Week 1 - Freedom of establishment and freedom to
provide services
Stappenplan
Breach?
1. Under the personal scope of the free movement?
a. Personal scope: whether the situation concerns internationals (EU nationals).
b. Material scope
i. Is there an interstate element?
ii. Is there an economic activity?
2. Temporary basis or permanent/spontaneous (Gebhard, 27-28)?
a. Stable, continuous?
b. Establishment vs service
i. Not only the duration of the service, but also its regularity, periodicity
or continuity.
Justified?
1. Scopes, etc. Which freedom?
a. Service → services directive?
2. Discriminatory?
a. Yes, direct → only treaty provisions + proportionality (derogations,
art. 52 & 62)
b. No / indirect → treaty provisions, rule of reason (case law) +
proportionality
3. Proportionality
a. Suitable for securing the goal of the objective they are pursuing
b. Not go beyond what is necessary (necessity)
c. Stricto sensu: is the extra protection more important than the freedom of
establishment/services?
The treaty requirements
Both the freedoms have vertical direct effect. This means that they apply to MS and also to
regulatory bodies.
★ Economic connotation (remuneration)
★ Lawful activities (Josemans, para 42)
CJEU Watts
Freedom of services also includes medical services:
R.o. 86: medical services fall within the scope of the provisions on the freedom to provide services.
R.o. 90: art. 49 applies where a patient receives medical care in a hospital environment in another MS than her
state of residence, regardless of the way in which the national system of the home country of the patient
operates.
CJEU Josemans
R.o. 42: narcotic drugs are prohibited from being released into the economic and commercial channels of the
, EU, therefore a coffee shop owner cannot apply the provisions on freedom of movement or the principle of
nondiscrimination.
R.o. 46: however, they can still be applied because even though coffee-shops mostly sell cannabis, they also
sell non-alcoholic beverages and food which do fall under the provisions.
Freedom of establishment
Article 49 TFEU
Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals
of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also
apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State
established in the territory of any Member State.
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 within the meaning of the second
paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country where
such establishment is effected, subject to the provisions of the Chapter relating to capital.
This freedom concerns the establishment of EU natural persons and companies, branches
and agencies in other MS on permanent or semi-permanent basis. It covers 2 situations:
1. Primary establishment: the right for natural or legal persons to set up and manage
undertakings in other MS.
a. Actual establishment of the company (permanent residence)
b. Genuine economic activity
2. Secondary establishment: the right for legal persons to set up agencies, branches
or subsidiaries in another MS.
Free movement of services
Article 56 TFEU
Within the framework of the provisions set out below, restrictions on freedom to provide services within the
Union shall be prohibited in respect of nationals of Member States who are established in a Member State
other than that of the person for whom the services are intended.
The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may
extend the provisions of the Chapter to nationals of a third country who provide services and who are
established within the Union.
The degree of permanence which is required in the freedom of establishment isn’t a
requirement for the free movement of services.
What a service is, is defined in article 57:
★ Services shall be considered to be ’services’ within the meaning of this Treaty where
they are normally provided for remuneration. Services in particular include:
a. activities of an industrial character
b. activities of a commercial character
c. activities of craftsman
d. activities of professions
Requirements are therefore:
1. There must be a service, this includes
a. Posting of workers by an employment agency
b. Medical services
, c. Television or internet services
d. Education
e. Lotteries
f. Sale of drinks in a restaurant
g. Collaborative economy: sharing houses, car journeys etc (See also Barnard & Peers, p. 414)
2. The service has to be provided for remuneration
3. The services must be temporary
CJEU Alpine investments
R.o. 38: the prohibition affects offers made to potential recipients in other MS. It therefore directly affects
access to the market in services in the other member states.
So: Prohibited is each measure that directly affects access to the market in services in other MS.
CJEU Gebhard
R.o. 24: someone with the right of establishment art. 52 - 58 TFEU may:
set up agencies, branches or subsidiaries
P. 25: art. 49 applicable when the national participates on a stable and continuous basis in the economic life of
a member state other than his state to profit.
P. 27: the temporary nature of his activities has to be determined in the light, not only the duration of the
service, but also its regularity, periodicity or continuity.
Discrimination
➔ Direct discrimination: less favourable treatment on the grounds of nationality.
◆ can only be defended by grounds named in the treaty.
➔ Indirect discrimination: a rules which applies to everyone, but in fact disadvantages
those with only a branch in the MS. A criteria in law that's easier to fulfill by citizens of
the state.
◆ can be justified by rule of reason.
Rules which include direct discrimination always infringe the treaty. Indirect discrimination
breaches the treaty when it hinders the market access.
