Probleem 8 European Law
Leerdoelen
(1) What is the right of establishment/freedom of establishment regarding legal persons (including
justifications & limitations) and are workers' rights protected against the rights of legal persons?
E-lesson Free Movement of Persons Part IV: The Freedom of Establishment of Legal
Persons/Companies
The freedom of establishment is divided in two parts;
1. One part consists of the self-employed natural persons falling under Article 49 TFEU (who are not workers, because they are not
working under the direction of another person). Self-employed persons are persons working for themselves in a host Member State;
2. The other part of establishment consists of companies and legal persons who are covered by Article 54 TFEU.
Companies/legal persons
According to Article 54 TFEU, legal persons, such as companies or firms, also fall under the scope of freedom of establishment. There are
two theories accepted under Article 54 TFEU that interpret the definition of a company; the real seat theory and the incorporation
theory.
- The real seat theory obligates the company to have a physical link between the legal personality and its primary residence. fysieke
band te hebben tussen de rechtspersoonlijkheid en haar hoofdverblijfplaats.
- The incorporation theory, however, grants legal personality to all companies properly incorporated under national law; it only looks at
its registered company. aan alle vennootschappen die naar behoren zijn opgericht naar nationaal recht;
The Treaties recognize both theories in Article 54 TFEU, every Member State is free to adapt their own theory. Because of the free choice
of the Member States to choose whichever theory, a cross border situation can occur. Two legal orders that claim competence to
regulate a company or a complete lack of a competent legal order. Door de vrije keuze van de lidstaten om welke theorie dan ook te
kiezen, kan een grensoverschrijdende situatie ontstaan. Twee rechtsordes die aanspraak maken op bevoegdheid om een onderneming te
reguleren of een totaal ontbreken van een competente rechtsorde. To avoid this problem, the case law tries to give guidance in such a
situation.
Justifications to the freedom of establishment
1. Directly discriminatory measures (the equivalent of ‘distinctly applicable measures’ in the free movement of goods) can be justified
only based on the express Treaty justifications in Article 52 TFEU.
2. All other measures (indirect discriminations and non-discriminatory restrictions) which constitute an obstacle to EU citizens wishing to
exercise their freedom of establishment can potentially be justified by implied justifications (also known as imperative requirements,
overriding requirements relating to the public interest etc., recognized in case law or on the basis of the express Treaty justifications
recognized by Article 52 TFEU and secondary law (public policy, public security, public health).
The CJEU has recognised in the Gebhard case (C-55/94) the possibility for a Member State to justify measures on the basis of implied
justifications, namely imperative requirements, as long as they satisfy the proportionality-test.
The Court explained the principles governing the application of these imperative requirements in the Gebhard-case (C-55/94). In order
for a Member State to rely on these imperative requirements, the contested national measures must cumulatively (para. 37):
(1) be applied in a non-discriminatory manner;
(2) be justified by imperative requirements in the general interest;
(3) be suitable for securing the attainment of the objective which they pursue;
(4) not go beyond what is necessary to attain the objective that they pursue (no less restrictive measures possible).
Exception
There is also a public service exception for restrictions to the freedom of establishment; this is applied similarly to what we have seen
with Article 45(4) TFEU. This public service exception for the freedom of establishment can be found in Article 51 TFEU. This provision
states that the provisions of establishment shall not apply, in so far as any given Member State is concerned, ‘to activities which in that
State are connected, even occasionally, with the exercise of official authority’. The CJEU tends to interpret this exception restrictively,
meaning that it is not easy for a Member State to show that a job satisfies the above definition.
Webcasts
Free movement of legal person
- The person and her activity can be separated from each other.
- The one does not move together with the other one. Because the legal person cannot exist without a legal order that defines
it.
What are legal persons?
- Daily Mail: ‘unlike natural persons, companies are creatures of the law and, in the present state of Community law, creatures
of national law. They exist only in virtue of the varying national legislation which determines their incorporation and
functioning (paragraph 19)
- What is meant by a ‘creature of the law’?
The birth, existence and death are defined by (national) law. But which one of the 27 national laws apply? Therefore we have
Private International Law: it defines a connecting factor that decides which national law is applicable to decide on the legal
, question. The crucial point is the connecting factor: what connects a legal situation to a territory. Private International law
knows 2 factors:
o Incorporation theory: place of the company register
o Real seat theory: place of the business activity/central administration
What does EU law say about ‘creatures of the law’? Art 54 (1) TFEU
Companies or firms forced in accordance with the law of a Member State and having their registered office, central administration or
principle place of business (the connecting factors ) within the Union shall, for the purposes of this Chapter, be treated the same way as
natural persons who are nationals of Member States.
This article doesn’t care what connecting factors are applicable: equal treatment of connecting factors freely set by the law of the
Member States.
The last two are unbearable. Art 54 kan niet opgaan, een solution has to be found, and the CJEU had to deal with these cases. Want het
kan niet dat two legal orders or no legal order is applicable. At least one legal order needs to be competent to regulate a company
There are two perspectives that need to be taken into account when trying to make sense of the case law.
First: the type of legal challenge
- Two legal orders claim the competence to regulate a company
- No legal order claims the competence to regulate a company
Second: the location of the company and its economic activity
- Home Member State: the Member State, under whose legal order a company was created
- Host Member State: the destination of the movement (movement of the economic activity or movement of the company
structure while the activity remains in the home member state)
Two legal orders
The economic activity moves from a country with an incorporation theory to a country with a real seat theory. For the home member
state there are no consequence: the home MS remains competent to decide on its ‘creature of law’: the relocation of the economic
activity does not affect the legal status of the creature. What matters is the place of registration. The real seat country says it will apply
its law on a company where the economic activity takes place.
