece of legislation is still neither correctly nor fully
implemented and of how market integration could be fostered. Indeed, if,
paradoxically, the achievement of a liberalized market of services is sought also
through the various free-trade agreements with third countries, the European Single
Market is still far away from being completed. In a context where the European
Integration project suffers from a lack of legitimacy and where important Member
States such as the UK are calling for the liberalization of the third sector, the urgent
need to complete the Single Market will still be one of the strategic points to be
addressed.

Key words: Services Directive, Market Integration, “Public Enforcement”, “Private

Enforcement”

Electronic copy available at: http://ssrn.com/abstract=2421262

Introduction

The former EU Competition Commissioner Neelie Kroes gave a significant

speech in 2009 1 on the EU policy of tackling cartels. She pointed out that this was a
never-ending task of the Union and when she came at addressing the issue of the so
called “crisis cartels” 2 she clearly stated that it would not have been the case of being
deferent towards those cartelists claiming that in time of economic crisis a policy of
tolerance is needed. Indeed, she stressed that “today’s softness is tomorrow’s
nightmare”.
The abovementioned statement was pronounced in a slightly different context
from the field of internal market law and of the free movement of services. It might be
argued that the fundamental freedoms have nothing to do with competition law and
vice-versa. Indeed, the ECJ uses two different tests when dealing with internal market
and competition cases 3. This is certainly true from a legal and economic point of
view. However, this paper argues that the aim, which must be achieved, is a fully-
fledged Internal Market of services within a properly functioning European Single
Market. Indeed, competition law is clearly an important tool in order to reach it.
Moreover, if the market is fragmented and is not efficient as it should be, competition
would consequently be distorted and restricted.
Secondly, the importance of the statement above is linked to free movement of
services also for another reason. In facts, what seems clear is that in time of economic
crisis there is always a trend to loosen the internal market and competition provisions
and to aim at going back to a protectionist approach. Indeed this is what is happening.
The EU is losing legitimacy in the public opinion and the Member States are taking
advantage of this moment to justify their own weaknesses 4.
The internal market of services is a good example of how much it is still to be
done in order to complete the single market. It is incomplete and fragmented. The
Services Directive, the most ambitious legislative tool ever adopted in the history of
European integration, which was supposed to fully liberalize and integrate the market
of services, was clearly not a success. The result is that the service sector,
notwithstanding the fact that it amounts to up to 70% of the GDP and of the
employment of the Member States of the EU, is still fragmented. Furthermore, what
appears to be nonsense is that the ones who would be supposed to be more better-off

* PhD candidate in European law, Universities of Bologna and Strasbourg; Visiting PhD
Researcher at Maastricht University; LLM in EU Competition law, King’s College London;
1
See the then European Competition Commissioner Neelie Kroes’s speech “Tackling cartels- a never-
ending task. Anti-Cartel Enforcement: Criminal and Administrative Policy, 8 October 2009, available
at http://europa.eu/rapid/press-release_SPEECH-09-454_en.htm.
2
The so called “crisis cartels” are those agreements among undertakings aimed at preventing,
restricting or distorting competition in time of crisis. Normally, cartelists argue that the Commission
should adopt a more tolerant approach towards that type of cartels as their main aim is to help
undertakings survive in case of economic crisis. Basically, the output is considerably reduced in order
to be able to raise the prices. See, inter alia, Case C-209/07, Competition Authority v Beef Industry
Development Society Ltd and Barry Brothers (Carrigmore) Meats Ltd ("BIDS"), [2008] ECR I-8637.
3
In internal market cases, the ECJ does not carry out an economic test. Indeed, in competition cases
the relevant market has to be analysed.
4
See M. P. Maduro’s report to the European Parliament “A New Governance for the European Union
and the Euro: Democracy and Justice”, 2012 available at
http://network.globalgovernanceprogramme.eu/wp-content/uploads/2012/10/report.pdf

4
after the full implementation of the Services Directive, such as the SMEs 5, are the
ones who keep on struggling not to go for further integration.
This paper aims at addressing the abovementioned issues. It will firstly
analyse the genesis, the scope of application and the implementation problems of the
Services Directive. In particular, it will be taken into consideration the case study of
those services that are provided for on areas assigned to individuals by public
authorities through concessions contracts. This article will then address the issues
regarding the fragmentation of the market of services and it will propose some
solutions on what instruments should be used in order firstly to preserve and secondly
not to have the common market of services disintegrated.

a. The Services Directive and its ambition to complete the (still fragmented)
market of services.

For a better understanding of what is at stake with the Services Directive, it

seems necessary firstly to address the urgent need of completing the market of
services in the EU. In the European legal order, the adoption of directives has
sometimes consisted into fleshing out the principles already established by primary
law 6 or into merely codifying the case law of the ECJ 7 . Nonetheless, as it was
demonstrated with the adoption of the “Bolkestein” Directive, it might happen that a
fierce economic and political opposition against pieces of legislation rises, especially
against those that would potentially entail great changes in strategic market sectors.
Yet, as regards the abovementioned directive, it seems arguable that, in this case, it
was nothing more than much ado about nothing as that piece of legislation was simply
confirming and maybe emphasising what had already been enshrined both in the
Treaties and in the ECJ’s case law.
Be that as it may, it seems the case of pointing out that services have always
represented a big conundrum for the EU 8, especially when it came the time to have
them regulated. If the free movement of services has always been considered as the
“cinderella” of the internal market provisions 9 , this was precisely because of the
peculiar nature of services. In fact, too many barriers were still in force in the market
of goods, capitals and persons. Therefore it could not be realistic to think that
services, which are by definition at the same time less concrete and widespread than
goods and persons, would have been fully liberalized before than the other
fundamental freedoms. Yet the EU was more and more a service-based economy.
As Hatzopoulos 10 points out, the first attempt to abolish obstacles and
restrictions in the services market was the “General Programme for the Abolition of
Restrictions in the Free Movement of Services” 11 in 1962. It was not successful
though, due to its non-legally binding nature. Indeed, this document was adopted after

5
See M. Barnier’s speech to the European Parliament “La Directive Services- La Situation
Aujourd’hui et Les Prochaines Etapes”, 27 April 2010
6
The argument has been brilliantly made in C. Barnard, “Employment Law” (OUP, 2012). Indeed, the
author brings evidence of how the Directive 96/71/EC (“The Posted Workers Directive”) has been used
by the ECJ to interpret Art. 56 TFEU.
7
Ibid.
8
See V. Hatzopoulos, “Regulating Services in the European Union” (OUP, 2012)
9
See F. Bolkestein’s foreword to S. D’Acunto, “Direttiva Servizi (2006/123/CE): Genesi, Obiettivi,
Contenuti”, (Giuffrè 2009).
10
See note 8 above;
11
General Programme for the abolition of restrictions on freedom to provide services, OJ 002 ,
15/01/1962, English special edition: Series II Volume IX;

5
the so-called “transition period” for what was then named “the common market”. It
was nothing more than a sort of list of actions to be implemented in order to
accomplish to the creation of free movement within the EU’s market. However, the
implementation of this programme was not successful because of the unanimity
requirement in the Council and the Luxembourg Compromise. Nonetheless, the
majority of the ideas, which were embedded into the abovementioned document, were
then inserted into the “Action Plan for the Single Market” 12 , which leaded to the
completion of the internal market 13.
This was the demonstration that the EU was planning to regulate in a
consistent way the services market. Indeed, the Commission proposed what was the
first draft of the “Bolkestein” Directive in 2004; however, due to lots of protests
coming from various associations of undertakings alleging that the Country of
Origin’s Principle (“CoOP) 14 aimed at destroying the SMEs, it proposed a second
draft in 2006.
One of the main reasons why the rules on services have developed in a quite
fragmented and inconsistent way was because the European institutions, especially
the Commission, started regulating services sector by sector 15. This was mainly due
to the fact that the EU was initially interested into a limited range of objectives as
regards the market of services. Subsequently, as the importance of that kind of market
was clearer and clearer, a more horizontal approach started to be preferred instead 16.
However, the new horizontal approach entailed that the scope of application of that
piece of legislation would have been narrower than expected.
Therefore, if, from one hand, the EU had begun to gradually understand the
importance of services for the single market since the first Treaties were adopted,
from another hand the EU found it difficult to approach to the market of services in a
consistent way because it was not an easy area of law. Be that as it may, it is
important to stress that it seems quite disputable that the Services Directive could be
deemed to be a proper horizontal piece of legislation. Indeed, in the first draft, for
instance, lots of derogations were inserted and many sectors were excluded from its
scope of application.
As regards the second draft, what is remarkable is that it was water downed by
hundreds of amendments adopted by the European Parliament. It is therefore a text
that is the result of a political compromise. It seems arguable that the reason why the
original proposal was set aside was mainly the incapacity of the European institutions,
in particular of the Commission, of convincing national political parties and national

12
Communication of the Commission to the European Council, Action Plan for the Single Market,
SEC(97) 1 final;
13
Completing the Internal Market : White Paper from the Commission to the European Council
(Milan, 28-29 June 1985), COM (85) 310, 14.6.1985;
14
The CoOP was aimed at applying the law of the home state to service providers moving from state A
to state B. However, the fact that host Member States would have had to renounce to regulate those
services, which were moving to their territory contributed to the raise of lots of protests, especially
from trade unions and association of undertakings. There were fears of social dumping and of unfair
competition. In France, for instance, it was argued that Polish plumbers would have invaded the French
market and drive French plumbers out the market. In Italy, by the way, there were fears regarding the
assignment of beach-concessions. It was argued (or rather it is argued) that Italian service providers
would be put at risk if the market were open to foreign entrepreneurs.
15
See, inter alia, the regulation in the field of transports, financial services and network-based services
which were among the first sectors to be regulated by the EU.
16
See, inter alia, the mutual recognition principle applied to professional services.