Derogations and justifications
The 3 questions that have to be asked are:
1. Does the challenged measure constitute a restriction of the free movement rights
guaranteed by the treaty?
2. If it does, can it be justified?
3. It if can, is the measure proportionate?
a. Suitable for securing the goal of the objective they are pursuing
i. attained in a consistent and systematic manner?
b. Not go beyond what is necessary (necessity)
i. other conceivable measures?
c. Stricto sensu: is the extra protection more important than the freedom of
establishment/services?
General derogations
Article 52(1) and article 62 TFEU allow MS to derogate from the rules on grounds of:
- public policy,
, - public security, and
- public health.
These derogations have to be interpreted strictly and cannot only serve economic ends.
After a MS has used a ground of justification, they also have to show that the objective was
proportionate.
● Article 51: shall not apply to activities with exercise of official authority.
The burden of proof falls on the MS seeking to establish a derogation.
Rule of reason derogations
Freedom of services, e.g.:
● Protection of the reputation of Netherlands financial market (Alpine Investments, para
44)
● Protecting the financial balance of the social security system (Watts, para 103)
● Conditions!
○ Alpine Investments, para 45: proportionality
○ Watts, para 116: principles of good governance
CJEU Alpine Investments
R.o. 45: must be appropriate to ensure achievement if the intended aim and must not go beyond what is
necessary in order to achieve that objective.
Freedom of establishment
Gebhard case, requirements (r.o. 37):
1. Non-discriminatory
2. Justified by imperative requirements in the general interest
3. Suitable for securing the goal of the objective they are pursuing
4. Not go beyond what is necessary (necessity)
The services directive 2006/123
The directive applies to services supplied by providers established in a MS (art. 2(1) TFEU)
and has specific derogations, which can be found in article 2(2) en (3), e.g. it excludes:
- Transport, health-care, financial services, gambling activities, private security
services.
● Article 14: lists requirements which are prohibited, no justifications or derogations
are available.
1. requirements based directly or indirectly on nationality/location of registered office.
a. requirements for the provider, his staff, persons holding the share capital or members
of the management (e.g. to be resident within a territory).
2. prohibition on having an establishment in more than one MS.
3. restriction on freedom to choose between a principal or secondary establishment/forced to
have the principal establishment in the territory.
4. conditions of reciprocity with the MS in which the provider already has an establishment.
provide services
Stappenplan
Breach?
1. Under the personal scope of the free movement?
a. Personal scope: whether the situation concerns internationals (EU nationals).
b. Material scope
i. Is there an interstate element?
ii. Is there an economic activity?
2. Temporary basis or permanent/spontaneous (Gebhard, 27-28)?
a. Stable, continuous?
b. Establishment vs service
i. Not only the duration of the service, but also its regularity, periodicity
or continuity.
Justified?
1. Scopes, etc. Which freedom?
a. Service → services directive?
2. Discriminatory?
a. Yes, direct → only treaty provisions + proportionality (derogations,
art. 52 & 62)
b. No / indirect → treaty provisions, rule of reason (case law) +
proportionality
3. Proportionality
a. Suitable for securing the goal of the objective they are pursuing
b. Not go beyond what is necessary (necessity)
c. Stricto sensu: is the extra protection more important than the freedom of
establishment/services?
The treaty requirements
Both the freedoms have vertical direct effect. This means that they apply to MS and also to
regulatory bodies.
★ Economic connotation (remuneration)
★ Lawful activities (Josemans, para 42)
CJEU Watts
Freedom of services also includes medical services:
R.o. 86: medical services fall within the scope of the provisions on the freedom to provide services.
R.o. 90: art. 49 applies where a patient receives medical care in a hospital environment in another MS than her
state of residence, regardless of the way in which the national system of the home country of the patient
operates.
CJEU Josemans
R.o. 42: narcotic drugs are prohibited from being released into the economic and commercial channels of the
, EU, therefore a coffee shop owner cannot apply the provisions on freedom of movement or the principle of
nondiscrimination.
R.o. 46: however, they can still be applied because even though coffee-shops mostly sell cannabis, they also
sell non-alcoholic beverages and food which do fall under the provisions.
Freedom of establishment
Article 49 TFEU
Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals
of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also
apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State
established in the territory of any Member State.
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 within the meaning of the second
paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country where
such establishment is effected, subject to the provisions of the Chapter relating to capital.
This freedom concerns the establishment of EU natural persons and companies, branches
and agencies in other MS on permanent or semi-permanent basis. It covers 2 situations:
1. Primary establishment: the right for natural or legal persons to set up and manage
undertakings in other MS.
a. Actual establishment of the company (permanent residence)
b. Genuine economic activity
2. Secondary establishment: the right for legal persons to set up agencies, branches
or subsidiaries in another MS.
