The scope of application of the Services Directive – in need of clarification?

by Sophie Perez Fernandes, Junior Editor

Two requests for a preliminary ruling concerning the Directive 2006/123[i] on services in the internal market were recently made to the ECJ. The joined cases concerned raise some fundamental questions relating to its scope of application.

The first case (C-340/14) concerns the application of Mr. Trijber for an authorisation for the transportation of passengers by water. Mr. Trijber wishes to use his boat, an open sloop powered by an electrical motor suitable for transporting small groups of persons, to carry passengers, in return for payment, on tours of Amsterdam by waterway for festive occasions. The second case (C-341/14) concerns the application of Mr. Harmsen for the operation of two window prostitution businesses in Amsterdam as well. Mr. Harmsen specified in his application that he would not rent out rooms to prostitutes with whom he could not communicate in English, Dutch or any other language comprehensible to him. Both applications were, for different reasons, denied by the competent national authorities.

In common, both cases raised the issue of the scope of application of the Services Directive, namely its Chapter III («Freedom of establishment for providers»), to purely internal situations, as none of the mentioned situations presented any cross-border element – at least not in a first analysis. The referring court expressly inquired: «Does Chapter III of Directive [2006/123] apply to purely internal situations, or is the assessment of the question as to whether that chapter applies subject to the case-law of the Court of Justice concerning the Treaty provisions on freedom of establishment and the free movement of services in purely internal situations?»

The question could be considered a non-issue if one considers the wording of some of the Services Directive provisions[ii], namely those at stake[iii]. In its Opinion delivered the 16th of July of 2015, Advocate General Szpunar also had a positive answer, advising the ECJ to «not answer the question by resorting to its standard case-law on the scope of application of EU law or admissibility in the context of purely internal situations, given that this case-law takes as its premise the fact that the Treaty provisions on the four freedoms regulate cross-border situations only.»[iv]

In its Handbook on the implementation of the Services Directive, the Commission also clarifies that Chapter III «covers both the situation where a service provider seeks to establish in another Member State and the situation where a provider seeks to establish in his own Member State.»[v] Some voices in the doctrine also [vi]concur to this interpretation[vii]. As for the freedom of establishment, the Services Directive is opening up a new stage of integration, as it does not focus on the freedom understood as the crossing of Member States borders, as it appears in the Treaty provisions on the four freedoms and in the ECJ classical case-law, but on the establishment of an economic activity, regardless of any cross-border element.

The ECJ was, thus, invited to take position in the matter – but it did not take the opportunity[viii]. The ECJ rather identified some cross-border elements in both situations at issue. Concerning the service provided by Mr Trijber, although in essence intended for residents of the Netherlands, the ECJ outlined that that service might also be enjoyed by nationals of other Member States and that the scheme at issue could impede access to the market for all service providers, including those from other Member States who wished to establish themselves in the Netherlands in order to provide such a service. With respect to the service provided by Mr. Harmsen, the recipients of the services provided were also nationals of Member States other than the Kingdom of the Netherlands. The ECJ therefore stated that neither of those situations were purely internal, thus refraining from answering the questions raised by both referring courts[ix].

Additionally, the cases also raised some questions regarding possible justifications to restrictions on the freedom of establishment, aiming respectively the interpretation of Articles 11(1)(b) and 10(2)(c) of Directive 2006/123[x]. As for the first provision mentioned, the referring court inquired as whether the competent authority of a Member State has discretion when it comes to the application of that Article which allows for an authorisation granted to a provider to be limited in time where «the number of available authorisations is limited by an overriding reason relating to the public interest». As for the second provision mentioned above, which submit any authorisation scheme, ought to be justified by an overriding reason relating to the public interest, to a proportionality test, the referring court inquired as whether it precludes a measure whereby an operator of window prostitution businesses is allowed to rent out rooms only to prostitutes who are able to make themselves understood by the operator in a language which he understands.

Advocate General Szpunar was incisive in his suggestion to the ECJ concerning the first question: Article 11(1)(b) of Directive 2006/123 should be interpreted as meaning that «once a Member State considers that the number of available authorisations must be limited by an overriding reason relating to the public interest, every individual authorisation must be limited in time.» As for the second question, the Advocate General also suggested that Article 10(2)(c) of Directive 2006/123 should be interpreted as precluding the measure in question, unless the requirement at issue was deemed necessary for effective verbal communication between the operator and the prostitutes by the referring court[xi]. In essence, the ECJ followed.

