The proposed European Union services directive, or Bolkestein’s monster, as it’s known, could produce a playing field with so many bumps that standards suffer
The recent article on Bolkestein’s monster (Building, 18 March) describes the consequences for workers if the services directive is implemented. But the legal implications of the directive for construction go further than that.
The main issue centres on the “country of origin” principle. This provides that European Union entities carrying out projects in EU member states need comply only with the regulations of their own country rather than the regulations of the host country. This principle relates both to access to services and also to carrying out the work itself.
In terms of access, it means that, for instance, a designer wishing to work in another country will not have to comply with the local requirements of being a member of a chamber of commerce, or being registered in the host country before they can practise there. There are some concerns in this respect about unscrupulous organisations setting themselves up in an EU country with less demanding standards.
The country of origin principle applies also to the provision of the services. This is much more problematic. The directive wants to encourage a “wide choice of high quality services” but the fear is that allowing service providers – including designers and contractors – to operate to their own standards in a host country will mean unfair competition for those who are required to operate to the higher standards of the host country. There will be a downward pressure on standards, to enable the service providers based in the host country to remain competitive.
Take the example of health and safety. The CDM Regulations are based on the EU’s mobile sites directive, but that is interpreted differently in various EU countries. If overseas workers are permitted to operate to their own interpretation of that directive, and not to the UK CDM Regulations, this will make the principal contractor’s job difficult. Sites will become more dangerous as some workers will be allowed to smoke, for instance, while others will not.
The position in relation to design is worse. It seems to be the intention of the directive that health and safety is exempted from the country of origin principle. However, the HSE has been encouraging designers for some years to integrate health and safety into the overall design process. So a design feature could be a result of health and safety, environmental, aesthetic or budgetary considerations. The same design feature could arise as a combination of all of these. How then can health and safety be isolated and exempted?
It is not clear whether other basic legislation such as the Building Regulations, environmental requirements and the Disability Discrimination Act will be subject to the directive. If they are, there will inevitably be a fall in standards as some employers will use overseas workers to avoid the more onerous requirements of this legislation.
There is another factor: contractors and designers are jointly liable to the employer where they each carry partial responsibility for a particular defect. This is straightforward where all parties are subject to the same law. If they are not, there may be significant disparities in levels of PI insurance or even automatic caps on liability, limited to the amount of the overall fee. The concept of joint liability will therefore be much eroded. Designers and contractors subject to UK law may find themselves exposed to greater liability as a result.
Employers want to know that all the responsibility for design and workmanship on a project has been adequately covered. There will be significant extra legal costs for the employer if the laws of different countries apply to the various contracts and appointments. Ideally, of course, all the appointments and contracts will be signed, and the parties can specify what the governing law of the contract should be. In practice, as we all know, often contracts are not signed until late in the day, if at all, so this could be a real problem.
When I was giving evidence recently as part of a Construction Industry Council delegation to the House of Lords select committee on the EU, it was obvious that the committee was receptive to the suggestions we made for improving the wording. Taking the concept of “exercise” out of the services directive would be a great start.
Gillian Birkby is a partner at Fladgate Fielder. You can email her at firstname.lastname@example.org