Free movement of services
Article 56 TFEU
Within the framework of the provisions set out below, restrictions on freedom to provide services within the
Union shall be prohibited in respect of nationals of Member States who are established in a Member State
other than that of the person for whom the services are intended.
The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may
extend the provisions of the Chapter to nationals of a third country who provide services and who are
established within the Union.
The degree of permanence which is required in the freedom of establishment isn’t a
requirement for the free movement of services.
What a service is, is defined in article 57:
★ Services shall be considered to be ’services’ within the meaning of this Treaty where
they are normally provided for remuneration. Services in particular include:
a. activities of an industrial character
b. activities of a commercial character
c. activities of craftsman
d. activities of professions
Requirements are therefore:
1. There must be a service, this includes
a. Posting of workers by an employment agency
b. Medical services
, c. Television or internet services
d. Education
e. Lotteries
f. Sale of drinks in a restaurant
g. Collaborative economy: sharing houses, car journeys etc (See also Barnard & Peers, p. 414)
2. The service has to be provided for remuneration
3. The services must be temporary
CJEU Alpine investments
R.o. 38: the prohibition affects offers made to potential recipients in other MS. It therefore directly affects
access to the market in services in the other member states.
So: Prohibited is each measure that directly affects access to the market in services in other MS.
CJEU Gebhard
R.o. 24: someone with the right of establishment art. 52 - 58 TFEU may:
set up agencies, branches or subsidiaries
P. 25: art. 49 applicable when the national participates on a stable and continuous basis in the economic life of
a member state other than his state to profit.
P. 27: the temporary nature of his activities has to be determined in the light, not only the duration of the
service, but also its regularity, periodicity or continuity.
Discrimination
➔ Direct discrimination: less favourable treatment on the grounds of nationality.
◆ can only be defended by grounds named in the treaty.
➔ Indirect discrimination: a rules which applies to everyone, but in fact disadvantages
those with only a branch in the MS. A criteria in law that's easier to fulfill by citizens of
the state.
◆ can be justified by rule of reason.
Rules which include direct discrimination always infringe the treaty. Indirect discrimination
breaches the treaty when it hinders the market access.
Derogations and justifications
The 3 questions that have to be asked are:
1. Does the challenged measure constitute a restriction of the free movement rights
guaranteed by the treaty?
2. If it does, can it be justified?
3. It if can, is the measure proportionate?
a. Suitable for securing the goal of the objective they are pursuing
i. attained in a consistent and systematic manner?
b. Not go beyond what is necessary (necessity)
i. other conceivable measures?
c. Stricto sensu: is the extra protection more important than the freedom of
establishment/services?
General derogations
Article 52(1) and article 62 TFEU allow MS to derogate from the rules on grounds of:
- public policy,
, - public security, and
- public health.
These derogations have to be interpreted strictly and cannot only serve economic ends.
After a MS has used a ground of justification, they also have to show that the objective was
proportionate.
● Article 51: shall not apply to activities with exercise of official authority.
The burden of proof falls on the MS seeking to establish a derogation.
Rule of reason derogations
Freedom of services, e.g.:
● Protection of the reputation of Netherlands financial market (Alpine Investments, para
44)
● Protecting the financial balance of the social security system (Watts, para 103)
● Conditions!
○ Alpine Investments, para 45: proportionality
○ Watts, para 116: principles of good governance
CJEU Alpine Investments
R.o. 45: must be appropriate to ensure achievement if the intended aim and must not go beyond what is
necessary in order to achieve that objective.
Freedom of establishment
Gebhard case, requirements (r.o. 37):
1. Non-discriminatory
2. Justified by imperative requirements in the general interest
3. Suitable for securing the goal of the objective they are pursuing
4. Not go beyond what is necessary (necessity)
The services directive 2006/123
The directive applies to services supplied by providers established in a MS (art. 2(1) TFEU)
and has specific derogations, which can be found in article 2(2) en (3), e.g. it excludes:
- Transport, health-care, financial services, gambling activities, private security
services.
● Article 14: lists requirements which are prohibited, no justifications or derogations
are available.
1. requirements based directly or indirectly on nationality/location of registered office.
a. requirements for the provider, his staff, persons holding the share capital or members
of the management (e.g. to be resident within a territory).
2. prohibition on having an establishment in more than one MS.
3. restriction on freedom to choose between a principal or secondary establishment/forced to
have the principal establishment in the territory.
4. conditions of reciprocity with the MS in which the provider already has an establishment.
