9 L a í t { / / h t D 5 1 Services, Citizenship and the Country of Origin Principle ∗ Gareth Davies The country of origin principle requires states to apply different legal regimes to companies and persons according to their state of origin. This looks rather like nationality discrimination, contrary to Article 12 EC. It is also fundamentally at odds with one of the central pillars of citizenship, both national and European; equality between citizens. The preference for a relatively unfettered country of origin principle in the Services Directive raises doubts whether the directive has an adequate legal basis, and in any case makes it undesirable. It is an example of economic law that has profound impacts on many non-economic aspects of life. It fragments jurisdictions, and therefore societies. Yet it has been made with only the narrowest of trade interests in mind. It shows the danger of allowing technocracy-led legislation. And nor are the economic arguments even good. If Member States cannot apply their law within their jurisdiction, then their capacity to develop coherent regulatory regimes is undermined, and the competition between these regimes which might revitalise national legislation, to the benefit of economic and non-economic life, cannot take place. The degree of openness of markets is only one part of wealth creation, and so should be part of regulatory competition, not a precondition for it. 1. Introduction This paper discusses the relationship between the free movement of services and citizenship. Its argument is that they rest on differing conceptual premises, and that as lines blur between categories of activity and person this is becoming not just a contrast, but a conflict. At the heart of this is what is now often called the ‘country of origin principle’, the idea that cross border economic activity, particularly service provision, should be subject to the regulation of the state of establishment, rather than the state where the service is provided. This can result in different providers on the same territory being subject to different regulation. The resulting inequality is constitutionally and socially – and economically – problematic, and may well be in conflict with the Treaty prohibition of discrimination on grounds of nationality. In a broad sense, what current developments display is the turbulent coming together of two streams of thought. On the one hand, the economically oriented internal market is led by lawyers and policy-makers who prize ease of regulation and ease of access to markets, and for whom equality is of marginal interest. On the other hand, those trying to give the EU political depth and social substance seek to forge links between EU citizens in different states, shared rights and values which may give a sense of unity and equality, rather than difference and division. When a service provider is also a citizen, he embodies both of these streams, and the conflict between equality and access is given a human face: the Polish plumber. The paper proceeds as follows: the next two sections outline in more detail the conceptual bases of citizenship and of free movement, or at least those elements relevant to the discussion here. ∗ Faculty of Law, Vrije Universiteit, Amsterdam. 2 Subsequent sections then outline how they interact. Firstly, the free movement of services changes the relationship of citizens to each other. The role of establishment is considered here, and whether the right to establish exacerbates or mitigates the constitutional cost of free movement of services. The issue of ‘abuse’ of free movement is an element of this. Secondly, free movement of services changes the relationship between the citizen and the state, making it harsher and more distant. Finally, conclusions suggest that while it is free movement that has realised the most concrete policy gains in recent years, there is a limit to what countries and societies can accept, and it may be time for more citizenship-like ideas to assert themselves, even at the cost of market access and free trade. Economics without justice is politically unstable, and may therefore be ultimately economically unsound. The role of the Services Directive in this cannot be, and is not, ignored. 1 While its contribution to the law remains unclear, it is becoming the accepted framework for discussion of these issues, among the public and non-specialists at least. Its influence on the developments described is therefore addressed where relevant. 2. The nature of citizenship Citizenship is often associated with rights to political participation, but for many citizens this is but a part, and not necessarily a particularly important part, of what they feel their citizenship entails. There are other rights and privileges associated with citizenship which make a greater contribution to the importance of that status to those who have it. Notable among these, in modern European states, is the right to the protection of the state and the right to its services, most importantly in the areas of health, education and social insurance. 