PROBLEM 5
Learning objectives:
1. What is the right of establishment or the freedom of establishment regarding natural persons, and when
does it apply?
2. What is the recognition of diplomas and how does that relate to the internal market?
3. What are the justifications and derogations to the freedom of establishment for natural persons?
4. What is the free movement of services and when does it apply?
5. What are the justifications and derogations to the free movement of services?
6. Solve the case: does Marisa need to close the second branch of her hair salon within thirty days, or can she
continue to operate her hair salon in France under EU law? (niet uitgewerkt)
Literature:
- E-lesson on the free movement of persons Part III: the freedom of establishment (self-employment and legal
persons/companies)
- E-lesson on the free movement of services (Article 56 TFEU)
- Webcast on basic notions Part I
- Webcast on basic notions Part II
Case Law:
Gebhard-case (C-55/94) Van Binsbergen-case (33/74) (Only rule)
Knoors-case (115/78) (Only rule) Alpine Investments-case (C-384/93)
Reyners-case (2/74) (Only rule) Grogan-case (C-159/90) (Only rule)
Klopp-case (107/83) Fidium Finanz-case (C-452/04)
Vlassopoulou-case (340/89) Säger-case (C-76/90) (Only rule)
Commission v. Belgium-case (149/79) (Only rule)
1. WHAT IS THE RIGHT OF ESTABLISHMENT OR THE FREEDOM OF ESTABLISHMENT
REGARDING NATURAL PERSONS, AND WHEN DOES IT APPLY?
The freedom of establishment is divided in two parts;
• One part consists of the self-employed natural persons falling under Article 49 TFEU
o Who are not workers, because they are not working under the direction of another
person;
o Self-employed persons are persons
working for themselves in a host
Member State;
• The other part of establishment consists
of companies and legal persons who are
covered by Article 54 TFEU.
1
, Personal scope: self-employed natural persons
Article 49 TFEU
• States that the freedom of establishment shall include the right to take up and pursue activities
as self-employed persons and to set up and manage undertakings, in particular companies or
firms
• Regulates the rights of self-employed persons
o Similar to workers, self-employed persons need to be engaged in a genuine economic
activity, however, they do not need to work under the direction of an employer, and
they will not receive a ‘salary’ compensating for their ‘subordination’
o Therefore, if someone is a worker, that person cannot be a self-employed person;
§ The two freedoms (workers and establishment in the meaning of a self-
employed person) cannot be applicable at the same time → Gebhard case
(para. 20)
Which freedom: establishment, services or goods?
This question how to distinguish between those three was answered in the Gebhard case
• The court decided that the free movement of establishment is applicable if the activity is not on
a temporary basis, and thus on a stable and continuous basis. If the activity takes place on
a temporary basis, it will fall under the free movement of services (para. 25). ‘Where the
provider of services moves to another Member State, the provisions of the chapter on services,
in particular the third paragraph of [Article 57], envisage that he is to pursue his activity there on
a temporary basis’ (para. 26).
• The decisive criterion distinguishing ‘established’ service providers from ‘temporary’ service
providers is thus the ‘stable and continuous basis’ on which the former participates in the
economy of the host Member State. The freedom of establishment therefore presupposes
a certain degree of permanent participation in the economy of the host Member State. This
participation must be on a stable and continuous basis (the free movement of services (Article
56 TFEU) on the other hand, presupposes certain temporality in the economic activity).
• However, importantly, the concept of establishment will not require exclusive presence in the
host State, as this would rule out secondary establishment.
o According to the CJEU in Gebhard (para. 27), the test to identify whether Article 49
applies to a situation is to examine on a case-by-case basis the ‘duration, regularity,
periodicity or continuity’ of the services provided. Presence in a Member State does
not need to take the form of a ‘branch’ or ‘agency’ but may consist of an ‘office’.
Personal scope: companies/legal persons
According to Article 54 TFEU, legal persons, such as companies or firms, also fall under the scope of
freedom of establishment.
• Companies are legal persons whose purpose usually is to undertake business activities.
Companies need to be profit oriented, formed according to the national law of a Member
State, and have some corporate connection to the EU in order to fall under the freedom.
Every Member State has its own rules and conditions regarding the form of a company; this is where EU
law comes into play.
What happens when a company in the Netherlands wants to establish itself in another Member State
where the conditions of establishing a company do not match with the conditions in the Netherlands?
• There is no EU concept of what a company is, but there are two theories accepted under
Article 54 TFEU that interpret the definition of a company
o The real seat theory obligates the company to have a physical link between the legal
personality and its primary residence.
o The incorporation theory, however, grants legal personality to all companies properly
incorporated under national law; it only looks at its registered company.