6
governments that a fully-fledged liberalization of the market of services was
necessary17.
It does not seem that the Services Directive is an effective (rectius, efficient)
tool through which opening up the single market of services. Indeed, due to the fact
that many sectors are excluded from its scope of application, it could be argued that it
might even constitute an obstacle to the urgent need of completing the internal
market. To put it differently, why did the Commission need to adopt a directive,
which indeed seems to cause more problems than expected? In other words, could
have the binding provisions embedded into the Treaties and the case law of the ECJ
been enough to provide for the necessity of integrating more the market of services?
Indeed, the final text of the “Bolkestein” Directive does not provide for the CoOP 18
anymore. It simply restates the principle of “Freedom to Provide Services” which is
already into the Treaties 19. Therefore, the real question is what is the added value of
the 2006/123/EC Directive? It could also be argued that it would have been more
efficient to keep on with the previous sectorial approach and adopting more ad-hoc
directives.
It might also be the case that some services sectors are more efficiently
regulated through the adoption of regulations, which do not need to be transposed into
the national legal orders, and which therefore enjoy horizontal direct effect. However,
it does not seem the case that those would have been good solutions for the
Commission and for the European institutions 20: first of all, because it would have
been costly indeed to negotiate and adopt as many sectorial directives as the number
of services sectors; secondly, because services are, by definition, a field in constant
evolution; thirdly negotiations both of sectorial directives and regulations might have
taken a long time 21. To confirm the fact that the two abovementioned alternatives
would have not solved the current problems, it is to be pointed out that pieces of
legislation which risk of being controversial need to have a strong legitimacy in the
public opinion in order to be adopted without being watered down.

b. The troubled genesis and its fragmented scope of application

A general perspective
According to Mr. Michel Barnier 22, the current Commissioner for the Internal Market
and Services, the public debate regarding the adoption of the “Bolkestein” Directive

17
This paper argues that the Commission should have had to persuade both the Member States, the
civil society and the public opinion that the achievement of the single market for services would have
entailed concrete benefits.
18
The final text of Art. 16 of the Services Directive does not contain the CoOP anymore. It simply
states the “freedom of services” principle. This result was due to the abovementioned protests and
fears.
19
Art. 56 TFEU reads as follows: “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 European Parliament and the Council, acting in accordance with the ordinary legislative
procedure, may extend the provisions of the Chapter to nationals of a third country who provide
services and who are established within the Union”.
20
See Commission Staff Working Paper “Extended Impact Assessment of Proposal for a Directive on
Services in the Internal Market” COM (2004) 2 final, SEC (2004) 21, 13.1.2004;
21
The nature of services is in constant evolution. It follows that sectorial directives and regulations are
not the best way of dealing with services as a certain degree of flexibility is certainly required.
22
See M. Barnier’s foreword to C. Ferrari-Breeur (ed.), “La Directive Services en principe(s) et en
Pratique”, (Bruylant, 2011).

7
was “rich, but stormy and mainly based on misunderstandings and simplistic
reasoning”. This paper concurs with the abovementioned view also because the
debate, which followed up to the interpretation and the implementation of the
Services directive, has been of the same nature. Mr. Barnier was mainly thinking of
the French public opinion and of the French civil society when criticizing the quality
of the public debate 23 . However, this occurred and still occurs in other Member
States, such as Italy, for instance, where service providers exercising their economic
activity on areas belonging to the public domain and assigned through concessions
contracts 24 see a full and correct implementation of the directive as a kind of bad
bogeyman.
It might be argued that the “rich, but stormy and mainly based on
misunderstandings and simplistic reasoning” debate was due to the alleged
democratic deficit of the EU. This paper does not aim at going deeply into the
democratic deficit issue. However, it seems the case of mentioning it because it helps
us better understand the reasons why that debate was triggered. According to that
view, the European legal order is essentially to be considered as non-democratic for a
few reasons, such as, inter alia, the fact that all the European institutions but the
European Parliament are not directly elected by the citizens. It follows that all the
pieces of legislation, which are adopted by the EU, suffer from lack of democracy and
therefore lack of legitimacy.
However, many scholars take a different view 25 according to which there is no
democratic deficit for two reasons: firstly, democratically elected members of national
governments seat in the EU institutions; secondly, what is named “democratic deficit
of the EU” is rather a democratic deficit of the Member States which are not able to
absorb externalities and to effectively address the challenges of our time anymore.
What follows from this is that state governments tend to blame Brussels arguing that
the EU is not able to take those decisions that would be the case to take. Actually, the
problem is that the Member States are not eager to confer powers to the supranational
level 26.
In addition, the EU Member States still oppose to any efficient opening up of
the market of services 27 . This is proven by the “rich, but stormy and based on
misunderstandings and simplistic reasoning” 28 debate, which surrounded the adoption
of the “Bolkestein” Directive. According to Mr. Barnier 29, notwithstanding the delay
of the implementation of the Directive 30, the result of its impact could be deemed to
be positive: a few barriers were removed and there were benefits for the SMEs which
amount to up to 95% of the service providers in the EU. This is quite an optimistic
statement, which is difficult to concur with. Indeed, the troubled genesis of the
23
The current Commissioner for the Internal Market and Services is probably referring to the fears of
Polish plumbers entering France and invading the French market with their competitive prices.
24
There have been many protests in Italy carried out by service providers who run beach concessions.
Indeed, they called (rather, they call) for opting out from the “Bolkestein” Directive. Basically, they do
not want the Services Directive to be applicable to their authorizations.
25
See note 4 above; see also A. von Bogdandy, “I principi fondamentali dell'Unione europea. Un
contributo allo sviluppo del costituzionalismo europeo” (Editoriale scientifica, 2011);
26
A good example of what is described above is the current debate regarding the possibility of
conferring more powers to the EU and to move towards a real political union in order to be able to
better address the economic and financial crisis.
27
Notwithstanding the Treaties, the ECJ case law, the Services directive and the sectorial directives,
the market of services has not been completed yet.
28
See note 22 above.
29
Ibid.
30
The Services Directive was supposed to be implemented by 31 December 2009.

8
directive has caused a loss of legitimacy in the eyes of the public opinion and of the
public authorities. This has made the whole system and, in particular, the idea and the
functioning of the internal market, less credible and less legitimated. In other words,
the Services Directive’s effectiveness had already been weakened before it was
adopted.
This was mainly due to the difference between the original proposal and the
final text 31. As a former judge of the ECJ has already pointed out 32 that the whole
genesis of the Services Directive was a “total and progressive process of destruction”.
As the Directive is rooted into the Lisbon Strategy, which would have had to render
the European economy the most competitive and the most powerful in the world by
2010, the European Council agreed that the optimal tool to accomplish to that
objective would have been the Services Directive. All the restrictions or obstacles to
the access and to the exercise of the freedom of services would have had to be
removed. It was an ambitious aim, which is still far from being reached though. It was
the first horizontal attempt to fully implement the freedom of establishment and the
free movement of services. The result was a progressive destruction of the original
version: what would have been the most effective and the most efficient legal tool
became, according to some scholars 33 nothing more than a mere restatement of
primary law and a codification of the case law of the ECJ.

