A more recent version of these Freedom Of Establishment notes – written by Cambridge/Bpp/College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our GDL EU Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
EU Law: Freedom of Establishment Understand when Article 49 TFEU is applicable
?????Article 49: 'restrictions on the freedom of establishment of nationals of a MS in the territory of another MS shall be prohibited'. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any MS established in the territory of any MS.
?????Applies to: o Self-employed persons (Art 49, defined in Jany, see below). o Companies and firms (Art 54).
?????And, Art 49, applies to secondary forms of establishment, i.e. agencies, branches and subsidiaries
?????Prohibits: o Restrictions on Freedom of Establishments.
?????Rights include: o Setting up and managing undertakings such as:
? Companies & firms
? Agencies, branches and subsidiaries
?????Articles 50-53: complement Art 49 by respectively providing for the issuing of directives for the purpose of attaining the free movement of establishment; and for the mutual recognition of professional qualifications. The distinction between establishment and services
?????Concept of establishment under Art 49, CF concept of a service under Art 56 TFEU.
?????Establishment = a permanent presence by a person, firm or company in a MS for economic purposes. Eg a company/person relocating to another MS on a permanent basis, or setting up a permanent branch there.
?????CF a service, Art 56: does not entail any physical presence by provider in the MS, or only a temporary presence. Art 47: 'the person providing a service may . . . temporarily pursue his activity in the MS'.
?????What constitutes establishment: o (1) Permanent basis (Steymann; Insurance Services; Factortame II). o Steymann v Staatssecretaris (1988), Permanent basis in MS; OR without foreseeable limit to duration. In this case, ECJ held: activities on permanent basis/without foreseeable limit did not come under 'services'---they either came under free movement of workers, or freedom of establishment, depending on the case. o Echoed by ECJ in Commission v Germany ('Insurance Services'): what comes under right of establishment? 'an
insurance undertaking of another MS which maintains a permanent residence in the MS in question..', even if merely an office managed by undertaking's own staff or by an authorised agent/agency authorised to act on permanent basis. R v Sec of State for Transport, ex parte Factortame ('Factortame II'): concept of establishment = actual pursuit of an economic activity through a fixed establishment for an indefinite period in another MS. (2) 'Stable and continuous' (Gebhard). Gebhard v Consiglio (1995), 'Stable & continuous basis in the economic life of the MS.' [re German lawyer, setting up a chambers in Italy].
? ECJ contrasted this with a person moved to another MS to provide services on a temporary basis, which would not fall under freedom of establishment.
? ECJ held, you determine whether it is permanent, not only by looking at the permanency, but by looking at:
? Gebhard, temporary v permanent nature of activities determined in light of:
? Continuity In this case, ECJ held that the activities of a German national who had practiced as a lawyer from chambers in Italy for several years, then set up his own chambers in Italy, fell within freedom of establishment. He was pursuing a professional activity on a stable & continuous basis in another MS, where he held himself out to, amongst others, nationals of that State from an established professional base.
Art 49 can have direct effect
?????Initially, seemed Art 49 would fail 'unconditional; Van Gend test for DE: Note a foregone conclusion it would have direct effect: Art 49 TFEU began with the words 'within the framework of the provisions set out below'. These words have been included since article first appeared in Treaty of Rome 1957. This placed an obligation on the Council, acting on proposals from Commission, to draw up a general programme for the abolition of restrictions on freedom of establishment, which the Council did in 1961, and to issue directives to implement that programme. All of this appeared to make the freedom of establishment conditional upon the enactment of positive legislative measures; and thus incapable of satisfying Van Gend en Loos criterion of unconditionality for a treaty article to have direct effect.
2 ?????However, implementation proved to be an extremely slow process. Original EEC treaty had provided for restrictions on freedom of establishment to be abolished by the end of the transition period, but this objective had not been achieved when the transition period expired.
?????This was not a foregone conclusion: because of way freedom of establishment was framed. The idea is that freedom of establishment is not available immediately, but instead EU would enact directives and other legislation to provide for the right of freedom of establishment. These weren't put in place.
?????Under Van Gen den Loos, it shouldn't have been unconditional, because it was dependent on directives being enacted, which they weren't.
? ?? ? Reyners v The Belgian State (1974): vertical direct effect (re case against Belgian state (the Belgian Bar), re a Dutch national refused admission by Belgian Bar). o Nonetheless, in Reyners, ECJ said: Art 49 became directly effective. o ECJ: Art 49 TFEU had been capable of having direct effect since the end of the transition period: 'in laying down that FoE shall be attained at the end of the transitional period, [Art 49 TFEU] imposes an obligation to attain a precise result'---the progressive measures would have been the fulfilment easier, but it was not dependent on them. o So held, rationale for DE: Art 49 laid down a clear and precise obligation, that should have been achieved by end of the transition period---fulfilment of obligation not dependent on the implementation of a programme of positive measures, that programme was only to make that easier, not dependent on it. o In this case, held that a Dutch national, who had obtained his legal education in Belgium, was able to claim in the national courts against the Belgian Bar for refusing him entry solely because he was not Belgian.