Concerning the duration of authorisations, the ECJ denied any discretion to the competent national authorities under Article 11(1)(b) of Directive 2006/123. Considering the «express wording» of the provision, the ECJ held that «authorisations granted to service providers must not be for a limited period, except in those cases exhaustively listed in Article 11(1), which include the case in which the number of available authorisations is limited by an overriding reason relating to the public interest.» It logically followed that «where the number of available authorisations is limited by such an overriding reason relating to the public interest, those authorisations must (…) be for a limited period.»[xii]

Concerning the conditions for the granting of authorisations, the ECJ firstly noted that the measure at issue – under which the grant of authorisation for the exercise of an activity consisting in the operation of window prostitution businesses by renting rooms is subject to the condition that the service provider is able to communicate in a language which is understood by the recipients of those services, in this case prostitutes – was justified by an “overriding reason relating to the public interest” within the meaning of Article 10(2)(b) of Directive 2006/123, specifically preventing criminal offences being committed against prostitutes, in particular human trafficking, forced prostitution and child prostitution.

As for the proportionality test, the ECJ provided some detailed guidance. The ECJ considered, on the one hand, the language requirement at issue appropriate for achieving the objective pursued: «by allowing prostitutes to give the operator of prostitution businesses directly and in person any evidence making it possible to establish the existence of an offence related to prostitution, it is likely to facilitate the performance by the competent national authorities of the necessary checks to ensure compliance with the provisions of national criminal law». On the other hand, the ECJ also held that the language requirement did not go beyond what was necessary to achieve the objective pursued: i) the measure merely requires the use of any language that can be understood by the parties concerned, which is less intrusive than a measure which imposes the exclusive use of a specific language, namely an official language of the Member State concerned[xiii]; ii) the measure does not require a high degree of linguistic knowledge; and iii) there appeared to be no less restrictive measures capable of securing the legitimate objective of general interest pursued[xiv].

Although the ECJ provided a well-structured proportionality inquiry, paying attention to each of the distinct parts of the proportionality test, the actual assessment of the language measure’s proportionality was left to the referring court[xv]. That is not always the ECJ’s style of adjudication when confronted with cases involving private language regulation. In Las, for instance, the ECJ engaged in a more informal and less detailed proportionality inquiry in a case involving national identity issues, the reason being that the language requirement pursued, among other objectives[xvi], the one of promoting and encouraging the use of the official language of the Member State concerned [xvii] and not, as in Trijber, by the protection of the individual against criminal offences. One may argue that, although the ECJ does value a Member State’s national identity when at liberty to balance it against integration-oriented precepts, it pays more attention to the protection of the individual, which is consistent with a Union that places the individual at the heart of its activities and reasoning.

[i] Directive of the European Parliament and of the Council of 12 December 2006 on services in the internal market, OJ 2006 L 376, p. 36.

[ii] For instance, Article 2(1) which defines the scope of application of the Directive 2006/123 to «services supplied by providers established in a Member State», or Article 4(2) which defines «provider» as «any natural person who is a national of a Member State, or any legal person as referred to in Article 48 of the Treaty and established in a Member State, who offers or provides a service» (emphasis added), lack any reference to cross-border elements.

[iii] Articles 9 to 15 of the Directive 2006/123.

[iv] See Opinion of Advocate General Szpunar delivered the 16th July of 2015, Joined Cases C-340/14 and C-341/14 Trijber [2015] nyr, EU:C:2015:505, para 47; see also para 44-57.

[v] See the Commission’s Handbook on the implementation of the Services Directive, document drawn up by the services of the Directorate-General for Internal Market and Services, Luxembourg, Office for Official Publications of the European Communities, 2007, p. 24.

[vi]

[vii] See Gareth Davies, «The Service Directive: extending the country of origin principle and reforming public administration», 32 European Law Review, 2007, pp. 232-245, at pp. 241-242; and Catherine Barnard, «Unravelling the services directive», 45 Common Market Law Review, 2008, pp. 323-396, at p. 351.

[viii] See Joined Cases C-340/14 and C-341/14 Trijber [2015] nyr, EU:C:2015:641.

[ix] See Trijber, op. cit., para 40-42.

[x] Concerning, in particular, the first case, the referring court also questioned the ECJ on the notion of «transport» considering the exception set out in Article 2(2)(d) of Directive 2006/123 – Trijber, op. cit., para 43-59.

[xi] Opinion of Advocate General Szpunar delivered the 16th July of 2015, Joined Cases C-340/14 and C-341/14, EU:C:2015:505, recitals 70 and 91.

[xii] See Trijber, op. cit., para 60-66, at 61 and 62.

[xiii] As was the case in Case C-202/11 Las [2013] ECR, EU:C:2013:239.

[xiv] The intervention of a third party, could, according to the ECJ «be the source of harmful interference in the relationship between the operator and the prostitutes» and camera checks «do not necessarily allow for the preventive identification of criminal offences» – see Trijber, op. cit., para 76.

[xv] See Trijber, op. cit., para 67-77.

[xvi] Such as the social protection of employees and the facilitation of the related administrative controls.

[xvii] See Las, op. cit., para 27-28 and 30-33. For a critical reading, see Elke Cloots, «Respecting linguistic identity within the EU’s internal market: Las», 51 Common Market Law Review, 2014, pp. 623-646.

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