A troubled genesis bringing fragmentation

The original proposal was aimed at reinforcing and further developing the
principles enshrined into the Treaties and into the case law of the ECJ, such as the
CoOP and administrative cooperation. As it has already been stated above, the
European Council 34 stressed the need of completing the internal market of services.
Therefore, the Commission Communication 35 identified a range of barriers, which
needed to be eliminated. These were mainly related to restrictions to establishment
and to the promotion and distribution of services. The effect of those barriers being in
force was big distortions in the market.
This was the main reason why the Commission launched a public
consultation 36 , which then leaded to the 2004-draft. The first proposal was
accompanied by an Extended Impact Assessment 37 which brilliantly highlighted what
were the negative effects of having a fragmented market of services and that a
horizontal legislative tool was needed in order to eradicate them 38 . Indeed, the
barriers to entry and to the exercise of the free movement of services entailed a loss of
competitiveness and big fragmentation of the market. All these negative effects had to
31
V. Hatzopoulos, “Que reste-t-il de la directive sur les services?” CDE 2007
32
M. Wathelet, “La genèse de la directive “services” in C.F. Breeur (ed.) “La directive “services” en
principe(s) et en pratique” (Buylant 2010)
33
Ibid.
34
24 March 2000
35
Communication from the Commission to the Council and the European Parliament “An Internal
Market Strategy for services” COM (2000) 888, 29.12.2000.
36
Report from the Commission to the Council and the European Parliament on the State of the Internal
Market for Services, presented under the first stage of the Internal Market Strategy for Services, COM
(2002) 441, 30.7.2002
37
See note 20 above
38
The negative effects of barriers in the market of services were identified to be on trade and
investment, employment, SMEs, innovation, labour productivity and consumer prices. These barriers
affected equally service providers and recipients and restricted both cross-border establishment and
cross-border provision and use of services.

9
be abolished not only due to the importance of services for the European market but
also due to the relatively low percentage 39 of intra-EU movement of services and the
relatively high percentage of extra-EU exchange of services 40. Moreover, two studies
on the impact of the original proposal were published 41 arguing that this directive
would have leaded to a total growth of up to 0.8% of the GDP.
The legislative process, which brought to the adoption of the Services
Directive, lasted less than three years 42 as the first proposal dates back to January
2004 and the final text was published on the Official Journal in December 2006. The
majority of the amendments were made during the first passage in the European
Parliament notwithstanding that both the Committee of the Regions and the Economic
and Social Committee gave positive comments on the draft 43.
After the first reading, the original draft resulted into being restricted in its
scope of application as many sectors were excluded and it was clearer that it did not
apply to posted workers at all. In addition, the CoOP was cancelled and it was
substituted with the Freedom of Services principle. Therefore what remained from the
original proposal is the obligation for the Member States to simplify their public
administrations and their administrative procedures linked to the free movement of
services, the requirement of eliminating or simplifying authorization schemes, a list of
forbidden requirements, a need of administrative cooperation between the home state
and the host state, the principle of Free Movement of Services and Consumer
protection.

The (reduced) scope of application

As it has already been fleshed out by this paper, the main features of the
Services Directive are its horizontal approach and therefore its aim at covering all the
field of free movement of services but the sectors which have been explicitly
excluded from the scope of application and the practical effect of restating the
principles established by the Treaties and the case law of the ECJ. As regards the
horizontal approach, it seems quite strange that recital 33 44 includes in a kind of non-
exhaustive list the different fields of services the directive applies to. In this case, the
meaning of the abovementioned paragraph seems to be quite confused in the way it is

39
The Commission found out that the percentage was relatively low (20%).
40
In this case, the percentage was slightly higher (28%).
41
See the CFB Netherlands Bureau for Economic Policy Analysis (2006) and Copenhagen Economics
(2005).
42
The proposal went through ten Committees of the European Parliament.
43
Committee of the Regions argued in favour of the exclusion of the SGEI from the text. It agreed on
the CoOP though. The Economic and Social Committee argued in favour of th exclusion of the SGEI
and of the audivisual services as well. It proposed to postpone the application of the CoOP.
44
Whereas 33 reads as follows: “The services covered by this Directive concern a wide variety of ever-
changing activities, including business services such as management consultancy, certification and
testing; facilities management, including office maintenance; advertising; recruitment services; and the
services of commercial agents. The services covered are also services provided both to businesses and
to consumers, such as legal or fiscal advice; real estate services such as estate agencies; construction,
including the services of architects; distributive trades; the organisation of trade fairs; car rental; and
travel agencies. Consumer services are also covered, such as those in the field of tourism, including
tour guides; leisure services, sports centres and amusement parks; and, to the extent that they are not
excluded from the scope of application of the Directive, household support services, such as help for
the elderly. Those activities may involve services requiring the proximity of provider and recipient,
services requiring travel by the recipient or the provider and services which may be provided at a
distance, including via the Internet”.

10
presented. This might be due to the difficult negotiations process the whole directive
went through. However, the fact that it is supposed to have a horizontal application
means that there should be no list of services the directive applies to. Indeed, it should
be characterized by an “opt-out” mechanism, which highlights the excluded sectors 45.
Be that as it may, the “Bolkestein” Directive applies both to business-to-
business and to business-to-consumer services 46 . In addition, as it has been stated
above 47 the reason why the Commission decided to propose a horizontal directive lies
in the fact that restrictions to the access to and to the exercise are common to all the
different kind of services and in the fact that, as it has been pointed out by De Witte48,
the Commission would not be successful at all in addressing the enormous number of
restrictions in the market of services by opening infringement procedures only. The
average duration of such a procedure is of two years plus the time before the ECJ 49. In
addition, Member States are quite reluctant to comply with the ECJ’s judgements 50.
However, as regards the mere scope of application of the directive, Art. 2
contains the explicit exclusions: services of general non-economic interest 51, financial
services 52, electronic communication services 53, transport services 54, temporary work
agencies services, health care, audio-visual services, gambling services, activities
connected to the exercise of public powers, social services 55, private security services,
notaries and bailiff services, taxation field. All the excluded sectors are within the
scope of application of the Treaties and of the case law though.
In addition, the Directive does not seem to contribute to improve clarity and
legal certainty. Indeed, it is argued that it brings even more fragmentation to the
market of services due to the higher number of recitals enshrined in the final
version 56. As regards the articles, there is no difference in quantity between the first
draft and the second one, whilst derogations and exclusions from the scope of
application augmented significantly. The original version of Art. 1, for instance, was
originally composed of 28 words, whilst the final text of the same article resulted in
being composed of 423 words 57. Moreover, the text consists of negative sentences 58.

45
See S. D’Acunto, “Direttiva Servizi (2006/123/CE): Genesi, Obiettivi, Contenuti”, (Giuffrè, 2009).
46
In order to understand the definition of “services”, see Art. 4 and whereas 34. To see all the
evolution of the case law of the ECJ, see C. Barnard, “The Substantive Law of the EU- The Four
Freedoms”, (OUP 2010).
47
See note 20 above.
48
See B. De Witte, Setting the Scene: How did Services get to Bolkestein and Why, EUI Working
Papers, 2007 available at http://cadmus.eui.eu/handle/1814/6929
49
Communication from the Commission, “A Europe of Results-Applying Community Law”, COM
(2007) 502, 5.09.2007
50
See note 45 above.
51
It is important to stress that Services of General Economic Interest are included within the scope of
application of the directive. As regards Services of General Non-Economic Interest, the exclusion from
the scope of application is not caused by the fact that they cannot be considered as services within the
meaning of EU law. Indeed, this is due to political reasons. However, Electronic communication
services and those enlisted in Art. 16 such as mail, gas, water and waste management services, are
excluded. The Member States are free to determine what services are to be considered as SGEI, the
way in which they are organized or financed.
52
This service has already been regulated.
53
This service has already been regulated .
54
This service has been totally excluded from the scope of application of the Directive.
55
In this case, it was partially excluded only.
56
The final version contains 118 “whereas” whilst the original draft provided for 73 “whereas” only.
57
As regards the French version.
58
As it has already been stated by L. Chabaud in “La Directive Services en principe(s) et en pratique”
and by F. Picod “Le champ d’application de la directive n. 2006/123/CE”, Europe 2007, the fact that

11
In addition to the many exclusions or derogations, the final text set aside the CoOP
and refers to the quite simpler principle of “Freedom of Services”. As it has been
stated above, the result of the switch from the more ambitious CoOP to a mere
restatement of the principles embedded in the Treaties and in the case law of the ECJ
was due to the political compromise which laid beyond.
As regards the sectors which are not affected by application of the directive,
Art.1 is very clear: the Directive is not aimed neither at liberalizing nor at privatizing
Services of General Economic Interest and does not deal with the abolition of
monopolies or with state aids rules and competition laws, with cultural and linguistic
diversity protection and promotion, with plurality of the media, criminal law,
employment law, social security and with the field of fundamental rights.
The Services Directive aims to an administrative simplification in the field of
freedom of establishment by providing for the creation of points of single contact
(“PoSCs”) and introducing electronic procedures through which service providers and
recipients would be able to obtain all the necessary information they need. By
prescribing the creation of PoSCs the directive does not intend to affect the allocation
of powers and competences within the Member States through the setting up of new
decision-makers. It does aim at creating offices able to put in contact service
providers with the public authorities of the host state. It could be both by setting up
real offices where providers can go before to or by creating multilingual websites
where all the necessary information can be obtained from.
In order to dismantle barriers to the access and to the exercise of the freedom
of establishment and services the Directive prescribes 59 that authorization schemes
must be eliminated where possible. The rationale is that ex-post checks are to be
preferred to ex-ante ones 60. If there were schemes which would not be the case to
eliminate due to the fact that ex-ante control procedures result in being much less
costly than ex-post ones, then the criteria according to which authorizations must be
released should be non-discriminatory, justified, proportionate, objective, transparent,
necessary 61. Moreover, all the procedures leading to the granting of authorizations
should be simplified.
However, the key aspect of the “Bolkestein” Directive for the services that are
offered on areas belonging to the public domain and assigned through concession
contracts, is Art. 12 62, according to which if the authorizations available are limited
because of the scarcity of natural resources or technical capacity, a selection
procedure 63 to choose among different candidates should be established by the public
authorities of the Member States. No automatic renewal or right to be preferred
provision is permissible in these cases. In addition, as regards Art. 12, one can argue