2
Learning objectives:
1. What is the right of establishment or the freedom of establishment regarding natural persons, and when
does it apply?
2. What is the recognition of diplomas and how does that relate to the internal market?
3. What are the justifications and derogations to the freedom of establishment for natural persons?
4. What is the free movement of services and when does it apply?
5. What are the justifications and derogations to the free movement of services?
6. Solve the case: does Marisa need to close the second branch of her hair salon within thirty days, or can she
continue to operate her hair salon in France under EU law? (niet uitgewerkt)
Literature:
- E-lesson on the free movement of persons Part III: the freedom of establishment (self-employment and legal
persons/companies)
- E-lesson on the free movement of services (Article 56 TFEU)
- Webcast on basic notions Part I
- Webcast on basic notions Part II
Case Law:
Gebhard-case (C-55/94) Van Binsbergen-case (33/74) (Only rule)
Knoors-case (115/78) (Only rule) Alpine Investments-case (C-384/93)
Reyners-case (2/74) (Only rule) Grogan-case (C-159/90) (Only rule)
Klopp-case (107/83) Fidium Finanz-case (C-452/04)
Vlassopoulou-case (340/89) Säger-case (C-76/90) (Only rule)
Commission v. Belgium-case (149/79) (Only rule)
1. WHAT IS THE RIGHT OF ESTABLISHMENT OR THE FREEDOM OF ESTABLISHMENT
REGARDING NATURAL PERSONS, AND WHEN DOES IT APPLY?
The freedom of establishment is divided in two parts;
• One part consists of the self-employed natural persons falling under Article 49 TFEU
o Who are not workers, because they are not working under the direction of another
person;
o Self-employed persons are persons
working for themselves in a host
Member State;
• The other part of establishment consists
of companies and legal persons who are
covered by Article 54 TFEU.
1
, Personal scope: self-employed natural persons
Article 49 TFEU
• States that the freedom of establishment shall include the right to take up and pursue activities
as self-employed persons and to set up and manage undertakings, in particular companies or
firms
• Regulates the rights of self-employed persons
o Similar to workers, self-employed persons need to be engaged in a genuine economic
activity, however, they do not need to work under the direction of an employer, and
they will not receive a ‘salary’ compensating for their ‘subordination’
o Therefore, if someone is a worker, that person cannot be a self-employed person;
§ The two freedoms (workers and establishment in the meaning of a self-
employed person) cannot be applicable at the same time → Gebhard case
(para. 20)
Which freedom: establishment, services or goods?
This question how to distinguish between those three was answered in the Gebhard case
• The court decided that the free movement of establishment is applicable if the activity is not on
a temporary basis, and thus on a stable and continuous basis. If the activity takes place on
a temporary basis, it will fall under the free movement of services (para. 25). ‘Where the
provider of services moves to another Member State, the provisions of the chapter on services,
in particular the third paragraph of [Article 57], envisage that he is to pursue his activity there on
a temporary basis’ (para. 26).
• The decisive criterion distinguishing ‘established’ service providers from ‘temporary’ service
providers is thus the ‘stable and continuous basis’ on which the former participates in the
economy of the host Member State. The freedom of establishment therefore presupposes
a certain degree of permanent participation in the economy of the host Member State. This
participation must be on a stable and continuous basis (the free movement of services (Article
56 TFEU) on the other hand, presupposes certain temporality in the economic activity).
• However, importantly, the concept of establishment will not require exclusive presence in the
host State, as this would rule out secondary establishment.
o According to the CJEU in Gebhard (para. 27), the test to identify whether Article 49
applies to a situation is to examine on a case-by-case basis the ‘duration, regularity,
periodicity or continuity’ of the services provided. Presence in a Member State does
not need to take the form of a ‘branch’ or ‘agency’ but may consist of an ‘office’.
Personal scope: companies/legal persons
According to Article 54 TFEU, legal persons, such as companies or firms, also fall under the scope of
freedom of establishment.
• Companies are legal persons whose purpose usually is to undertake business activities.
Companies need to be profit oriented, formed according to the national law of a Member
State, and have some corporate connection to the EU in order to fall under the freedom.
Every Member State has its own rules and conditions regarding the form of a company; this is where EU
law comes into play.
What happens when a company in the Netherlands wants to establish itself in another Member State
where the conditions of establishing a company do not match with the conditions in the Netherlands?
• There is no EU concept of what a company is, but there are two theories accepted under
Article 54 TFEU that interpret the definition of a company
o The real seat theory obligates the company to have a physical link between the legal
personality and its primary residence.
o The incorporation theory, however, grants legal personality to all companies properly
incorporated under national law; it only looks at its registered company.
2
