European and External Relations Committee,

Meeting date: Tuesday, May 27, 2008

Official Report 259KB pdf

---

Services Directive Inquiry

Item 3 is evidence as part of our inquiry into the transposition of the services directive. I welcome the first panel of witnesses. Almira Delibegovic-Broome and Michael Howlin are from the Faculty of Advocates, and Sarah Fleming and James McLean are from the Law Society of Scotland. I thank you all for coming and invite you to give your opening statements.

My opening statement is that we do not propose to make an opening statement. I say that not out of any disrespect for the committee but because the faculty's position is that it does not come here with an axe to grind or an image to present. The faculty can see something that, judging by background papers that I have seen, is glaringly obvious to the committee already, which is that the task for the Scottish Parliament or the Scottish Government—depending on whose job it finally is—in implementing the directive is daunting because the directive is extremely broad in scope. It is what the European Commission calls, in eurospeak, a horizontal directive, which means that instead of saying, "We're going to regulate throughout Europe on one specific point," it goes across the board and tries to achieve something very general for a broad sweep of services. Therefore, given our perception—which I suspect the committee will share—of the extent to which the task is daunting, what the faculty proposes is simply to attempt to assist the committee so far as it can by answering any questions that the committee has. To make it clear, the faculty does not wish to restrict its assistance simply to appearing today; it is happy to assist downstream. It may be, for example, that if and when we get to the stage of draft legislation, there will be an opportunity for further input from the faculty. That is my opening non-statement, convener.

That is an innovation. Can the Law Society of Scotland beat that?

I will not try to beat that. I thank the committee for inviting us to give evidence to what I think will be a useful inquiry. I echo the comments of our colleagues from the Faculty of Advocates that this is a large, important directive, with potentially profound effects, specifically for the regulation of the legal profession in Scotland. It deals with a number of issues that have been discussed over the years in great detail at Scotland level, United Kingdom level and Europe level about the regulation of professions and the rules that we can apply to people who want to practise in the professions. It will require significant consideration by the Law Society on behalf of its members and the potential recipients of services provided by solicitors and others under the directive. In doing so, it raises quite significant logistical issues for the Law Society, in quite a brief timescale before implementation is required in December 2009. That seems like a long way off but, in the life of an organisation, and given the issues that are raised by the directive, it is really quite a short period.

We are interested in the substance of the directive but also in the process around it. Our interest in that is partly on the back of our recent inquiry into the transposition of European Union directives, in which one of the key issues that arose was the need for the Scottish Government to get in early in the European Union legislative process.

The Law Society's written evidence expresses

"concerns about the lack of progress made in regard to ascertaining the volume of legislation which will be covered by the Directive".

It points out that the

"Scottish government would have been involved with negotiations on the UK position on the text and the consideration of specific Scottish issues in liaison with relevant stakeholders."

Given the significant impact that the directive will have on the provision of legal services, was your organisation consulted by the Scottish Government during the development of the services directive at EU level? If so, what was the nature and extent of that engagement?

As we mention in our written evidence, the society has been involved in the directive since it was first released as a proposal. We examined it and took steps to encourage amendment of the directive because of the specific issue that related to the society's guarantee fund.

With regard to our involvement with the Scottish Government, I can confirm that in 2004 or 2005 we had a meeting with the Justice Department to discuss the potential effects of the directive on the legal profession in Scotland. Although the Government was involved in the process of lodging an amendment to the directive, the Department of Trade and Industry was the lead negotiating department for the UK. However, I do not recall a formal consultation process as such.

Most of our remarks were made through the DTI.

We are in the same position. We have no recollection of any specific consultation. As the committee will see from the faculty's response thus far, it was directed not at the committee or the Parliament—or indeed the Scottish Government—but rather at a consultation document that was issued by the DTI, which is now the Department for Business, Enterprise and Regulatory Reform.

I have two questions. First, what practical impact, on a day-to-day basis, will the implementation of the services directive have on your members and, more important, if I may say so, your clients? I am thinking in particular of aspects such as the cost of your services to your clients. Secondly, are there practical difficulties in the implementation of the directive that arise from the fact that the directive covers both devolved and reserved matters?

If I may, I will begin by addressing the latter question, which poses an issue of some generality and importance. For example, from the consultation papers that have been issued thus far, we can see that the committee is exercised by the issue of differential implementation. The faculty knows for a fact that there has been differential implementation in other areas of Community law.