the text of the directive is full of negative sentences does not necessary entail that the directive is not
applicable to all those sectors. What this could mean is that in case of conflict between the Services
Directive and another piece of legislation which would be supposed to regulate the sector excluded, the
latter will prevail.
59
Art 9.
60
See Joined Cases C 358/93, C 416/93 Criminal proceedings against Aldo Bordessa and Vicente Marí
Mellado and Concepción Barbero Maestre, ECR 1995 I-00361; See also Case Canal Satélite Digital
SL v Adminstración General del Estado, and Distribuidora de Televisión Digital SA (DTS), ECR 2002
Page I-00607.
61
Art. 10.
62
As it has been states above, by services which are offered on areas belonging to the public domain it
is meant beach-concessions in Italy and in the other Member States.
63
The selection procedure to chose among different candidates should be carried out according to the
principle of transparency and publicity.

12
that it has a clear “public procurement function” as it is applicable in the awarding of
service concessions.
The directive highlights 64 requirements which are prohibited 65 or which are
subject to evaluation 66. The restrictions which should be deemed to be prohibited per
se are: discriminatory requirements 67, the prohibition of having an establishment in
more than one Member State 68, restrictions on the freedom of a provider to chose
between a principal or a secondary establishment as well as restrictions on the
freedom to chose the preferred form of secondary establishment 69 , conditions of
reciprocity70, the case-by-case application of an economic test making the grant of the
authorisation subject to the proof of an economic demand 71, the direct or indirect
involvement of competitors in the decision-making process granting the
authorization 72, an obligation to provide or to participate in a financial guarantee or to
take out insurance from a provider established in the territory of the host state 73 and
the obligation of having been registered or having exercised in the host state 74.
The requirements, which are subject to a sort of rule of reason 75, are: the so-
called numerus clausus clauses, the obligation on a provider to adopt a specific legal
form 76, requirements relating the shareholding of a company77, requirements, other
than those covered by Directive 2005/36/EC 78 which reserve access to the service to
particular providers 79, the prohibition of having more than one establishment in one
member state 80, a minimum number of employees 81, fixed tariffs 82, and the obligation
on the provider to offer other services. Those are cases in which the ECJ has stated

64
Art 14.
65
In this case the obstacles established by the host state are prohibited per se. This means that it
constitutes an unrebuttable presumption.
66
The presumption can be rebutted.
67
See, inter alia, Case C-62/96 Commission v. Belgium, ECR 1999 I-03999;
68
See Case 107/83, Ordre des avocats au Barreau de Paris v Onno Klopp; See also Case C-106/91,
Claus Ramrath v Ministre de la Justice, and l'Institut des réviseurs d'entreprises, ECR 1992 I-03351;
Case 96/85, Commission v. France, ECR 1986 01475.
69
See Case C-212/97, Centros Ltd v Erhvervs- og Selskabsstyrelsen, ECR 1999 I-01459; See Case C-
167/01, Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd, ECR 2003 I-10155;
Case C-307/97, Compagnie de Saint-Gobain, Zweigniederlassung Deutschland v Finanzamt Aachen-
Innenstadt, ECR 1999 I-06161; Case 270/83, Commission v. France, 1986 00273;
70
Case C-131/01, Commission v. Italy, 2003 I-01659;
71
Case C-63/99, The Queen v Secretary of State for the Home Department, ex parte Wieslaw
Gloszczuk and Elzbieta Gloszczuk, ECR 2001 I-06369; See also, inter alia, Case C-255/04,
Commission v. France, 2006 I-05251.
72
See Case C-439/99, Commission v. Italy, ECR 2002 I-00305
73
See, inter alia, Case C-514/03, Commission v. Spain, ECR 2006 I-00963.
74
See Case C-58/99, Commission v. Italy , ECR 2000 I-03811; See also Case C-203/98, Commission
v. Belgium, ECR 1999 I-04899.
75
Art. 15.
76
See Case C-70/95, Sodemare SA, Anni Azzurri Holding SpA and Anni Azzurri Rezzato Srl v Regione
Lombardia, ECR 1997 I-03395; See also Case C-438/99, Maria Luisa Jiménez Melgar v Ayuntamiento
de Los Barrios, ECR 2001 I-06915;
77
See Case C-171/02, Commission v. Portugal, ECR 2004 I-05645;
78
Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the
recognition of professional qualifications.
79
See Case C-451/03, Servizi Ausiliari Dottori Commercialisti Srl v Giuseppe Calafiori, ECR 2006 I-
02941.
80
See Case C-140/03, Commission v. Hellenic Republic, ECR 2005 I-03177.
81
See note 73 above.
82
See Joined Cases C-94/04, C-202/04, Federico Cipolla v Rosaria Fazari, née Portolese and Stefano
Macrino and Claudia Capoparte v Roberto Meloni, ECR 2006 I-11421.

13
that the abovementioned requirements should be subject to evaluation, that is to say to
a non-discrimination, suitability and necessity test.
The CoOP should have been embedded into Art. 16 and it would have been
applicable both to the right to access and to exercise the free movement of services. It
would not have been applicable to the freedom of establishment and to the posting of
workers. In addition, the original draft did provide for up to 29 derogations to the
application of the CoOP. However, as it has been stated above, the debate
surrounding the adoption of the “Bolkestein” Directive was not easy at all. There
were unfounded fears of social dumping and of a sort of “Delaware effect” within the
EU legal order. Some scholars 83 argued in favour of the benefits, which the
application of the CoOP would have brought to the European economy. Even more,
notwithstanding the fact that it was due to the political debate going on both in the
Member States and in the European Parliament that the CoOP was abolished, the
latter had argued in favour of the CoOP too 84.
Nonetheless, the CoOP was cancelled and the now Art. 16 fleshes out the
more generic principle of “Freedom of Services”, which can be derogated by reasons
of public policy, public security, public health, environmental protection or by the
overriding reasons in the public interest 85 and it must comply with the principle of
non discrimination and with the proportionality test. Art. 16(2) provides for a non-
exhaustive list of prohibited requirements, which are different from the ones in Art.
14.
Be that as it may, it seems reasonable to seek for the real added value brought
to the freedom of establishment and to the free movement of services fields by the
Services Directive. In fact, if it seems doubtless that the “Bolkestein” Directive would
have been supposed to open up the whole internal market of services through its
horizontal approach and therefore to better apply the principles enshrined in the
Treaties and in the ECJ case law, the reality seems to be quite far from the original
dream. The market of services appears to be as fragmented as it was before. In other
words, the Services Directive seems to have been unsuccessful. Even more: what
seems clear is that its interpretation might cause more confusion and that many
services sectors are still unregulated and closed to competition due to the fact that it
needs to be fully and correctly implemented by the Member States.
According to Wathelet 86 the added value of the Directive consists into the
obligation imposed on Member States and on their public administrations to closely
cooperate through the creation of the PoSC. Regarding the CoOP, what should be
pointed out is that even if it seems to be that it has been abolished, in reality, the
alleged difference between the CoOP and the now Art. 16 would not be that
significant. Indeed, the CoOP has not been invented by the Services directive but by
the ECJ through the principles of mutual trust and mutual recognition 87.
In addition, the free movement of services, which is fleshed out by Art. 56
TFEU, is not different from the CoOP in the concrete application of EU law. In fact, it

83
See, inter alia, M.D. Garabiol-Furet, Pladayer por le principe du pays d’origine, in Revue du
Marché commun et de l’Union Européenne 495/06; See also, C. Prieto, La liberté d’établissement et de
la prestation des services, in Revue trimestrielle du Droit Européenne 2005
84
European Parliament Resolution of 13 February 2003 on the Communication from the Commission
to the Council, the European Parliament, the Economic and Social Committee and the Committee of
the Regions: “2002 Review of the Internal Market Strategy- delivering the promise, COM (“002) 171-
C5-0283/2002 – 2002/2143 (COS). A5 -0026/2003, paras. 35, 36.
85
Art 4(8).
86
See note 32 above.
87
See Case 33/74 Van Bisbergen and Case 120/78 Rewe Zentral (Cassis de Dijon).

