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A Legal Analysis of the Service Directive 2006/123/EC and its
impact in Euro zone
Mustafa Lika
Department of Law, Beder University, Albania
Abstract
The Services Directive facilitates the free movement of services throughout the EU by removing
administrative and legislative barriers to service activities. Services are by far the largest sector
of the European economy. They account on average for around 70 % of GDP and of total
employment in EU Member States1
. The objective of the Services Directive is to release the
unused potential of services as the engine for economic growth and job creation.
This paper aims to analyze the impact that the Service Directive has had into the euro zone. This
impact is going to be achieved by doing a legal analysis of the directive and also by analyzing
the specific sectors that the directive covers.
The structure of the paper is as follow. The first part provides a general overview of the service
directive and its relevance on the economy of the member states. Second part introduces the
history for service directive and sectors that are covered by this directive. Third part analyses the
legal basis of the service directive, followed by the relevance of this directive for the EU member
states. In the end, the paper provides some conclusions.
Introduction
Since the inception of the EU, internal market has been defined as an area without frontiers in
which the free movement of goods, persons, services and capital is ensured. The internal market
is one of the pillars of the European Union. Completed in 1992, the single market is an area
without internal frontiers in which persons, goods, services and capital can move freely, in
accordance with the Treaty establishing the European Community2
. The internal market is
1
User guide, The Internal Market Information System (IMI) and the Services Directive, 2009, page 8.
2
http://europa.eu/legislation_summaries/internal_market/internal_market_general_framework/index_en.htm.

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essential for prosperity, growth and employment in the EU, contributing to the achievement of its
objectives under the Lisbon strategy. As an integrated, open and competitive area, it in fact
promotes mobility, competitiveness and innovation within the EU policies.
Before the enactment of the Service directive a lot of administrative barriers existed to service
undertakings to set up their business or providing their services, in particular in another Member
State. There were many difficulties for service providers to establish themselves, in particular in
other Member States. For example, businesses may have to wait months or even years before
getting all the necessary licenses and permits. Also the Businesses wanting to set up in another
Member State face difficulties and costs just to find out what the legal and administrative
formalities are.
The Service Directive aims to maximize the benefits of the Single Market for consumers and
businesses. Businesses will be able to establish themselves anywhere in the EU saving time and
money. The Services Directive also provides that Member States must remove needless barriers
and ensure that full information is available to businesses on applicable requirements and
formalities. Service providers will be able to obtain information and complete administrative
formalities through points of single contact in each Member State. The Points of Single Contact
(PSCs) are e-government portals for entrepreneurs active in the service sector3
. They will be able
to complete all formalities to set up a business and achieve their activities online. Another
important service is that the Service providers will effectively be able to provide their services
across borders into other Member States without any restriction.
History
The Services Directive was one of the most important proposals brought forward under the
Lisbon Agenda, which was adopted by the Heads of State and Government of the European
Union in 2000 with the intention of strengthening the competitiveness of the European Union.
The negotiation and transposition of the Directive was a long and difficult process. The draft
Directive was first tabled by the European Commission in 20044
. A revised draft was proposed
by the Commission in April 2006 and the Directive was adopted in December 2006. In
3
http://ec.europa.eu/internal_market/eu-go/index_en.htm.
4
European Communities, Handbook on implementation of the service Directive, 2007, page30

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December 2009 was the last period that the member states had to implement this regulation in
their own legislation.
Sectors that Service Directive cover
The Services Directive applies to services, defined as self-employed economic activities
normally provided for remuneration. Thus, it applies neither to salaried workers, nor to the
industrial production of goods, nor to activities which are directly connected with the exercise of
official authority (police, administration of justice). The Services Directive applies to all
activities and sectors that are not expressly excluded from its scope of application.
As all the directives that cover one or some sectors also the service directive covers different
service sectors. The list is not exhaustive but I am going to list some of them.
Distributive trades (like supermarkets, small shops);
The activities of most of the regulated professions (like legal and fiscal advisers, architects,
engineers);
Services in the field of tourism (such as services of travel agencies and tourist guides);
Services in the area of installation and maintenance of equipment;
Real estate services;
Services in the area of training and education (such as languages or driving schools);
Accommodation and food services (such as hotels, restaurants, bars, catering services);
Leisure services (such as services provided by sports centers and amusement parks);
Sectors that Service Directive do not cover
The Services Directive explicitly excludes a number of services from its scope. These exclusions
are optional in the sense that Member States may exclude these sectors or not it depends on the
willpower of the specific member state. These sectors are:

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Non-economic services of general interest5
(services which are not performed for an economic
concern),
Financial services6
(including banking services, credit services, securities and investment
funds),
Electronic communication services and networks7
(voice telephony and electronic mail
services),
Services in the field of transport8
(it covers air transport, maritime and inland waterways
transport, including port services, as well as road and rail transport, including in particular urban
transport, taxis and ambulances),
Healthcare9
(accounting services, cleaning services, secretarial and administration services, the
provision and maintenance of medical equipment as well as the services of medical research
centers, are not covered by this exclusion, this restriction covers only the sector that deals with
the human health),
Gambling activities10
(including in particular, numeric games such as lotteries, scratch cards,
gambling services etc),
Audiovisual and radio broadcasting services11
(including television and showing of films in
cinemas, etc),
Private security services12
(Services such as, for instance the sale, delivery, installation and
maintenance of technical security devices, are not covered by the exclusion).
5
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(a).
6
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(b).
7
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(c).
8
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(d).
9
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(f).
10
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(h).
11
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(g).
12
DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(k).

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Legal Basis
In view of the principles of freedom of establishment and freedom to provide services,
mentioned respectively in Articles 49 and 56 of the TFEU, the Services Directive intends to help
realize the full potential of the services sector, by removing unjustified or unequal legal and
administrative barriers to the creation of a business by a service provider or to its cross-border
activities in the EU.
Firstly the legal background for the creation of service directive starts in the article 3 of TFEU
that states:
Article 3
1. The Union shall have exclusive competence in the following areas:
(a) customs union;13
This article lets the fairway to the commission to make changes by shaping new directives that
would create new economic opportunities for the businesses.
Another legal basis that has shaped the service directive is article 49 of TFEU that mention:
Article 49
Within the framework of the provisions set out below, restrictions on the freedom of
establishment of nationals of a Member State in the territory of another Member State shall
be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies,
branches or subsidiaries by nationals of any Member State established in the territory of
any Member State.
Freedom of establishment shall include the right to take up and pursue activities as self-
employed persons and to set up and manage undertakings, in particular companies or firms
within the meaning of the second paragraph of Article 54, under the conditions laid down
for its own nationals by the law of the country where such establishment is effected, subject
to the provisions of the Chapter relating to capital14
.
This article stipulates that if any member state makes any restriction to any other member state
individuals this is going to be prohibited because with the entering into force the TFEU the
13
Treaty on functioning of European Union, 2012, C 326/51.
14
Treaty on functioning of European Union, 2012, C 326/67

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freedom of establishment the freedom to provide services is going to be made without any
stopping within the respective member state.
Also the Article 56 stipulates that the restriction in the freedom to provide services within the
member states is not alloyed.
Article 56
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.15
The Services Directive sets up a comprehensive system which builds not only upon the existing
Treaty fundamental freedoms but also the important body of Internal Market legislation
applicable to the services sector. This means that the service directive has found a favorable
ground in the EU system to be implemented and to provide very good fruits for the today
economy but also for the future economy.
Directive Legal Analysis
In this directive the crucial parts that explain all the directive are :
Article 5 talks for Simplification of procedures between member states. According to Article 5,
Member States have to examine all procedures and formalities applicable to access to a service
activity, if these procedures are not sufficiently, simplify them.
The article 6-8 talks for the Points of Single Contact. The Point of single contact is an e-
government portal for entrepreneurs active in the service sector. On the basis of Article 6,
Member States are obliged to ensure that service providers can complete all procedures and
formalities needed for access to and exercise of their service activities through “points of single
contact”. This is one of the obligations of result in the Services Directive.
Articles 9 – 13 talks for the Authorizations, including: Conditions for granting authorizations
(non- discriminatory). Also Articles 9 to 13 establish a number of general principles for the
15
Treaty on functioning of European Union, 2012, C 326/70