For example, in fisheries law, certain directives have been implemented in Scotland in such a way that they have come into force before the corresponding secondary legislation in England and Wales has come into force. From my experience at the bar, I know that that has led to interesting problems that resulted from skippers saying, "I have committed an offence only because my vessel is registered in Scotland. If it had been registered in Hull, I would not have committed an offence, because it is not an offence there yet."

An underlying issue is whether the mechanics of the implementation are discriminatory. I understand that a case is pending before the European Court of Justice to test whether differential implementation is unlawful under European law—it is testing not the principle but whether the mechanics are discriminatory.

Leaving to one side for a moment the professions, we should consider the matter from the consumer's point of view. The consumer has to have a broad choice of services, including from service providers from outside the United Kingdom that wish to be facilitated in providing services in this country. If facilitation is a key purpose of the directive, one possible outcome should be borne in mind. I will take the extreme example that differential legislation or implementation in Scotland, England, Wales and Northern Ireland does not simplify matters but adds layers of complexity. In that case, and depending on how things worked out in practice, the argument could be made that, because the multiplicity of approaches had not simplified but complicated matters, implementation was contrary to the general thrust of the directive.

Having said that, we know that when legislation is implemented separately in Scotland and England and Wales, the implementing provisions can turn out to be pretty well identical. In other words, implementation is not at all differential but is the same north and south of the border.

Are you talking to your counterparts south of the border and in Northern Ireland about implementation?

I am not aware of that, although I think that there have been informal discussions with the Northern Irish bar. When we compare the legal profession in Scotland with the sheer size of it in England and Wales, we are very aware of the relatively small size of the profession in Scotland. If we take advocates and solicitors together, we are talking about tens of thousands of practitioners in Scotland and much larger numbers in England and Wales. The Scottish bar has only about 450 practising members and the Northern Irish bar is also small in number. We have identified a community of interest with Northern Ireland in that regard.

If implementation is applied across the board without recognition of the differences north of the border, the effect in Scotland could be quite different from that in England. For example, if implementation leads to advocates clustering together with accountants or other professionals in multidisciplinary practices, the choice that is available to consumers will be restricted. I have a straightforward, almost arithmetic example of that. Let us say that, of the 450 people who are practising at the bar in Scotland, 200 are criminal defence lawyers—the number feels about right, although I am not certain that it is. If so, there are 250 advocates in general civil law of various sorts, with various specialisations. If they were to become compartmentalised into multidisciplinary firms and practices—for example, as a result of the implementation of article 25 of the directive—a client who at the moment has a theoretical choice of 250 advocates to consult, seek advice from or be represented by in court could have his choice limited to four, five or six firms. Conflict of interest would prevent people in the same firm from consulting on different sides. The example illustrates the potentially negative effect on the consumer, depending on the way in which implementation was done and if the number of practitioners in Scotland was ignored.

In a previous answer, you indicated that discussions with the Scottish Government about implementation are not recent. From what you have just said, there is now rather more urgency in having those discussions.

The urgency arises from something that Sarah Fleming said earlier. It is already 2008 and we have only until the end of 2009. Given the sheer vastness of the task, a lot has to be done in a short time. The faculty issued a paper entitled "Access to Justice: A Scottish Perspective; A Scottish Solution" in response to the Scottish Government's policy statement "Regulation and Business Structures in the Scottish Legal Profession". In that respect, there has been engagement.

Was that not in response to a Competition Commission report?

That is right. It may have been triggered by the so-called super-complaint. There was engagement at that level, albeit that it was, of course, at a different level of generality and was not wearing blinkers—so to speak—to focus its attention on the services directive.

From the perspective of the legal profession, will the Scottish Parliament need to pass primary or secondary legislation to implement the directive?

Lawyers are known for their inability to give a straight answer—

I though that you were going to use the word "expensive".

To be lawerly for a moment, I note that, towards the end of the directive, it says:

"Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive".

As I am sure the committee is aware, the European Commission has produced a handbook on the implementation of the services directive. It rightly points out that it does not expect that implementation of the entire directive will require primary legislation. It envisages that some aspects, for example cross-border co-operation within the Community, might require simply a change of administrative practice, as between civil servants or government bodies, but that is legislatively off the scale.

Some provisions might require either the tweaking of existing secondary legislation or the generation of new secondary legislation. There may be circumstances in which primary legislation is required, however. Given that we have not yet got to grips with the draft legislation, it is difficult to say more than that at this time.

The Commission envisages that implementation will be done in a way that is perhaps not a particularly British way of doing things. Drawing on its experience of how things are done in other countries, the Commission envisages primary legislation that is merely an empty cupboard that is filled with secondary legislation—

Enabling legislation.