14
is more and more the case that the ECJ has abandoned the three-step test based on the
principle of non-discrimination on the ground of nationality and it has adopted the
two-step test based on whether a national measure constitutes an obstacle or a
restriction 88. This occurs in the field of freedom of establishment and free movement
of services but also in the case law where the other fundamental freedoms are
implied 89.
Therefore, it does not seem clear which is the real difference between the
CoOP and the freedom of services principle. According to the principle of
convergence of the fundamental freedoms 90, to the general principle of equality91 and
to fundamental rights 92, the ECJ will highly likely interpret the freedom of services
principle in the light of the Treaties and of the case law. This would necessarily imply
that the law applicable to the service provider moving from his home state to the host
state would be the country of origin’s law.
Anyway, the CoOP is nothing new for secondary law as well. It is applied by
the Posted Workers directive in the field of free movement of workers 93and it has
been applied in many other horizontal provisions. As it has been stated by
Hatzopoulos 94 there have been three periods through which the CoOP developed in
the history of European integration: the first period regards the “passport” directives
for credit branches 95, investment services 96, insurances 97; the second one regards the
“Televisions Without Frontiers” Directive 98, the directives on electronic signatures 99,
on e-commerce 100 and on personal data in the telecommunications sector 101. In all the
abovementioned cases the CoOP is applied to both the right to access to the market
and the right to exercise. The third period would have been represented by the
Services Directive: legally speaking, the CoOP which was provided in the then Art.
16 could have been considered as a kind of “third generation” CoOP as it stated what
was the competent tribunal in case of litigation.

88
See Case C-76/90, Sager.
89
For a better understanding of the argument related to the principle of convergence among the
fundamental freedoms, see A. Tryfonidou, Further steps on the road to convergence among the market
freedoms', (2010) 35 European Law Review, pp. 36-56.
90
Ibid.
91
See T. Tridimas, “General Principles of EU law”(OUP, 2013).
92
It is argued that in this case, the right to economic initiative, which is enshrined in Art. 16 of the
Charter of Fundamental Rights of the European Union could be used.
93
See C. Barnard, “Employment Law” (OUP, 2012)
94
See note 8 above.
95
Council Directive 89/11/EEC of 13 February 1989 on the obligations of branches established in a
Member State of credit institutions and financial institutions having their head offices outside that
Member State regarding the publication of annual accounting documents;
96
Council Directive 93/22/EEC of 10 May 1993 on investments in the securities field.
97
In this case the CoOP has been applied as regards the right to access to the market and not to the
right of exercising the service activity.
98
Directive 97/36/EC of the European Parliament and of the Council of 30 June 1997 amending
Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation
or administrative action in Member States concerning the pursuit of television broadcasting activities.
99
Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a
Community framework for electronic signatures.
100
Directive 200/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal
aspects of information society services, in particular electronic commerce, in the Internal market
(“Directive on electronic commerce”).
101
Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning
the processing of personal data and the protection of privacy in the electronic communications sector
(Directive on privacy and electronic communications”).

15
 However, due to the fact that the CoOP was so far-reaching, a few
counterbalances were inserted into the text. Firstly, its application was limited;
secondly it would have been applicable to business-to-business relations only; thirdly,
it could have been derogated by overriding reasons in the public interest.
In addition, it should be pointed out that, if, from one hand, the CoOP is not
that different in the practice from the freedom of services principle, on the other hand,
the ECJ and the national courts could let the two coincide. Nonetheless, the issue here
is: who has to demonstrate what before the court?
In fact, the original version prescribed that it was to the host state to prove that
the service provider had to comply with its requirements. The final text left
unchanged the then mechanism through which it was to the service provider to make
evidence that he or she had not to comply with the host state laws because they would
have constituted a restriction to the freedom of establishment and to the free
movement of services and that they would have not satisfied the proportionality test
and that they might have been in breach of fundamental rights 102. However, this paper
argues that the courts could make it easier for the service provider, at least when
business-to-business relations are under scrutiny.

c. The fragmentation stems from the implementation process

The aim of this paper is not of going deeply into every issue that rose during
the implementation process in the Member States 103. Therefore, this paper aims at
analysing the most relevant issues regarding implementation that might lead to
fragmentation and then to disintegration of the single market. This could be even
riskier in time of crisis. Indeed, if the transposition process is not correctly done, it
might bring fragmentation and therefore inefficiencies in the market. Hence, it is
argued that the implementation process of the Services Directive has not been
completed yet. Consequently, it is likely that that could lead to risks of progressive
disintegration of the single market. In fact, as it has already been pointed out, the
services sector is extremely important for the EU economy. It represents up to the
70% of the GDP and of the employment force of the Member States, whilst the intra-
EU trade in services is extremely low if compared both with the extra-EU trade in
services and with the competitive advantage which the EU enjoys in that field. This
means that there is an untapped potential, which is still not exploited. The
“Bolkestein” Directive aimed at unchaining that potential by eliminating
discriminatory requirements put into force by the host state and by imposing
obligations on national governments to simplify their public administrations.
The deadline for the implementation of Directive 2006/123/EC was scheduled
for the end of 2009. However, even if the result of the transposition process is to a
certain extent appreciable, there are still sectors where the provisions of the Services
Directive have not been properly or fully implemented, such as, for instance, Art. 12
regarding the introduction of selection procedures among different candidates when
the number of authorizations is scarce. In addition, there are obligations, such as the
establishment of the PoSCs and the application of the directive to the so-called purely
internal situations, which have been unevenly implemented. Moreover, if the
confusion related to the alleged difference between the CoOP and the freedom of

102
See C. Barnard, “The Substantive law of the EU- The Four Freedoms” (OUP, 2010).
103
For an overview on the problematic of the implementation of the Services directive, see U. Stelkens,
W. Weiss, M. Mirschberger (eds.), “The Implementation of the EU Services Directive” (Springer
2012).

16
services principle and the confused relation between the Services Directive and
primary law are added, the legal framework, which is in force, seems to lead to
uncertainty.
Be that as it may, this section will firstly address the implementation problems
caused by the troubled genesis of the directive; secondly it will address the above-
examined scope of application; thirdly it will examine the problems related to Art. 12;
fourthly, it will address the problematic of the establishment of the PoSCs; fifthly, it
will examine the risks of reverse discrimination caused by the implementation
process; sixthly, it will analyse what remains of the CoOP after the adoption of the
second draft; in the end, it will be stressed what is the relation between the directive
and primary law.
The reason why this paper started by highlighting what was the genesis of the
adoption process, is that it is deemed that the effectiveness, or rather the efficiency, of
a piece of legislation lays in its legitimacy towards both the institutions which have
adopted it and towards the subjects it addresses to. In this case, it seems clear that the
first draft was proposed by the Commission conforming to the indications coming
from the European Council and that therefore the main aim was to fully open up the
market of services. Indeed, the first proposal provided for the CoOP in the field of
services and for less derogations. The huge debate, which took place within the civil
society, particularly among those who would have suffered most from the directive,
as they would have lost their previously acquired benefits, had the purpose and the
effect of diminishing the Services Directive legitimacy.
That debate affected the media, the national institutions and, ultimately, the
European institutions as well. In fact, it was due to the European Parliament action
that the first draft was watered down by eliminating the CoOP and by increasing the
number of excluded sectors from the scope of application.
In other words, it is argued that the debate in itself and the adoption of a second less-
ambitious proposal contributed to decrease the credibility of the whole system and of
the internal market as well.
Indeed, those European institutions that were in favour of the adoption of the
2004-draft were not able to efficiently advocate that a more ambitious text would
have brought more benefits to consumers and to the whole economy. In this way, the
single market, which seemed to have reacquired its lost appeal 104, started to lose both
legitimacy and credibility. In addition, the fact that the idea of dismantling the barriers
to entry and the barriers to the exercise was successfully questioned by neo-
protectionist trends 105 entailed a loss in terms of deterrence from infringing EU
law 106.

104
According to the Buegel Policy Brief “Single Market Trails Home Bias” of 5 October 2006, the
single market strategy need rethinking and new impetus. Indeed, market integration should be pursued
both by horizontal and sectorial instruments. Furthermore, it pointed out that time has come to focus
on services much more than ever.
105
See the debate surrounding the adoption and the implementation of the Services Directive,
particularly the fears of social dumping. In fact, as it has been already mentioned, the French public
opinion feared that Polish plumbers would have invaded the French market and driven French
plumbers out the market. In Italy, the majority of fears are still concentrated on the impact of the
Directive upon those services provided for on areas belonging to the public domain, such as beach-
concessions.
106
The European Member States are more and more seen as legitimated to maintain barriers by their
public opinion. In this way, the deterrent effect, which stems from the Treaties and from the case law
of the ECJ is being strongly jeopardized.

