Blog: Brexit-the concept of “contractual service supplier” – Lexology

UK service suppliers have lost their automatic right to provide services across the EU.

Article SERVIN 4.1 UK-EU Trade and Cooperation Agreement (hereinafter referred to as TCA) lays down the definition of  contractual service suppliers “natural persons employed by a legal person of a Party(other than through an agency for placement and supply services of personnel), which is not established in the territory of the other Party and has concluded a bona fide contract, not exceeding 12 months, to supply services to a final consumer in the other Party requiring the temporary presence of its employees who:

(i) have offered the same type of services as employees of the legal person for a period of not less than one year immediately preceding the date of their application for entry and temporary stay;

(ii) possess, on that date, at least three years professional experience, obtained after having reached the age of majority, in the sector of activity that is the object of the contract, a university degree or a qualification demonstrating knowledge of an equivalent level and the professional qualifications legally required to exercise that activity in the other Party; and

(iii) do not receive remuneration from a source located within the other Party”.

Where that definition is more restrictive than the one of contractual service supplier in the meaning of the International Agreement Worker route under the UK T5 (Temporary Worker) scheme, the question is whether the concept of contractual service supplier brings any added value to UK undertakings providing services within the EU territory.  

From the EU perspective that definition represents per se a more restrictive treatment than that the EU and its Member States currently accord to service suppliers of a third country.

Pursuant to Article SERVIN 3.5.1 (Most favourable nation treatment): “Each Party shall accord to services and service suppliers of the other Party treatment no less favourable than that it accords, in like situations, to services and service suppliers of a third country”.

Prima facie, it follows that from the EU perspective, the mere application of the definition of contractual service supplier constitutes a breach of Article SERVIN 3.5.1.

However, service providers who do not fall under the definition of contractual service suppliers (and for which commitments are not undertaken by the TCA), may rely on the host Member State national legislation.

Pursuant to Article SERVIN 4.1.2 “To the extent that commitments are not undertaken in this Chapter, all requirements provided for in the law of a Party regarding the entry and temporary stay of natural persons shall continue to apply, including laws and regulations concerning the period of stay”.

More ever, pursuant to Article SERVIN 4.1.3 all requirements provided for in the law of a Party regarding inter alia work, continue to apply.

It follows that UK contractual service suppliers are not given a less favourable treatment than that accorded to service suppliers of a third country (being submitted to national legislations that are more favourable than the definition of contractual service suppliers from the TCA).

The definition of contractual service supplier must be read as the parties’ commitment not to impose conditions that are more restrictive than those laid down in the said definition. The above reasoning can be applied mutatis mutandis to EU undertakings providing services in the UK.

However, it follows that Member States are given the opportunity to provide for more favourable treatment to contractual service suppliers, in the framework and considering the limitations imposed by the TCA.

It must be noted that Article SERVIN 4.4 (b): “a Party shall not adopt or maintain limitations on the total number of contractual service suppliers and independent professionals of the other Party allowed entry and temporary stay, in the form of numerical quotas or an economic needs test”, applies exclusively if the criteria from the definition of contractual service supplier are met, and does not apply to existing non-conforming measures, continuation, prompt renewal or conform modification of the latter, and to any measure of a Party consistent with a condition or qualification specified in Annex SERVIN2 (see to that effect Article SERVIN 4.5).

An example to clarify the current situation: an UK undertaking must send a highly specialised technician to carry out casting upgrade welding, in the framework of a maintenance and repair service contract concluded with a recipient located in the EU (before 31 December 2020 common scenario under the provisions of the Posting of Workers Directive).

Such a service is covered by Annex SERVIN-4: maintenance and repair of metal products, of (non-office) machinery, of (non-transport and non-office) equipment and of personal household goods (CP 8862- casting and forging services of metals treatment and coating services of metals, repair services incidental to metal products …).

However, it is unlikely that the technician possesses a university degree or a qualification demonstrating knowledge of an equivalent level (i.e., in the meaning of the host Member State’ national legislation), and consequently does not fall under the definition of contractual service supplier.

The national legislation of the host Member State must be (however) considered, and unless an exemption determined by the duration and/or nature of the service is relevant (i.e., exemption under employment of aliens acts and not under acts transposing the Posting of Workers Directive), or a work authorisation is foreseeable (shortage occupation and/or labour market test satisfied etc.), the service may not be provided.

A mechanical engineer providing services under the same CP886 will be deployed “under” the host Member State national legislation regardless the definition of contractual service supplier (unless the host Member State national legislation will be amended to provide for simplified admission to stay and work procedures, and the engineer will satisfy the other conditions from the definition above quoted).

The takeaway

UK service providers are bound by the host Member State national legislation to the same extent as service providers established in other third countries are bound.

The definition of contractual service supplier must be read as the parties’ commitment not to impose conditions that are more restrictive than those laid down in the said definition.  

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