Yes. Sometimes, it is called framework legislation. We have such legislation in the United Kingdom, including in immigration legislation where a broad, general, principal statute allows the minister to draft more detailed regulation. A breadth of techniques is available for implementation. It is too early to say whether the Parliament will have to adopt the sledgehammer approach of passing new primary legislation to take another approach.

Convener, I suggest that even at this stage the committee should write to the Government to clarify what it believes will be required by way of primary and secondary legislation to implement the directive.

I am sure that we should do that. Does the Law Society want to comment on any of those issues?

Implementing the directive is a daunting but doable task. The purpose of the directive is to do for services what has already been done for goods by the single market legislation, to ensure that if a service is put on to the European single market, it is properly regulated and accessible. Although some legislation might be required, we should bear in mind two things. First, as far as the Law Society is concerned, its professional rules are made under the Solicitors (Scotland) Act 1980 and they do not become rules until they have been approved by the Lord President, after which they have the force of law. There is fair scope for putting in place the right structure at that level.

However, much of what will be required is administrative and structural. Although legislation might form a part, the biggest task will be to establish the point of single contact—there is quite a lot about that in the handbook on the implementation of the services directive. A framework, probably an electronic one, will be required to enable someone to get into the system, be taken through it and interact with it and, at the appropriate level, be diverted to whichever of the three jurisdictions, in the case of lawyers, they need to go to and perhaps to other professions in other ways.

I see the task of implementation as primarily about putting the right mechanics in place, as it were; legislation will be less of a problem. Of course, we will have to examine some areas for compatibility, but it is the information technology task that is most daunting.

"Daunting" is the right word and it applies to all of us. I agree with the Law Society's comment in its submission that currently there is a low level of awareness of the directive's effects, not only among citizens but among those affected. The BERR consultation gives examples as diverse as

"hallmarking, architectural services, debt collection, management consultancies and tourism."

I guess that you guys are on the front line and, by virtue of your profession, know more about the issues than the rest of us. How can we further engage stakeholders to look at the directive? Is there a role for the Scottish Parliament to do that? How should we go about it? Do you have evidence of work outside your professions where people are looking actively at the directive's implications and inputting as stakeholders to the process?

That is a very pertinent and big question. As you rightly point out, the directive is wide in its application and organisations such as the Law Society and the Faculty of Advocates are in a slightly advantaged situation because we are able to approach the directive in a different way—we are competent authorities under the directive so we can be engaged with as identifiable bodies. The directive also covers people who are not particularly regulated at the moment. The last time that I spoke to BERR about that, it used the example of hairdressers. I do not know about the regulation of hairdressers; there might well be rules for them but, as far as I know, they do not have a competent authority as such. The issue is to engage not only with bodies such as ours but, potentially, with individual businesses or individuals who provide services that are covered by the directive.

My understanding is that within the Scottish Government, the enterprise and industry division is the co-ordinating department, as it were, for the different areas that are covered by various divisions in the Government. It might be useful for the committee to have an idea of what that division thinks about how it will take forward implementation and how it plans to engage with both competent authorities and those that fall outwith that scheme. It is undoubtedly a very big task and, as we have said, time is short.

One constructive approach could be to try to use the skills of those who were involved in negotiating the directive in the first place. As has been noticed in the past, a general problem at the UK level has been that people have spent considerable time negotiating particular provisions—whether in an international treaty or in an EU directive—but, although they achieved results, they disappeared from the scene and were not involved in the implementation of the treaty or directive that they negotiated. By the time it comes to implementation, there is nobody there to point out to those who have the hands-on job of implementing the provisions the very subtle aspects that were achieved through negotiation.

An example that relates to the Law Society and the services directive is that one of the negotiators might say, "Hold on a sec, the idea was to accept article 14.7." Another example might be that limits in a directive mean that only businesses whose turnover exceeds £300,000 are covered, but when it comes to implementation, it could be possible to set a lower limit of £200,000 so that the directive is implemented immediately in the UK or in Scotland with a £200,000 limit and it is forgotten that loads of people put in lots of effort to negotiate provisions to set the level at £300,000.

One could urge those at the UK or Scotland level who have been involved in negotiations on the services directive to provide guidance and assistance at the implementation stage.

That is a very good suggestion and we might wish to write to our MEPs about it. I know that huge numbers of amendments were tabled to the directive and Scottish MEPs were very much involved with it. Perhaps we can get further information from them.