17
 As regards the scope of application, it is important to highlight that there are
difficulties in correctly implementing the abovementioned norms because, as it has
been stated above, many services sectors remain excluded from it, such as the
Services of General Non-Economic Interest 107, the health-care sector, the gambling
sector and the private securities services, together with notaries and bailiff, the
taxation field, temporary agencies services, activities linked to the exercise of public
authorities. In addition, fields such as the audio-visual services and the financial and
electronic communication services are excluded as they are already regulated by ad
hoc provisions. If, from one hand, it is clear that the directive does not apply to the
those sectors, it is important to bear in mind that the establishment and services
provisions enshrined into the Treaties together with the principles fleshed out in the
case law continue to apply to the excluded fields as well. This might cause problems
of legal certainty and of inefficiencies within the market because the Services
Directive is used to interpret and to flesh out the principles embedded into primary
law 108.
As regards Art. 12, it derogates from the general rule established in Art. 9 and
in Art. 11 according to which authorization schemes shall be abolished and ex-post
controls are to be preferred to ex-ante ones and that those authorizations must be
unlimited in time. Indeed, Art. 12 provides that where the number of authorizations
available is limited due to the scarcity of available natural resources, then a selection
procedure to choose among different candidates must be introduced. In addition,
neither automatic renewal mechanisms nor privileges to the incumbent service
provider are to be established. This particular field, which various service providers
want to get access to, is currently the sector where the Services Directive has not
correctly been implemented in yet. One can argue that Art. 12 has a “public
procurement function” as it can be used, together with the principles of equal
treatment and non discrimination and the principles of publicity and transparency, for
regulating service concessions. In other words it strongly contributes to shed light
onto the grey area of all those contracts that are not caught by the Public Procurement
Directives.
This paper argues that a non-full and correct implementation might jeopardize
the completion of the internal market and cause first its fragmentation and ultimately
its disintegration. This article addresses the problematic of the implementation of Art.
12 regarding those services which are provided for on areas belonging to the public
domain assigned to individuals through concessions, such as touristic services offered
on beaches in Italy, Spain, Portugal and France 109 . The Commission opened an
infringement procedure 110 against Italy for not having correctly implemented Art. 12
to the abovementioned sectors. The contested measure was that Italy had tolerated
that the incumbent service provider was to be preferred to any would-be competitor
by the public authorities in charge with the power of assigning the concessions (the
regions and the municipalities) and that automatic renewal mechanisms were in 111
force to impede the opening up of the market. Furthermore, the Italian Government

107
See note 51 above.
108
See note 6 above.
109
These countries were chosen because they can be easily considered as similar to Italy as regards the
characteristics of their coasts.
110
Infringement Procedure no. 2008/4908
111
The beach-concessions are supposed to last for no more than 6 years. However, no selection
procedure to chose among different candidates has been established so far in order to be able to
reassign the public areas to would-be service providers.

18
had not provided for any selection procedure to choose among different candidates 112
when assigning those areas. In other words, the national measures were liable of
impeding and deterring access to the market and the exercise of the freedom of
establishment and freedom to provide services.
Subsequently, the Italian Government negotiated an extension of the time limit
to 2015 to have more time to correctly implement the Services Directive in those
sectors. The Infringement procedure was then closed due to the fact that the national
parliament delegated to the government the adoption of a piece of legislation aimed at
reorganizing beach-concessions. However, as it often happens in these cases, the
Parliament has recently extended the entry into force of the selection procedure to
2020. It is worth mentioning that the Commission has not agreed to the second
extension period and that therefore it could happen that a new infringement procedure
will be opened.
In Spain 113 the situation is rather similar to the Italian one. However, those
areas, which are offered through concession contracts in Italy, are considered as mere
authorizations 114 in Spain. Generally speaking, selection procedures to choose among
different candidates are established by law. However, it is not compulsory for the
public administration to open such a procedure. The discretionary power is quite high.
The principles of publicity, transparency, equal treatment and non-discrimination and
competition must be respected in any case though. Anyway, the legal framework
being rather similar to the Italian one, it seems clear that there is no sufficient degree
of freedom of establishment and freedom of services. It follows that the Treaties and
the case law of the ECJ have not been applied to the abovementioned sector, whilst
the directive has not been properly implemented in the national legal order.
Furthermore, as regards the duration of the concessions, the time limit is of no more
than 30 years, whilst the authorizations cannot last more than one year.
In Portugal 115 , the national laws require that the concessions should be
assigned through a competitive selection procedure. However, the incumbent service
provider is to be preferred to any would-be competitor. This provision seems quite at
odds with the nature and the aim of the selection procedure in itself. In addition
Portuguese law provides that the duration of the concessions should be of no more
than 75 years and that it should be balanced with the investments. It is easy to
understand how much discretionary power the public authorities have as regards the
duration of the authorizations.
In France 116 , the law prescribes that the procedure to assign the public
concessions is carried on by the prefect who has to inform the general public. Indeed,
public administrations have a right to be preferred to any other would-be assignee. If
they are not interested into having those areas assigned, then a selection procedure
among different candidates must take place. It is worth mentioning that the prefect
has quite a high degree of discretionary power. In the case that private subjects want
to take part into the procedure, it will be the “best” proposal to be taken into account
by the prefect. As regards the duration of the concession, French law states that the

112
It would be desirable that competitive procedures are introduced as the current situation is not
complying with the general principles of equality, non-discrimination, publicity, and transparency. See
also Case C-324/1998, Telaustria Verlags GmbH and Telefonadress GmbH c. Telekom Austria AG;
See also Case C-458/2003, Parking Brixen GmbH v. Gemeinde Brixen e Stadtwerke Brixen AG.
113
See M. De Benedetto, “Spiagge in cerca di regole”, (Il Mulino, 2011)
114
The Services Directive refers to authorizations as a general term.
115
See note 113 above.
116
Ibid.

19
time limit should be of no more than 12 years as regards the concessions that are
assigned directly by the State through the prefect. Anyway, the general law of
concessions prescribes no duration limit at all. However, there are regulations
establishing that natural beach-concessions have to last no more than 15 years, whilst
artificial ones no more than 30 years. It seems worth mentioning that the short
duration of the French concessions is an exception if compared to the other national
legal orders. This is certainly due to the high degree of consideration given to
environmental protection and preservation of the goods belonging to the public
domain by the French government.
As regards the establishment of the PoSCs, it should be pointed out that it has
leaded to uneven outcomes. Four groups 117 of States can be identified: the countries
which had already established similar structures before the adoption of the Services
Directive; those countries which introduced the PoSCs by using existing institutions
already dealing with business; those countries which assigned the tasks of the PoSCs
to pre-existing authorities and institutions and, in the end, those which introduced a
mere virtual PoSCs. The main issues regarding the PoSCs are related to the way in
which federal states, such as Germany, have implemented their offices. Indeed,
Germany has established a complex and quite confusing net of PoSCs, and to the fact
that it seems to make sense for the website to be multilingual in order to abolish
barriers to entry caused by linguistic reasons. It is worth stating that there is no
homogeneity in this case too. Indeed, there are Member States which have not created
their PoSCs website according to the abovementioned requirements yet.
As regards the risks of reverse discrimination 118 which have raised during the
implementation process, there seem to be two levels of conflicts: the one related to the
scope of application of the Services Directive and the one linked to the scope of
application of its transposing norms. The former brings about two different positions
among the Member States. Indeed, the majority of the Member States perceive the
Directive to be binding for transnational services only. A small minority only seems
to consider it applicable to domestic providers as well. As regards the latter, it is
worth stressing that a huge majority of Member States extended the application of
their national implementing measures 119 to domestic service providers too in order not
to make them suffer from discrimination and competitive disadvantage. Only two
Member States have completely avoided extending the application of transposing
rules to domestic providers: Austria and Czech Republic. Nonetheless, the other
Member States do not seem to guarantee equal treatment. All these situations
necessarily cause that legal phenomenon known as reverse discrimination. This paper
argues that this should not be tolerable anymore within the EU legal order as it brings
fragmentation in the internal market and the breach of the fundamental freedoms and
fundamental rights too 120 . Moreover, it seems arguable that reverse discrimination
constitutes a violation of the general principle of equality121.
Furthermore, in order to better address the issues raising from implementation,
it seems the case of taking into consideration the then CoOP and the now principle of
117
See note 103 above.
118
For a general overview of reverse discrimination, see A. Tryfonidou, Reverse discrimination in
purely internal situations: An incongruity in a Citizens' Europe', (2008) 35 Legal Issues of Economic
Integration, pp. 43-67; See also A. Tryfonidou, Resolving the reverse discrimination paradox in the
area of customs duties: The Lancry saga', (2011) 22 European Business Law Review, pp. 311-336 and
A. Tryfonidou, “Reverse Discrimination in EC Law”, (Kluwer Law International, 2009).
119
In the majority of the case, the extension regarded procedural rights only.
120
See note 118 above
121
Ibid.