2 Citizenship of a welfare state is life-long membership of a system of social benefits. Citizenship is also a guarantee of equality. 3 The content of the rights and benefits that national law provides may vary over time, but they are available to all citizens on equal terms. The particular identity of the individual does not affect their rights. As well as this the citizen is entitled to what one may call a ‘Most Favoured Person’ treatment. Non-citizen members of society may have some of the rights of citizenship, perhaps even all, but they will not have more. The citizen is never second-class. Diplomats are the notable exception to this, but they are indeed exceptional, too exceptional to undermine the general principle of the citizen as most privileged client of the law and the state. The sense of this right 1 Directive 2006/123/EC on services in the internal market [2006] OJ L 376/36, (27/12/2006). The directive must be implemented by 28 th December 2009. 2 Davies ‘The process and side-effects of the harmonisation of European welfare states’ Jean Monnet Working Paper 02/06, www.jeanmonnetprogram.org. 3 The thoughts on citizenship here are largely inspired by reading Barber ‘Citizenship, nationalism and the European Union’ (2002) 27 ELRev 241; Bosniak ‘Citizenship denationalized’ (2000) 7 Indiana Journal of Global Law Studies 447 (also on ssrn.com);Hartnell ‘Belonging: citizenship and migration in the European Union and Germany’ (2006) 24 Berkeley Journal of International Law 330. 3 to equality gives status to individuals. It confers dignity even on those who in other ways are not successful in their life. In some, even if formal, sense, a citizen cannot be looked down upon. One of the major effects of citizenship is to provide a sense of place. 4 Formal equality provides a high level of transparency and certainty, and rights to protection and services give a sense of security and obligation, which the state can leverage to further collective ends – taxation or military service, for example. To possess citizenship is to have a form of socio-political fixed abode, convenient for both the denizen and the authority who may wish to address them. 3. The nature of free movement The legal basis of free movement was traditionally non-discrimination. The Treaty articles concerning the internal market were seen as prohibiting measures which distinguished between national and foreign goods or services, or which were protectionist in effect. 5 However, such an approach does not fully bring down barriers to movement. Over-regulation, or heavy regulation, makes cross-border trade difficult just as it makes domestic trade difficult. There may be no identifiable inequality of effect, but there is a general suppression of economic activity. The desire to achieve the broader economic aims of the internal market, to stimulate the growth of cross-border industry and achieve economies of scale, led to an adjustment in the interpretation of the Treaty articles. While this remains ongoing and controversial, the idea of removing barriers to market access per se , irrespective of whether they had any disparate or protectionist effect, attracted academic and, to a lesser but still significant extent, judicial support. 6 The country of origin principle is a way of achieving this. If actors are only subject to the regulation of their state of origin, and the standards prevailing in their state of activity are not applied to them, then cross-border economic activity becomes a great deal easier. It is this principle that was recognised in Cassis de Dijon ,7 and that under the name of ‘mutual recognition’ has been accepted as a general rule of Community law. 4 Ibid. 5 See Gormley (ed) Kapteyn and Verloren, Introduction to the Law of the European Communities at 625 (goods), 737-8 (establishment), 756 (services); Directive 70/50; Marenco ‘Pour une interpretation traditionelle de la notion de mesure d’effet equivalent a une restriction quantitative’ (1984) Cahiers du Droit Europeen 291; Case C-379/92 Peralta [1994] ECR I-3453. 6 See Weatherill ‘After Keck: some thoughts on how to clarify the clarification’ (1996) 33 CMLRev 885; Barnard ‘Fitting the remaining pieces into the goods and persons jigsaw’ (2001) 26 ELRev 35; Woods Free Movement of Goods and Services within the European Community (Ashgate, 2004) at 209-218 (for an overview rather than advocacy of the developments); A-G Jacobs in Case C-412/93 Leclerc-Siplec [1995] ECR I-179 (but c.f. A-G Tesauro in Case C-292/92 Hunermund [1993] ECR I-6787); Case C-76/90 Säger v Dennemeyer [1991] ECR I-4221; Case 8/74 Dassonville [1974] ECR 837 but c.f. Case C-267/91 Keck [1993] ECR I-6097.