I agree with the view about framework legislation—it is the only way to stay within the timescale. If we in the UK are behind with implementation, I wonder how some of the other member states are coping. Do our witnesses have information about Europe-wide implementation of the directive?

I do not know about the services directive in particular, but if one looks in the annual report of the European Court of Justice about the nature of the cases in front of it and then identifies those member states that are in effect being sued by the Commission for failure to implement this or that directive, it is fair to say that in the league table of good and bad states, the United Kingdom tends to come off rather well as a good state. There are other states that have a bad record—one cannot name them, of course, but one might take Italy as a name that simply occurred to one out of the blue—not least because their political system is such that very often they cannot keep Parliament in physical being long enough to conduct a whole legislative process before it falls and there is a new election.

The Law Society has been involved in discussions about implementation of the services directive with the European legal professions as part of our involvement with the Council of European Bars and Law Societies, which is a pan-European lawyers body. It is difficult to make a generalisation about all the different states that have to implement the directive. We are looking at the situation simply from the point of view of the legal professions. Some seem to be dealing with implementation of the directive very well and others less so, so it is difficult to make any general points.

I return to an earlier question from Mr Neil about any discussions that we have had with our counterparts elsewhere in the UK. The Law Society of Scotland has had quite a lot of contact with the Law Society of England and Wales and has attended meetings with BERR, along with that society. The issues for us are the same as for our fellow bodies in other parts of the UK, notwithstanding the fact that, obviously, the issue of differential implementation does not come into play in England and Wales. However, the more general issues of a logistical nature are the same for them as they are for us and they face the same challenge.

It occurs to me that local authorities will be very much affected by the services directive. I do not know whether we intend to take evidence from the Convention of Scottish Local Authorities, but that would seem to be a sensible next step.

I think that it was Ms Fleming who said in her opening remarks that the directive had potentially profound effects for the profession. Will you spell out what those profound effects might be?

As has been commented on, the directive is broad and a number of issues affect us. As Mr McLean said, a lot of it is to do with logistical issues such as the ability to deal electronically with matters that are not dealt with electronically at the moment.

We have quite a lot of large logistical issues to deal with. For example, as we pointed out in our written evidence, the directive does not merely cover cross-border provision of services; it covers all services. In a Scottish context, particularly in relation to the Law Society of Scotland, although relatively few practitioners from other member states come to Scotland to practise, we obviously have many legal professionals who are, in a broad sense, domestic practitioners. For example, a solicitor in Cambuslang who wants to deal with the Law Society should be in the same position as a lawyer from Paris who wants to deal with the Law Society. That could involve the Law Society, for example, dealing with all practising certificate applications, which are dealt with annually, in an electronic format, which we do not do at the moment. Also, the point of single contact, which is meant to be a portal through which applications for access to a service activity will be made will require both the lawyer from Paris and the solicitor from Cambuslang to be able to approach the Law Society through that portal. That is a potentially large logistical issue, and it is one of the biggest that we face.

Even at this stage, it is probably safe to say that we will also require to change our rules regarding issues such as the part of the directive that deals with services to clients and the kind of information services that will be required. There is a general thrust in the directive that as much information should be provided as possible to clients and potential clients during the contact between the service provider and the service recipient. That will require general changes. More broadly, we must screen all our rules to ensure that they are compliant with the directive and that, if we put requirements on practitioners, they are reasonable within the directive's terms.

One of the most challenging tasks for the Law Society will be to devise rules that are compliant with article 25 of the directive—the multidisciplinary activities article—because there are two parts to that. The first bit is that anything that might appear anticompetitive must be objectively justifiable. The second part, in article 25(2), is to ensure that, if we allow non-lawyers to be involved, we must have a proper way of dealing with conflicts of interest and ensuring that there is independence and impartiality, and the rules governing professional ethics must allow for legal privilege.

Putting that in place in a way that is compliant with article 25 will not be easy. We must bear in mind that we are putting in place something that will allow the lawyers to operate in the single market, so it will need to be something that will withstand any challenge, for example, from a Scots or English firm that opens up in Paris. We have work to do, therefore.

Will you face more or fewer difficulties than your counterparts in Paris?

We will have to solve the problem of dealing with external influence in law firms; our counterparts in Paris do not have to solve that problem because they just do not allow it. We will deal with that, but otherwise it will be a similar exercise.

Will your counterparts not have to allow external influence under the services directive?

No.

Does that not defeat the purpose?

If we do not allow it, we must be able to justify that. In article 25, paragraph 1, on competition, and paragraph 2, on the independence and impartiality of the profession, are not in a hierarchy; paragraph 2 is not inferior to paragraph 1. We must be capable of ensuring that we can deal with conflicts of interest and that independence, impartiality and professional ethics are safeguarded. That is an absolute requirement, so we will have to fulfil it.