20
“freedom of services”. Member States might find it difficult to understand what this
difference means and what the implementation of the latter could entail into national
legislation. Firstly, it does not seem clear whether they can be given a different
meaning or not. Indeed, if it is true that the CoOP has been cancelled from the final
text of the directive, it is also true that, as regards services, it is nothing new as the
case law of the ECJ already provides for it. Furthermore, it would not make any sense
to apply the law of the host state to services providers moving from state A to state B.
As the Directive is supposed to facilitate the transnational provision of services, it
would rather constitute an obstacle if the host state were supposed to regulate the
service provision. In addition, the CoOP is de facto applied in the field of the posting
of workers 122 as a general rule 123.
Be that as it may, it seems relevant to address the issue of the relation between
the Directive and primary law, that is to say Art. 49 TFEU 124 and Art. 56 TFEU125.
What seems clear is that, according to the general rule, primary law is superior to
secondary law and that whatever is not covered from the latter will come within the
scope of application of the former. However, as it is shown by the ECJ in its case
law 126 , what happens is that directives are often used by the courts to flesh out
primary law. In other words, primary law is more and more a tool used to interpret
secondary law, whilst secondary law gives substance to primary law 127. It could be
argued that there is a mutual-confirming relation between the two. The problem is that
this interplay risks of causing further fragmentation when primary law and secondary
law have to be transposed into the national legal orders 128.

d. A progressive and subtle fragmentation process still going on

The legal framework that comes out from the complex issues examined above
is not at all encouraging. Indeed, there is a mounting phenomenon of fragmentation
going on within the EU internal market, especially within the EU single market of
services. The fragmentation process is progressively and subtly eroding EU market
integration. This might seem quite paradoxical, as it has always been seen, according
to the functionalist and neo-functionalist approaches, as the motor of EU integration.
This paper argues that the fragmentation process, which is going on, started with the
“rich, but stormy and mainly based on misunderstandings and simplistic reasoning”
debate surrounding the adoption of the Services Directive. Although the Directive has
been perceived as a sort of panacea for increasing the already lowering of the single
market appeal, it seems arguable that the EU institutions have lost their capability of
advocating the concrete benefits that stem from a properly functioning single market.
As it has been stated above, the fragmentation process commenced with the
troubled genesis of the Services Directive: the watering down of the first proposal

122
See note 6 above.
123
Ibid.
124
It prohibits restrictions to the freedom of establishment.
125
It regards free movement of services only.
126
See note 6 above.
127
Ibid.
128
As regards the Italian situation of beach-concessions, for instance, it is worth mentioning that the
incumbent assignees call for a derogation from the “Bolkestein” Directive. Obviously, this is not
possible. However, even if it was, it should be borne in mind that the Treaties’ provisions would be
applicable anyway. In other words, even though the directive were not applicable, primary law would
be. This interplay between the former and the latter might increase legal uncertainty and doubts as
regards interpretation and implementation.

21
curbed the ambition of completing the single market by horizontally addressing the
market of services for the first time in the history of EU integration. To put it
differently, the second draft augmented legal uncertainty rather than efficiently
eliminating barriers 129. Indeed, it was reduced in its scope of application as several
services sectors have been excluded. It is important not to lose sight on the fact that
the implementation process has been taking a lot of time in the field of concessions
and authorizations such as, for instance, the abovementioned services. Indeed, the
incomplete transposition of what is now Art. 12 entails lots of inefficiencies within
the common market. In fact, the non-implementation of selection procedures to chose
among different candidates when assigning authorizations might be seen as a
restriction to freedom of establishment and freedom of services. The fragmented legal
framework, which emerges, has a strong deterrent effect to access to and to the
exercise of the fundamental freedoms. Indeed, this lack of effectiveness might lead to
a lack of output legitimacy and therefore to the disintegration of the single market.
Furthermore, the slow and inefficient implementation of the PoSCs is the
demonstration that there are still unsolved problems, which should urgently be
addressed in order to complete the single market.
In this entire confusing legal framework, the implementation process is still an
on-going process. The majority of the Member States 130 have chosen to adopt
horizontal legal provisions to transpose 2006/123/EC Directive into their legal orders.
Moreover, the perception that the directive and its transposition measures apply to
transnational services only and not to domestic providers augments the concrete risk
of a fragmented market. Indeed, reverse discrimination should not be a problem as it
might be the case that purely internal situation exist. However, this paper argues that
in a EU of citizens 131 what has been known as reverse discrimination should not be
tolerated anymore. The general principle of equality, which has both a vertical and
horizontal direct effect 132 together with the fact that the fundamental freedoms are
more and more being treated as fundamental rights by the ECJ 133 seem to make clear
that it would not be the case of treating cross-border situations differently from
entirely domestic ones. In addition, the application of fundamental rights 134 could be

129
As it emerged from the first part of this paper, the choice of adopting an “umbrella” directive was
the wisest one as sectorial regulations as well as sectorial directives would have not been able of
opening up the market due to the nature itself of services.
130
See note 103 above
131
See note 118 above.
132
See note 91 above.
133
See See Case C-438/05 The International Transport Workers’ Federation and The Finnish
Seamen’s Union v Viking Line ABP and OÜ Viking Line Eesti; see also Case C-341/05 Laval un
Partneri Ltd. v Svenska Byggnadsarbetareförbundet, Svenska Byggnadsarbetareförbundets avd. 1,
Byggettan, Svenska Elektrikerförbundet; See also Opinion of AG Mengozzi in Case C-341/05 Laval un
Partneri [2007] ECR I-11767, point 84, and his Joined Opinion in Case C-354/04 P Gestoras Pro
Amnistía and Others v Council [2007] ECR I-1579, point 177, and Case C-355/04 P Segi and
Others v Council [2007] ECR I-1657, Point 177. See also V. Skouris, “Das Verhältnis von
Grundfreiheiten und Grundrechten im europäischen Gemeinschaftsrecht,” Die Öffentliche Verwaltung
59, no. 3 (2006): 89–97 (93ff.). See also S. Prechal and S.A. De Vries, “Viking/Laval en de
grondslagen van het internemarktrecht,” Sociaal-economische Wetgeving: Tijdschrift voor Europees en
economisch recht (2008): 425–440, pointing out (pp. 434 and 435) that a conflict between fundamental
rights and fundamental freedoms can often be reformulated as a conflict between two fundamental
rights. See also See Opinion in Case C-171/11 Fra.bo SpA v Deutsche Vereinigung des Gas- und
Wasserfaches eV (DVGW),Paragraphs 56 and 57.

134
As it has been stated above, one of the fundamental rights that would be useful indeed is the right
to economic initiative, which is enshrined into Art. 16 of the Charter. However, it seems worth

22
useful to address the abovementioned issue as well. Indeed, as the former AG Maduro
has pointed out 135, reverse discrimination is created by EU law and therefore it is to
the EU to solve that conundrum.
Moreover, the fact that it does not seem clear what are the practical
implications of the abolition of the CoOP and of the substitution with the more
general “freedom of services” principle, makes the implementation process even more
difficult as risks of inefficiencies increase. It follows that both the credibility of the
system and the deterrent effect are being dramatically jeopardized. In addition, the
probabilities of Member States not complying with the obligations enshrined into the
text and the risk of the Commission being forced to open infringement procedures in
order to make the national legal orders comply with it are very high as those services
which are provided for on areas assigned through concessions demonstrate.
Paradoxically, the current situation highlights three important issues: the
single market has not been completed yet; there is a huge risk of disintegration of
what has been the real motor of European integration so far; it might seem at odds
with the slow fragmentation process going on within the EU legal order, but internal
market laws are applied even to non-EU countries 136. It could be argued that this
statement is obvious: in fact, it is well-known that European Free Trade Association’s
(“EFTA”) Member States agreed on the freedom to provide services 137 and that the
European Economic Area (“EEA”) was established in order to let three out of four
EFTA states to take part to the EU internal market laws. Moreover, EU internal
market rules are applicable to special territories of the EU Member States 138 that are
not part of the EU too. In addition, it is worth mentioning that there are 28 free trade
agreements already in force 139 between the EU and third countries, 9 free trade
agreements finished negotiating that have yet to come into force 140, 9 more free trade
agreements under way 141 and other forthcoming negotiations have already been
scheduled 142. According to the general framework contained in all those agreements,
the main aim is to foster trade in goods and services. In other words, the paradox is
that free movement of services is being strongly encouraged between the EU and third
countries, whilst EU Member States find it difficult to fully and correctly implement
the Services directive.
The legal framework that comes out is that there is more than one “single
market” due to the uneven development of economic integration in the field of
services. This paper argues that in time of economic crisis and of high risks for the

mentioning the “Reverse-Solange idea”: see A. von Bogdandy, M. Kottmann, C. Antpöhler, J.

