Permissible Requirements I

EU member states must respect the right of service providers in another EU state, to provide services in a member state other than that in which they are established. The member state in which the service is provided shall allow free access to and free exercise of the service activity within their state.

The EU States shall not make access to or the exercise of a service activity in their territory subject to compliance with any requirement which does not satisfy the principles of non-discrimination and certain limited justifications. Any requirements which qualify as legitimate must also be proportionate. In effect, the host state may impose restrictions only where there is a good reason to do so, in particular having taken into account the protections offered to the user by the home state regulation.

Host states shall not make access to or the exercise of a service activity in their state subject to compliance with any requirements which do not conform to the principles of non-discrimination, necessity and proportionality. The requirements may be neither directly nor indirectly discriminatory with regard to the nationality or in case of legal persons the state in which they are established.

Permissible Requirements II

A number of requirements are prohibited unless saved by a derogation (Article 17) case by case derogation (Article 18) and narrow public interest requirements. They are requirements of

  • having an establishment in the territory of the host state;
  • obtaining an authorisation from the host state’s competent authority,
  • entry on a register
  • prohibiting or requiring certain type of infrastructure, offices or establishment.

The public interest requirement may be used to justify other requirements in principle.requirements may be justified on the ground of public policy, public security, public health or the protection of the environment. This is narrower than the overriding reasons in the public interest test recognised in European Court of Justice case law. This is in contrast to the position in respect of establishment; in this latter case, the home state has greater rights based on overriding interests of policy and the public interest.

Prohibited Regulatory Requirements

The Services Directive sets out requirements which the Member States cannot prescribe and are therefore prohibited.   These include:

  • requirements based on nationality or residence of the service provider, staff members or board members;
  • prohibitions on having an establishment in more than one state;
  • restrictions on freedom to have its permanent establishment in a particular Member State;
  • the application of an economic test making authorisation subject to economic need or market demand;
  • the obligations to provide a financial guarantee or take out insurance from a particular provider
  • an obligation to pre-register for a given time before exercising an activity.

Suspect Regulatory Requirements I

The Services Directive confirms the general principle that EU member states must respect the right of providers to provide services in a state other than that in which they have been established. The member state in which the services are provided must ensure free access for the exercise of the activity within its territory.

The directive in effect requires that state of origin requirements be accepted as sufficient unless there is a very good reason otherwise. The services directive creates a strong presumption of equivalence of the standards of services between states. Generally, if a service is lawfully provided in accordance with the requirement of the state of origin, the home state, this will generally will suffice in the host state, unless there is a good reason otherwise in accordance with the criteria in the directive.

The host state can impose restrictions/, only where there are good reasons for doing so.

Suspect Regulatory Requirements II

The Directive identifies requirements which are regarded as suspect and are not easily readily justified. These include

  • quantitative restrictions
  • territorial restrictions,
  • a requirement to assume a particular legal form,
  • a requirement that the operator be non-profit
  • having a minimum number of employees,
  • fixed prices and tariffs.
  • prohibition on the provider setting up certain forms or type of infrastructure including an office or chambers;
  • the application of specific contractual arrangements between the provider and recipient (subject to being saved by limited derogations in Article 17, or case-by-case in Article 18)

Suspect requirements may be justified if there is an overriding reason in the public interest. They must be non-discriminatory, necessary and proportionate. States must consider whether the suspect requirements are compatible with the general requirements in relation to necessity and the prohibition on discrimination. Such requirements must be rigorously and clearly justified if they are capable of justification at all.

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