Does anyone else want to comment?

This goes back to Mr Neil's question at the outset about the practical impact of all this on the professions. The answer is partly that it depends on the view that is taken of provisions such as those in article 25, which allow for the possibility of exceptions and certain restrictions, if they are justifiable on named grounds, such as impartiality and conflict of interest. Before the Faculty of Advocates, for example, can plan and put in place procedures, it needs to know whether its view on not being in partnership with non-lawyers and so on is considered justifiable under the directive.

We will have some guidance from the Court of Justice, probably by the end of the year, because the appeal on the Akzo case, which is the main case on the issue, is set to be heard on 18 June. We hope that the judgment will be issued not too long after then.

One general issue in which we are interested is whether provisions on devolved matters should be transposed in Scotland or at the UK level. The Law Society's submission says that that decision should be made case by case but that the devolved subject of legal services should be dealt with in Scotland. Has the society discussed those views with the Scottish Government? If so, what was the response?

The answers are yes and nobody knows yet—it is too early to say. I understand from BERR that it is considering producing at Westminster legislation—whatever it turns out to be—at least in draft form towards the end of this year or the beginning of next year. Before that happens, BERR will have to be clear about how different provisions are to be allocated. As has been said, it can be assumed that many issues that relate to the legal profession will be practical and administrative rather than legislative, although we have not delved into that with the Government yet. One important point is that whatever happens with the implementing legislation—whether that is dealt with entirely at Westminster, where it is required, or whether some of it is dealt with by the Scottish Parliament—the Scottish Government will have to be fully engaged in the parts that relate to devolved matters in Scotland, because it must know whether the legislation is appropriate.

Does the Faculty of Advocates have a view?

I am not aware of our having any direct engagement with the Scottish Government on the matter, but it is fairly obvious that that ought to take place. We will report back on that after today's meeting.

In principle, do you want the legislation on devolved matters to be dealt with in Scotland?

If legal practitioners did not have a particular interest because they are members of so-called regulated professions and therefore have special treatment—so to speak—under the directive, we might be relaxed about whether implementation took place north or south of the border. However, given the slant towards regulated professions and the fact that the faculty has a view of its own, especially on multidisciplinary practices, which might be coloured by the Scottish bar's smallness—the English bar has 17,000 practitioners—our view could be that it would be better to implement provisions north of the border, if legislative intervention rather than a lesser form of implementation turns out to be called for.

As our submission says, legislation that affects the legal profession in a Scottish domestic context could be dealt with by the Scottish Parliament next year. Whatever else happens, we must ensure that the implementing legislation—wherever it is introduced—and implementing steps for the services directive are entirely in harmony with whatever is introduced in this Parliament.

The committee has received a letter from the Minister for Europe, External Affairs and Culture about the directive, which says that the

"immediate priority is to complete the screening process"

and talks about

"the awareness of new commercial opportunities that the Directive"

will bring. In your discussions, have you heard evidence of the opportunities that the directive will bring to your profession or associated professions?

The legal profession is fortunate in that the single market has to an extent worked for it for some time through the establishment directive. The problem with services has related to financial services. It has often been noted and said that it is perhaps difficult for the British financial services industry to operate in mainland Europe for all kinds of reasons, one of which is very detailed regulation that may or may not have objective justification. Anything that cuts through that is a huge opportunity and it should benefit Scotland's financial services industry immensely.

I will make a point in response to an earlier remark. Moving away from the legal profession, it is probably generally true that a lot of activities that are not necessarily regulated in this country are regulated in mainland Europe—there may be a board that authorises people to carry out the activity. There will be issues in Europe about whether the rules to allow someone to become, say, a hairdresser are objectively justifiable and fit with the directive generally. If we do not regulate hairdressing—I could be wrong about that, as there may be such an organisation in Scotland—the hairdresser from Scotland who goes to Paris may not be able to say, "I am an accredited hairdresser." They may not be able to produce a certificate and say, "I am properly regulated and I should be allowed to work." In such cases, the task is to look to see whether the obstacles are justified. There will be a slight imbalance on that basis.

As well as recommending the early engagement to which I have referred, one of the key recommendations of the committee's inquiry into transposition was on the introduction of a transposition plan. We suggested that the Scottish Government formally notify the Parliament of its plan for transposition, including the timetable, and indicate whether it planned to rely on section 57(1) of the Scotland Act 1998, which would obviously mean using the United Kingdom Parliament even for devolved matters. We also suggested that it tell the Parliament how it planned to engage with stakeholders. Would a transposition plan have been of assistance in this case?

