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Provision of Services Regulations: Are you ready?

15 January 2010

The Provision of Services Regulations 2009 (Regulations) came into force on 28 December 2009 and created new obligations for service providers.

The Regulations stem from the EU Services Directive (Directive), which aims to simplify regulatory and administrative procedures in relation to establishing and carrying on services in the EU, thereby encouraging more services to be provided on a cross-border basis.

Whilst most of the requirements of the Directive fall on the member states themselves, there are a number of obligations which apply directly to service providers in relation to making certain information available to customers, complaints handling and abiding by the principles of non- discrimination in the provision of services.

What is a relevant service?

A ‘service’ is defined as ‘a self employed economic activity normally provided for remuneration and which is not a contract for employment’. The activity could be industrial or commercial in nature and includes a craft or the activity of a profession. Remuneration is interpreted widely and includes payments in kind.

Who is caught?

Subject to the excluded categories of services set out below, the Regulations apply to all service providers offering or providing relevant business-to-business and/or business-to-consumer services in the UK, whether they are of UK origin or from another EEA state.

However, the provisions of the Regulations which impose duties on service providers apply to all relevant service providers offering or providing relevant services in the UK, regardless of where they are established.

The following categories of services are excluded from the scope of the Regulations:

financial services
electronic and communications services and networks
transport services
services of temporary work agencies
healthcare services
audiovisual services (including cinemas and broadcast services)
gambling services
activities connected with the exercise of official authority
social services
private security services
services provided by notaries and bailiffs
services relating to taxation
non-economic services of general interest

In addition, the Regulations do not affect the manufacture or sale of goods. However, there are a raft of ancillary services to which the Regulations could apply. For example, post manufacturing servicing and support.

What are the benefits to businesses?

The main benefits for service providers appear to be a reduction in red-tape, and an easier process for expanding into the EEA.

For example, service providers will have the benefit of a Point of Single Contact (PSC) in each member state to which they can apply for the necessary authorisation to operate. Service providers in the UK who wish to expand into the EEA can find the PSC for the relevant country through www.businesslink.gov.uk. Once there they will be able to determine what rules and regulations will apply to them and access all licences required for their expansion.

Competent authorities (those bodies with a regulatory or supervisory role over the provision of services, such as professional bodies like the Solicitors Regulatory Authority, or a central or local government authority) within the EEA are only permitted to impose conditions on service providers that are justifiable against specified and restricted criteria.

Member States must ensure information is readily available by electronic means for consumers on rights and redress when buying services cross-border. In the UK this information is being provided by the European Consumer Centre for Services (www.ukecc-services.net) run by the Trading Standards Institute.

What must you do?

Provision of information

From 28 December 2009 every qualifying service provider must make the following information available to customers in a clear and unambiguous manner, and in good time before the contract for the services is concluded (unless it is information which a customer has requested after the contract has been concluded):

its name, address, legal status and contact details
details of the trade registrations it holds or is required to hold
where there is an authorisation scheme, details of any relevant competent authority or PSC
its VAT identification number
details of any regulating body, if it is a regulated profession
the terms and conditions applicable to the provision of its services, including those relating to jurisdiction, after sales guarantees, prices that are pre-determined by it, main features of the services and professional guarantees or insurance
details of any applicable non-judicial dispute resolution procedure which it is subject to as a member of a trade or professional body

This information can be made available to customers by any one of the following means:

supplied on the service provider’s own initiative
made easily accessible at the place where the services are provided
made easily accessible electronically by means of a website address
included in any information documents that it uses to describe its services, such as terms and conditions documents or marketing materials

In addition, the following information must be provided to customers if requested:

information on prices that are not pre-determined, or the method used to determine the price or a sufficiently detailed estimate
any professional rules applicable to the services and where to access them
information on other activities undertaken by the service provider which are linked to the service (if any) and measures taken to avoid conflicts of interest between the two activities
details of any codes of conduct to which the service provider is subject, along with the website address where they can be viewed

The Regulations also require you to provide certain information to a competent authority in relation to any application for authorisation and after the authorisation has been granted.

Complaints procedures

Under the Regulations you must:

supply contact details to which all customers in any member state can send complaints or a request for information
respond to complaints as quickly as possible and use your best efforts to find a satisfactory solution to any complaint
inform complainants of any non-judicial means of dispute resolution open to them via your trade association or professional body

Non-discrimination

Your general conditions of service must not include any provisions which discriminate against customers on the basis of their nationality or place of residence (unless objectively justifiable).

Risks of non-compliance

Similar to other consumer legislation, the OFT and Local Authority Trading Standards will take action against breaches which harm the collective interests of consumers. For example, by applying for an enforcement order to stop the breach, failure to comply with which could lead to fines and imprisonment.

For business to business transactions, a business can seek redress on its own initiative, or if a provider serves both businesses and consumers, then the OFT and Local Authority Trading Standards may be able to take action.

What does this mean?

If your services are not excluded, you will have to comply with the obligations in relation to providing specified information, handling complaints and abiding by the principles of non-discrimination.
The Regulations apply to relevant service providers regardless of their size and constitution.
The information requirements under the Regulations apply in addition to the requirements of other legislation, such as the Consumer Protection from Unfair Trading (2008), E-Commerce (2002), Distance Selling (2000) and Company (Trading Disclosures) (2008) Regulations. So if, for example, you already offer your services on-line, it might be that the Regulations won’t require much in the way of modification to your existing business practices.
The requirements in respect of complaints handling appear to be based on good business practice, so the review of your business practices may be more for comfort than modification.
Neither the published guidance nor the Regulations themselves make it entirely clear what impact service providers can expect in relation to non-compliance, or exactly what format the information they are required to provide should take. Hopefully, more pertinent guidance will be issued in due course.
If you are looking to expand into the EEA, troublesome red-tape should be reduced, making the whole process much smoother, and potential customers from other member states should have much easier access to information about your services.

What should you do?

If your services are not excluded under the Regulations, then you will need to:

review and, if necessary, amend your business practices in order to ensure that they comply with the Regulations
ensure that your staff are aware of the Regulations and, where necessary, receive training so that inadvertent breaches do not occur

Note to readers: 14 January 2010 – When this update was first published (5 January 2010) it included a number of references which the BIS felt could be misleading. Therefore, in order to clarify the situation, the following points should be noted:

The original statement that UK service providers wishing to expand into the EEA could make just one application to gain all licenses required for their expansion, has been changed to make it clear that those service providers are able to find the relevant PSC through www.businesslink.gov.uk, and can then determine what rules and regulations apply and access all necessary licences required for their expansion.
The original reference to an on-line portal containing consumer information has been changed to make reference to the requirement that all member states must ensure that information on rights and redress when buying services cross-border is readily available by electronic means for customers. In the UK, this information is being provided by the European Consumer Centre for Services run by the Trading Standards Institute.
In respect of available sanctions, clearer wording has been used to set out the redress which can be sought by businesses in respect of business to business transactions.
All relevant service providers should review their business practices in light of the new Regulations to ensure that they are compliant, regardless of whether they operate on-line or not.

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