Dickschen, S. Hentrei, M. Smrkoli, Reverse Solange - Protecting the essence of fundamental rights
against EU Member States, in Common Market Law Review 49/2, 489-519 (2012). In addition, this
paper argues that it would be desirable that the ECJ started using fundamental rights and the
Citizenship provisions to bring previously excluded situations into the scope of EU law.
135
See AG M. P. Maduro’s opinion in Case C-72/03, Carbonati Apuani SRL v. Comune di Carrara,
ECR 2004 I-08027
136
See D. Kochenov, “Eu Law of the Overseas: Outermost Regions, Associated Overseas Countries
and Territories, Territories Sui Generis” (Kluwer Law International, 2011).
137
See the Convention Establishing the European free Trade Association
138
See note 136 above.
139
See the press release of 25 March 2013, “The EU’s free trade agreements, where are we?” available
at http://europa.eu/rapid/press-release_MEMO-13-282_en.htm.
140
Ibid.
141
Ibid.
142
Ibid.

23
national governments to go back to protectionist policies 143, it is not the case to let the
single market idea fade away by tolerating a blurred approach. Indeed, as it has been
pointed out above, “today’s softness is tomorrow’s nightmare”. The result might be
the raising of inefficiencies in the market 144 due to the fact the whole system loses
credibility and that the EU institutions are not able to enforce the rules and to play a
deterrent effect 145. Moreover, it is also argued that in time of differentiated
integration, where the nation states seem to enjoy a new but dangerous renaissance, it
does not seem desirable that internal market rules are questioned by national
governments having the only purpose of acting in their own particular interest.
Indeed, if differentiated integration could be a good motor to lead towards more
integration 146, it will certainly lead to disintegration if even de facto applied to the
internal market. A differentiated market is not a solution as the risks of inefficiencies
and therefore the risks of a lack of outputs would be highly likely. The single market
project should be preserved from protectionist temptations. Even more, the single
market of services 147 needs to be urgently completed.

Conclusions

This paper has addressed the main problems related to the genesis, the scope
of application and the implementation of the Services directive arguing that the single
market is walking down the slippery slope of disintegration while passing through
fragmentation. It is also argued that this does not seem desirable, as there could be no
EU without a properly completed and functioning internal market. Moreover, if in
other fields 148 of EU law differentiated integration has been the driver of moving
towards a closer union, this article takes the view that having more than one internal
market in the field of services is highly likely to cause inefficiencies.
However, there could be four “keys” in order to avoid that today’s softness
will become tomorrow’s nightmare. The first one is to understand the importance of
advocacy. Indeed, one of the factors which has always been seen as a justification for
the alleged lack of democracy in the EU was the so called “output legitimacy” 149.
According to this theory, the EU was conceived as essentially non-democratic just
because it would have been able to guarantee outputs to its peoples. The point that
this paper wants to make is that there is an urgent need of advocating the benefits of
having a fully-fledged internal market of services. The prohibition of barriers to get

143
See the French debate about the Polish plumber, the Italian debate about beach-concessions and also
the recent British Trade Unions’ demonstrations calling for “British jobs for British workers”.
Moreover, the tendency to move to protectionist policies in time of crisis is shown by the “crisis
cartels”, which have been mentioned above.
144
See note 106 above.
145
Ibid.
146
Such as, for instance, the creation of the Euro, the Schengen Agreement which has now been
incorporated into the EU acquis, or the more recent Fiscal Compact and the European Stability
Mechanism Treaty.
147
Indeed, Europe has an untapped potential competitive advantage in the field of services. It does not
seem to make sense, in a globalized world, to compete with Asia or South America in the industrial
sector. Europe has to specialize in the services field. This does not mean that industry has to be
compeltely dismantled though.
148
See note 146 above.
149
See, inter alia, S. Karaman, Output legitimacy: A Possible Solution for the Union’s Legitimacy
Problem, Marmara University’s Working Papers, 2012-2013, available at
http://www.academia.edu/3465362/OUTPUT_LEGITIMACY_A_Possible_Solution_for_the_Unions_
Legitimacy_Problem_

24
access to the market and to exercise an economic activity within the EU legal order
brings several benefits both to service providers and consumers. The former will
enjoy a competitive market where they can fight one another and hence prepare for
worldwide competition; the latter will enjoy more choice, better quality and lower
prices. The way in which the European institutions could make more advocacy
activity is by addressing the stakeholders and by persuading national governments and
national independent authorities to do the same.
The second one is by keeping on with public enforcement 150. This is the first
weapon in the hands of the European institutions, in particular in the hands of the
Commission. As it has been pointed out above regarding those services provided for
on areas belonging to the public domain, what the Commission can do is opening an
infringement procedure against the Member State 151 in order to make it comply with
EU law. However, as it has been shown, this instrument could not be efficient enough
as the Commission would have to open a procedure every time that a EU Member
State does not fully or correctly implement EU law. Coming back to services, this
would be highly costly as there are several services sectors. Moreover, it is a lengthy
procedure and it might take up to three years to be completed 152. In addition, if more
than one Member State is deemed to comply with EU law, and then it will be
unmanageable to carry out as many infringement procedures as the number of
violations of EU law.
The third “key” proposed by this paper is that the EU Commission should start
to use more soft law instruments. This could help member states to better understand
what kind of action need to be taken, undertakings to better know what kind of
behaviour could constitute an infringement of the EU law, and consumers on how to
effectively bring action in case of violations of their rights, both by states and by
individuals. Furthermore, soft law instruments are really useful to national judges as
well.
The fourth “key” suggested by this article is that private enforcement needs to
be fostered. First of all it seems desirable that the ECJ recognizes the horizontal direct
effect of directives 153. This would allow private parties to sue other private parties,
which infringe, for instance, the Services Directive 154. Going back to those services
offered on areas belonging to the public domain, a would-be assignee could bring
action against the incumbent service provider who continues to offer services after the
expire of the authorization. Even more, the would-be service provider could bring
action against the association of undertakings arguing that their collective action
aimed at impeding the national government to establish a selection procedure is to be
considered as a violation of the Directive. It is true that the fundamental freedoms,
such as freedom of establishment and freedom of services are to be deemed as
horizontally directly applicable and that therefore they could be used to bring action
against individuals. However, it seems desirable to use the Directive instead, as it is

150
It is worth mentioning that an important tool that can be used in order to foster market integration
and to avoid the introduction of barriers among private parties is a zero-tolerance competition policy.
151
Art. 258 TFEU.
152
See note 45 above.
153
See Opinion of AG Lenz in Case C-91/92 Faccini Dori v Recreb (1994) ECR I-3340. See also
Opinion of AG Jacobs in Case C-316/93 Vaneetveld [1994] ECR I-769; and Opinion of AG Van
Gerven in Case C-271/91 Marshall v Southampton and South West Hampshire Area Health Authority
(1993) ECR I-4387.
154
Private parties can always bring action against private parties by calling for the application of the
national implemenation measures. However, the problems raise in the case in which national
transposition measures need further implementation.

25
more detailed. Moreover, as it has been stated above, directives are often supposed to
flesh out the principles established in primary law.
In the field of private enforcement against states, it is worth mentioning that
individuals can always refer to the State liability principle invented by the ECJ 155 and
to the vertical direct effect enjoyed by directives 156. What is interesting though, is that
the ECJ is more and more treating the fundamental freedoms as fundamental rights 157.
This could certainly help to foster the effectiveness of these provisions even in private
litigation both as regards private actions against the states. Moreover, fundamental
rights 158 in themselves, especially the right to economic initiative 159 could be used
against state measures. Indeed, this is even more true if read in the light of the EU
citizenship provisions. It does not seem tolerable anymore that in a EU of citizens
Member States are left able to raise restrictions 160 to fundamental freedoms.
The four solutions brought forward by this paper are aimed at fostering market
integration in the field of services. Indeed, there could be no de facto differentiated
integration within the abovementioned field because the costs would be too high:
fragmentation and then disintegration. Although the economic crisis might entail that
national governments and public opinion are tempted by protectionist policies, this is
indeed the time where no tolerance must be the rule.

155
See Joined Cases C-6/90 and C-9/90, Andrea Francovich and Danila Bonifaci and others v. Italy,
[1991] ECR I-05357; See also Joined Cases C-46/93 and C-48/93, Brasserie du Pêcheur SA v.
Bundesrepublik Deutschland and The Queen contro Secretary of State for Transport, ex parte:
Factortame Ltd and others, [1996] ECR I-01029.
156
For a general overview on the vertical direct effect of directives, see, inter alia, T.C. Hartley, “The
Foundations of EU Law” (OUP, 2010).
157
See note 133 above.
158
See note 134 above.
159
See note 92 above.
160
It might be interested to argue in favour of the existence of a fundamental right to a “competitive
and properly functioning single market” and in favour of a sort of “right to having competition
effectively enforced”. These two “new” rights could stem both from the Treaties (rectius, from the
fundamental freedoms) and from the case law of the ECJ, such as Joined Cases C-158/04 and C-
159/04, Alfa Vita Vassilopoulos AE, formerly Trofo Super-Markets AE and Carrefour Marinopoulos
AE v Elliniko Dimosio, Nomarchiaki Aftodioikisi Ioanninon. In addition, the Charter could be a source
as well.

26