Yes.

Good. We wanted you to say that.

It is such a complex piece of legislation and covers so many different parts of the Scottish Government—never mind the Government in Whitehall—that it would have been an ideal candidate for a transposition plan. That might have made the situation more transparent not only to the committee and the Parliament but to the bodies outwith the Parliament that also need to know about the transposition process.

I can only agree. It is worth remembering that the enactment of a directive does not automatically oblige every member state to alter its laws wholesale. The first thing that we must do is look at the directive and ask, "To what extent do we already comply?" If we already comply in an area, we do not have to change.

However, we must then identify areas in which we do not comply. Someone will have to sit down and wade through a mass of legislative provisions and ask himself or herself, "Does the present state of affairs in the UK or in Scotland comply with the directive, or does it require to be altered and, if so, in what respects?" It is the breadth of that task, given the size of the trawl that potentially has to be done, that makes this a large undertaking. That is why, as you mentioned, there has to be a lot of consultation. We welcome consultation that comes as early as possible and is as broad as is possible.

That was very useful. Thank you for helping us through the complexities of the services directive. I will suspend for five minutes to allow the witnesses to change over.

Meeting suspended.

On resuming—

I welcome our second panel of witnesses who are giving evidence on our services directive inquiry. We have with us Karen Wright, from Scottish Natural Heritage, and Matt Ogston and Peter Campbell, from the Scottish Environment Protection Agency. I invite our witnesses to make brief opening statements.

Thank you for inviting SNH to give evidence to your inquiry. We are pleased to be here and to contribute where we can. In our written submission, we did not provide an awful lot of detail in response to your questions, primarily because we were uncertain about what the implications of the directive would be for SNH. Since then, we have attended the Scottish Government seminar at COSLA's offices, which provided some clarification, and we have spoken to a number of people in the Scottish Government and in England and Wales. We do not have a firm idea of exactly what the implications of the directive will be, but we have an idea of the areas on which we need to consider doing further work.

We need to consider screening the legislation that we use that permits people to do things to ensure that it is compliant with the directive. We also need to look at the administrative provisions that we have in place. For example, one of the areas that we cover is the licensing of activities that relate to protected species, so we need to look at the administrative provisions that we have for assessing applications to ensure that the criteria are not discriminatory against citizens from other EU states.

We need to ensure that our IT systems are completely up to date and provide clear signposting so that anybody coming in from the EU would be able to see exactly what was required and would be able to find the necessary information and complete applications online.

Finally, we need to look at the administrative co-operation aspects and consider how we can liaise and communicate with our counterparts in other member states if we are required to do so. Those are the broad areas to which we need to dedicate some work.

We will continue our discussions with the Scottish Government, BERR and our counterparts in England and Wales with a view to avoiding any duplication. If they are finding out information, we want to ensure that we are not doing exactly the same thing here.

Thank you for the invitation to attend the meeting. We have only a short opening statement.

In most respects, SEPA's position remains as it was when it responded to the Scottish Government's consultation document. SEPA sent two delegates to the workshop that BERR staged in April 2008, which clarified many of the issues surrounding the scope of the services directive and the work to be undertaken by organisations such as SEPA that are affected by it. However, the workshop also raised questions about how the work is to be taken forward at Scottish Government level. SEPA has been in communication with the Environment Agency and the Department for Environment, Food and Rural Affairs to establish the extent to which the screening work that they already undertake can be used by SEPA in its screening work. We have also been in discussion with our sponsor department in the Scottish Government, although discussions are at an early stage.

Thank you. My first question is for SEPA. In your written evidence, you suggest that many stakeholders are probably not aware of the potential implications and that the directive appears to have "slipped through the net" of many organisations. Will you expand on that?

We have a process for screening and spotting emerging issues, particularly those coming out of Europe. The services directive did not feature in that process. We came upon it quite late in the day; we were certainly not involved in any of the influencing that might have been appropriate. It is late for us to start work on it.

What action by the Scottish Government would assist your organisation and other stakeholder groups to understand the implications of the services directive and the action that needs to be taken in relation to implementation?

There needs to be something analogous to what is happening in England and Wales between DEFRA and the Environment Agency, which are co-ordinating the screening process and, in effect, leveraging off each other's expertise in doing so.

Would Karen Wright like to comment on that?

A transposition plan, which was mentioned earlier, would be particularly useful for such a complex and wide-ranging directive.