Leerdoelen
(1) What is the right of establishment/freedom of establishment regarding legal persons (including
justifications & limitations) and are workers' rights protected against the rights of legal persons?
E-lesson Free Movement of Persons Part IV: The Freedom of Establishment of Legal
Persons/Companies
The freedom of establishment is divided in two parts;
1. One part consists of the self-employed natural persons falling under Article 49 TFEU (who are not workers, because they are not
working under the direction of another person). Self-employed persons are persons working for themselves in a host Member State;
2. The other part of establishment consists of companies and legal persons who are covered by Article 54 TFEU.
Companies/legal persons
According to Article 54 TFEU, legal persons, such as companies or firms, also fall under the scope of freedom of establishment. There are
two theories accepted under Article 54 TFEU that interpret the definition of a company; the real seat theory and the incorporation
theory.
- The real seat theory obligates the company to have a physical link between the legal personality and its primary residence. fysieke
band te hebben tussen de rechtspersoonlijkheid en haar hoofdverblijfplaats.
- The incorporation theory, however, grants legal personality to all companies properly incorporated under national law; it only looks at
its registered company. aan alle vennootschappen die naar behoren zijn opgericht naar nationaal recht;
The Treaties recognize both theories in Article 54 TFEU, every Member State is free to adapt their own theory. Because of the free choice
of the Member States to choose whichever theory, a cross border situation can occur. Two legal orders that claim competence to
regulate a company or a complete lack of a competent legal order. Door de vrije keuze van de lidstaten om welke theorie dan ook te
kiezen, kan een grensoverschrijdende situatie ontstaan. Twee rechtsordes die aanspraak maken op bevoegdheid om een onderneming te
reguleren of een totaal ontbreken van een competente rechtsorde. To avoid this problem, the case law tries to give guidance in such a
situation.
Justifications to the freedom of establishment
1. Directly discriminatory measures (the equivalent of ‘distinctly applicable measures’ in the free movement of goods) can be justified
only based on the express Treaty justifications in Article 52 TFEU.
2. All other measures (indirect discriminations and non-discriminatory restrictions) which constitute an obstacle to EU citizens wishing to
exercise their freedom of establishment can potentially be justified by implied justifications (also known as imperative requirements,
overriding requirements relating to the public interest etc., recognized in case law or on the basis of the express Treaty justifications
recognized by Article 52 TFEU and secondary law (public policy, public security, public health).
The CJEU has recognised in the Gebhard case (C-55/94) the possibility for a Member State to justify measures on the basis of implied
justifications, namely imperative requirements, as long as they satisfy the proportionality-test.
The Court explained the principles governing the application of these imperative requirements in the Gebhard-case (C-55/94). In order
for a Member State to rely on these imperative requirements, the contested national measures must cumulatively (para. 37):
(1) be applied in a non-discriminatory manner;
(2) be justified by imperative requirements in the general interest;
(3) be suitable for securing the attainment of the objective which they pursue;
(4) not go beyond what is necessary to attain the objective that they pursue (no less restrictive measures possible).
Exception
There is also a public service exception for restrictions to the freedom of establishment; this is applied similarly to what we have seen
with Article 45(4) TFEU. This public service exception for the freedom of establishment can be found in Article 51 TFEU. This provision
states that the provisions of establishment shall not apply, in so far as any given Member State is concerned, ‘to activities which in that
State are connected, even occasionally, with the exercise of official authority’. The CJEU tends to interpret this exception restrictively,
meaning that it is not easy for a Member State to show that a job satisfies the above definition.
Webcasts
Free movement of legal person
- The person and her activity can be separated from each other.
- The one does not move together with the other one. Because the legal person cannot exist without a legal order that defines
it.
What are legal persons?
- Daily Mail: ‘unlike natural persons, companies are creatures of the law and, in the present state of Community law, creatures
of national law. They exist only in virtue of the varying national legislation which determines their incorporation and
functioning (paragraph 19)
- What is meant by a ‘creature of the law’?
The birth, existence and death are defined by (national) law. But which one of the 27 national laws apply? Therefore we have
Private International Law: it defines a connecting factor that decides which national law is applicable to decide on the legal
, question. The crucial point is the connecting factor: what connects a legal situation to a territory. Private International law
knows 2 factors:
o Incorporation theory: place of the company register
o Real seat theory: place of the business activity/central administration
What does EU law say about ‘creatures of the law’? Art 54 (1) TFEU
Companies or firms forced in accordance with the law of a Member State and having their registered office, central administration or
principle place of business (the connecting factors ) within the Union shall, for the purposes of this Chapter, be treated the same way as
natural persons who are nationals of Member States.
This article doesn’t care what connecting factors are applicable: equal treatment of connecting factors freely set by the law of the
Member States.
The last two are unbearable. Art 54 kan niet opgaan, een solution has to be found, and the CJEU had to deal with these cases. Want het
kan niet dat two legal orders or no legal order is applicable. At least one legal order needs to be competent to regulate a company
There are two perspectives that need to be taken into account when trying to make sense of the case law.
First: the type of legal challenge
- Two legal orders claim the competence to regulate a company
- No legal order claims the competence to regulate a company
Second: the location of the company and its economic activity
- Home Member State: the Member State, under whose legal order a company was created
- Host Member State: the destination of the movement (movement of the economic activity or movement of the company
structure while the activity remains in the home member state)
Two legal orders
The economic activity moves from a country with an incorporation theory to a country with a real seat theory. For the home member
state there are no consequence: the home MS remains competent to decide on its ‘creature of law’: the relocation of the economic
activity does not affect the legal status of the creature. What matters is the place of registration. The real seat country says it will apply
its law on a company where the economic activity takes place.