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review and adaptation of authorization schemes. In order to avoid gaps in implementation and to
ensure that these principles are complied with at all levels, Member States should consider
embodying these principles in their horizontal framework legislation implementing the Directive.
Article 14 speaks for the list of prohibited requirements (economic test, involvement of
competitors, nationality requirements etc. Article 14 establishes a list of requirements which
Member States cannot impose for access to or exercise of a service activity. These requirements
are discriminatory or are in other ways particularly restrictive and thus cannot be maintained.
Article 16 speaks in general for the freedom to provide services. Article 16 provides for the
freedom to provide cross-border services without unjustified restrictions. It is one of the basis of
the Services Directive. It applies to all services falling within the scope of application of the
Directive.
Case Law
Another important part for having a better understanding for Service Directive is also the Case
Law. The Court of Justice of the European Union has already issued some important first
judgments on the interpretation of the Services Directive. The judgments concern the exclusion
of 'healthcare services' and 'social services' from the scope of application of the Directive.
In the Case Femarbel16
, after recalling at the outset the principle that the Directive shall apply to
all services and sectors that are not expressly excluded from its scope of application, the Court of
Justice dealt with the exceptions of 'healthcare services' and 'social services', referred to in
Article 2(2)(f) and Article 2(2)(j) respectively.
In the Case Société fiduciaire nationale d'expertise comptable17
, the Court of Justice interpreted
the obligation to remove all total prohibitions on commercial communications by the regulated
professions under Article 24.
It stated that the Article must be interpreted as precluding national legislation which totally
prohibits the members of a regulated profession, such as the profession of qualified accountant,
from engaging in canvassing.
16
Case C‑57/12.
17
C-119/09.

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In the Case OSA18
, the Court of Justice stated that Article 17(11) must be interpreted as
excluding the service provided by collective management societies to the users of copyright
protected work from the scope of Article 16.
Importance for member states
The 2012 Commission study on the impact of the Services Directive has shown that the
measures adopted by Member States to implement the Services Directive are bringing an
additional 0.8% of EU GDP over time, with the majority of the effect materializing during the 5-
10 years following implementation. Service providers however still face obstacles when they
want to operate cross-border. Economic analysis has shown that if Member States were to stop
almost all the remaining restrictions, additional gains of up to 1.8% of GDP could be achieved
leading to a total economic gain of about 2.6% of GDP19
.
The Services Directive considerably facilitates the establishment of a business in a Member
State. This concerns cases in which an individual or a company intends to set up an
establishment in another country. The Directive also benefits providers who want to establish in
their own Member State, as they will also take advantage of simplified rules and procedures.
The Services Directive also facilitates the activity of service providers who want to supply their
services across borders to other Member States without setting up an establishment there. Such
would be the case of an architect from France who crosses the border to design a house in
Germany, or an event organizer from Finland who runs an open-air festival in Estonia20
. In this
case, the Services Directive lays down the principle of ‘freedom to provide services’, which
means that Member States should, in general, not impose their own national requirements on
incoming service providers, which are already legitimately established in another Member State.
All these opportunities make that the member states have very much interest in respecting the
service directive in a wide point of view.
18
C-351/12.
19
THE ECONOMIC IMPACT OF THE SERVICES DIRECTIVE, European Commission, 2012, page 20.
20
Pierre Mathijsen, Mathijsens guide to European Union law, page 295

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Conclusions
As soon as I have done my work on this paper I have reached on some conclusions which are:
The objective of the directive is to provide a legal framework that will eliminate the obstacles to
the freedom of establishment for service providers and the free movement of services between
the Members States.
Services Directive will improve the operating environment for services providers within the EU,
as well as improve the quality and range of services available to consumers and reduce the prices
of those services for consumers.
The Services Directive will deliver large benefits to citizens, consumers, service providers,
national administrations and the EU as a whole. Employment and income will increase although
Trust and confidence in the Single Market will also increase through the new administrative co-
operation provisions contained in the Directive.

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Bibliography
1. C-119/09
2. C-351/12
3. Case C‑57/12
4. DIRECTIVE 2006/123/EC, OJ, L 376/51 Article 2(2)(a)
5. European Communities, Handbook on implementation of the service
Directive, 2007
6. http://ec.europa.eu/internal_market/eu-go/index_en.htm.
7. http://europa.eu/legislation_summaries/internal_market/internal_market_gen
eral_framework/index_en.htm.
8. Pierre Mathijsen, Mathijsens guide to European Union law
9. THE ECONOMIC IMPACT OF THE SERVICES DIRECTIVE, European
Commission, 2012
10. Treaty on functioning of European Union, 2012, C 326/51
11. User guide, The Internal Market Information System (IMI) and the Services
Directive, 2009