The services directive is daunting and complex and covers a range of issues. Given how it will impact on you, do you think that it is consistent with the Commission's better regulation agenda? Is it going to make life easier for you on the ground?

Given that one purpose of the directive is to simplify procedures, it will chime with the objectives of the better regulation agenda. That point has relevance to the question whether there should be a single point of contact in the UK—a single national liaison point—to make implementation as simple as possible and ensure that there is no confusion. Citizens from European countries will not necessarily understand the governance arrangements in the UK, so it makes sense that we make it as simple as possible.

Given that people have said that they have been taken a little unaware and that the directive has "slipped through the net", do you feel that you are at an advanced stage of preparation and understand fully the directive's implications for your organisations?

I would not say that we are particularly far along the line, but we know the areas that we need to consider. Other areas that have wide-ranging implications for a lot of organisations are recruitment procedures and procurement. We must ensure that any qualification requirements do not stipulate qualifications that can be obtained only in Scotland or the UK. The requirements must include a provision such as "or similar" to cover equivalent qualifications in other member states.

I have a couple of comments on the first question, and I will then hand over to my colleague.

On the extent of the problem of implementation, SEPA keeps a register of all the legislation for which it is the regulator and by which it is regulated. It concentrates almost exclusively on the environmental side rather than other legislation. The register runs to almost 200 entries and covers just the main legislation, as we style it; it does not include consequential and amending statutory instruments. We would have to screen a lot of environmental legislation, and we would certainly welcome some firm instruction on how that screening process should go ahead. I would like to come back to that point and the detail of what screening involves.

We also have a better regulation unit, which the committee heard about in evidence during its general inquiry into the transposition of EU directives. That involves a process of constant improvement in overcoming what might otherwise be barriers to inquirers and customers having easy access to our systems, applications and so on. That is also covered by the services directive.

The environmental legislation that has been passed in Scotland over the years has involved a process of considering possible barriers. I have a gut feeling that it might not be such a huge task to unearth the legislation that we might have to address under the services directive.

On the actual impact, my colleague Matt Ogston might have a shortlist of the areas in which we are involved with regulating people who supply services as opposed to goods. I think that that might be quite a short shortlist.

We need some clarification on how far the definition of service providers extends. Considering how and who we regulate, I believe that waste—and waste transport in particular—is the area that is most likely to be affected. Most of our licensing and permitting involve activities that pollute in a particular location. It is difficult to see the provisions of the services directive changing that work very much. There are justifiable reasons why an organisation that wants to undertake an activity in Scotland that needs to be licensed would have to apply for a licence and would therefore need a base or presence here.

Particular provisions, including our requirement for an organisation to have a registered office in Scotland, will need to be considered. We have that requirement so that we can serve legal actions on people who do not comply with their licences. That aspect would need to be considered if an organisation did not have a registered office in Scotland but was carrying on activities in Scotland.

Peter Campbell voiced a desire for instruction on the screening process. Are you looking to the UK Government, the Scottish Government or the European Commission for support, clarification and guidance on that? What discussions have you had to date?

When I contacted my counterpart in the Environment Agency, I found out that they had received quite a lot of information about screening and had worked on the matter in co-ordination with DEFRA. I would envisage something similar here. There are good reasons why we would be wise to await the outcome of that screening, however. Much of the legislation that we would screen here would be broadly similar in principle to what has already been screened by DEFRA and the Environment Agency. There would be no point in duplicating their effort. We should know what the timescale for screening is, and we should plan to undertake it as quickly as possible as soon as we can make a start.

We have been in touch with our counterparts in England and Wales, but we have had very little information from them. I am not sure how much interaction they have had with DEFRA in respect of their responsibilities under the services directive. We are continuing a dialogue with them about that. It would be useful to have some support from the Scottish Government to help us determine our requirements.

I have a thought about the licensing duties that SEPA performs in relation to waste and other activities. Could your assessment of a firm's activities itself be viewed as a service? Is there any potential for such assessments to have to be opened up for competition with other certification agencies?

That raises a question from me in return: what is a service? We do not have firm enough instruction at the moment on what qualifies as a service. We have the basic definition from the European treaties, and I have seen case law on it, but your question is the sort of question that I want to ask the Scottish Government or DEFRA, for instance.

Various independent certification agencies inspect work on oil rigs in connection with offshore health and safety, for example. SEPA's activities include all the inspections to check compliance with legislation, do they not?

In fact, that is starting to change. The SEARS—Scotland's environmental and rural services—initiative, which is being launched in about a month's time, is a case in point. Different organisations that operate in the rural sector are undertaking compliance inspections on behalf of other organisations, and efficiencies are being sought. There are already precedents. However, that is not totally pertinent to the idea of opening up such matters for competition; it is more a matter of efficiency.

So you do not know whether competition is ruled out or ruled in at the moment, and you need guidance on the matter.

Yes.

There is a general issue about the guidance that you have been given. The SEPA submission says:

"SEPA has yet to be advised what Scottish environmental legislation is within the scope of the Directive".

SNH says:

"At this stage, we are unclear what environmental legislation may be within the scope of the Directive."

Another issue that occurs to me is how you have ascertained that you are competent authorities. Do you have to find out about all those issues for yourself, or are you getting advice from the Scottish Government or anybody else?

We have not had specific advice. We are in discussion with the Scottish Government but, as of today, we have not had advice.

Your submission refers to a seminar that you were due to attend on 15 April. Was it useful? Did it enlighten you?

It was useful. It was staged by BERR, which underlined what the various competent authorities need to plan to do and laid out fairly clearly that the screening process is a critical part of that. As my colleague has said, the screening process is, potentially, an enormous process. SEPA does not feel that it is equipped to undertake it for the range of environmental legislation. Our position has always been that we expect the Scottish Government to take a lead in that process.

We found the BERR seminar useful. The message that I took from it was that we need to consider the legislation that we use to find out where it allows persons to do something and then consider whether the provisions need to be changed, and, if they do not, whether the administrative provisions that follow on from the legislation need to be changed.

As Mr Ogston said, we are lagging behind England and Wales in that we are waiting to see what their screening process throws up. That is one reason why I would not expect to be further ahead with firm instruction or guidance on how the screening process is done. To link back to your wider inquiry about transposition, in some instances Scotland lags behind the rest of the UK and in other instances Scotland is far ahead, for example on the water framework directive. This time round, because we have sort-of matching legislation north and south of the border, it is sensible logistically to wait—not too long, I hope—for the exercise south of the border to be completed and then piggyback on it.

Do you have a view on the general issue of whether the devolved bits should be dealt with in Scotland or in London, or are you relaxed about that?

If we find legislation that needs to be changed to be compliant, I guess that the answer depends on where that legislation exists. If it is Scottish legislation, I presume that it will need to be modified here.

That applies to the modification of legislation, but what about other regulations that might be required?

An important point is that the process is pragmatic and follows the better regulation agenda.

I have a quick question that follows on from what we heard from the previous witnesses. Is there a likelihood of opt-outs for your sister organisations abroad?

I am not aware of that.

Is it too early to know? What we heard from the previous witnesses was a revelation for us.

Yes—it is too early to know.

The problem is that it is early in the process and you will be in the dark about many issues until the Government makes its position clear, although I presume that it is waiting for answers from elsewhere.

I can add a comment on the uncertainty. Much of the legislation with which we deal may, in fact, be exempt from the directive. For example, barriers and restrictions exist to protect the environment, which is one of the exemptions.

Another issue that we are not clear about relates to service providers who are involved in the transport of waste. Is that classed as transport, which is exempt from the services directive, or waste collection, which is included? The list goes on. We want to flesh out those issues. The process is under way somewhere, but mainly in DEFRA. We know that we will catch up soon.

The services directive was agreed in December 2006, but you said in your submission that you did not pick up on it right away. When did you become aware of the impact that it would have on your organisation?

There were two sources of information about the directive, as far as I know—Matt Ogston might add to that. We got two alerts around April 2007. I got information from the Brussels joint office of the Law Society of Scotland and the other UK law societies, which publish the newsletter "Brussels Agenda", which is available electronically. Although I knew about that service's existence, I had not studied the newsletter much, because my field is environmental legislation. However, a line in the newsletter alerted me to the fact that certain public organisations in the environmental sector would be affected by the directive.

Around the same time, one of our officers, who is currently on secondment to the European Commission, attended a presentation at a conference of the European Union network for the implementation and enforcement of environmental law—IMPEL. He came back to the office in a panic—it was a very minor panic at that stage.

That is when we started the ball rolling and other areas of SEPA, including Mr Ogston's department, were notified. I do not want to harp on, but perhaps we should have heard about the directive's implications from the Scottish Government before we heard via the two sources that I described.

What was SNH's experience?

We knew about the services directive but did not realise that it had implications for us until the BERR consultation took place towards the end of last year.

That is illuminating. If there are no more questions from members, I thank the witnesses for their helpful evidence.