? ?? ? But horizontal direct effect?... (against private parties)?
o Wouters JW Savelburgh and Price Waterhouse Belastingadviseurs v Algemene Raad Van de Nederlandse Orde van Advocaten (2002): ECJ indicated that Art 49 also applied at least to regulatory organisations and associations not governed by public law. o International Transport Workers Federation v Viking Line (2007): Horizontal direct effect applies, re collective action to stop Viking Lane transferring registration of its ferry from Finland to Estonia. o In this case, it was against a trade union. Decision by Viking Line to transfer the registration of its ferry from Finland to Estonia to reduce labour costs. The Union representing its
Finnish employees (FSU) and the International Transport Workers Federation (ITWF) threatened strikes and boycotts. ECJ: rejected the ITWF's argument that Art 49 could only apply horizontally against organisations/associations exercising a regulatory task or having quasi-legislative powers. Held that the Art 49 could be relied upon against a trade union or group of trade unions. Though in doing so, ECJ took into account the function of trade unions in drawing up collective agreements to regulate paid work collectively, and the fact that the actions of the ITWF and FSU were aimed at inducing Viking Line to enter into such an agreement. This left some ambiguity as to whether or not a collective dimension is still required before Art 49 can have horizontal direct effect against a private party. In this case, as to whether there was a breach of Art 49, ECJ held: the collective action to prevent a Ferry being registered in another State would be a restriction on the freedom of establishment, but that restriction could be justified by an overriding reason of public interest in protecting workers, as long as the collective action was proportionate.
Limitations, where you can't apply Art 49
? ?? ? Two matters falling outside Article 49
1. Art 51: Official authority exemption (the exercise of official authority)
2. Art 49: Purely Internal situations (1) Official authority exemption (Art 51) (the exercise of official authority) o Art 51: exemptions activities which are 'connected, even occasionally, with the exercise of official authority.' o This left two questions: (1) what do we mean by official authority? (2) what is the nature of the connection there needs to be with official authority?
? ?? ? Both questions answered in Reyners v The Belgian State (1974): o This concerned a ban on foreign nationals being lawyers in Belgium. o Belgian gov tries to argue this falls within the official authority exemption, so Art 49 doesn't apply. o So issue before ECJ was whether the whole of the legal profession of 'avocat' was exempt from the Treaty, because it comprised activities connected with exercise of official authority in the administration of justice.
? ?? ? (1) Definition of official authority, defined by the Attorney General, Mayras, Reyners:
4 o 'That which arises from the sovereignty and majesty of the state---for him who exercises it, it implies 3 things: o (1) the power of enjoying prerogatives outside the general law. o (2) privileges of official power; AND o (3) powers of coercion over citizens.
? ?? ? (2) Nature of the connection with official authority (direct and specific connection---Reyners).: o ECJ held: the official authority exemption extended only to activities which in themselves involve a direct and specific connection with the exercise of official authority. o Reyners: Belgium argues that lawyers do not fulfil these requirements, but the courts do---and lawyers are related to the courts so fall within this. ECJ rejected this: insists must be direct and specific connection to official authority. In this case, any connection legal profession has to official authority, through the courts, is far too indirect, so exemption does not apply.
? ?? ? ECJ has continued to interpret the Art 51 exception narrowly, all the following excluded from public service exemption:: o Commission v Greece (1991), re road traffic expert witnesses in court: the professional activity of road traffic experts, who appeared as witnesses in court rooms, were excluded from official authority exemption. o Commission v Italy (1994), : provision & operation of a computerisation system for national lotteries was held not to fall under official authority exemption. o Thijssen v Controledienst voor de Verzekeringen (1993): the post of commissioner of insurance companies did not fall within Art 51 exception, since although the post involved monitoring companies and reporting infringements of the penal code, it lacked final powers of coercion to stop insurance companies from pursuing certain policies. (2) Internal situations exemption (can Art 49 TFEU be applied within the home MS?)
[summary of this section]]
Art 49: nationals 'in another MS'. No Art 49 if purely internal, but can rely on DE of directives:
? Auer---re French national in France, veterinary med qualification from Italy. Directive didn't have DE, implementation date not passed.
? Knoors-re Dutch national, plumber qualification in Belgium. No Art 49, purely internal? but DE of a directive.
Auer (No 2)---implementation date passed, directives now have DE.
Art 49 can apply in home state of a MS national, if a cross-border element:
? Asscher, re Dutch national, resident in Belgium, company director in Holland and Belgium, charged higher tax rate by Holland.
? Rationale: not purely internal, as taxed differently due to exercising his Treaty rights of FoE and FoM by living in Belgium as a company director. But no Art 49 if purely internal: Nino---re prosecution of Italian biotherapists and pranotherapists. Full notes
?????Does it apply in a situation, eg, when a national of a MS seeks to return to his home state to practise a vocation as a self-employed person, after having obtained less stringent qualifications in another MS.
?????Art 49 refers to: nationals of MS in the territory of another MS.
?????This seems to suggest it can't be used against your own state. But . . .
? ?? ? Initially, Ministre Public v Auer (1979): Art 49 itself cannot be relied upon within the home MS. This case concerned a French national who held an Italian qualification in veterinary medicine. He was being prosecuted in France for practicing as a vet without authorisation from French ministry. His application for authorisation had been rejected on grounds that his Italian qualification was not the equivalent to that required in French. Held he couldn't rely on Art 49.
? ?? ? Reiterated in Knoors v Sec of State for Economic Affairs (1979) (same time as Auer): this relates to purely internal situations, i.e. purely related to one MS. Held: Art 49 could not apply to purely internal situations. BUT . . . se below
? ?? ? So Knoors, Auer, Nino: Art 49 does not apply to purely internal situations (relating to nationals of the relevant MS).
? ?? ? Nino (Joined Cases) (1990), purely international situations, Art 49 does not apply: 4 Italian nationals (who are plant healers and faith healers). Providing this therapy in Italy, but without authorisation from Italian authorities. Being prosecuted in Italy. Everything about the case is to do with Italy, and Italy alone. ECJ: purely internal situation to Italy, so Art 49 does not apply.
? ?? ? However, ECJ interpreted Art 49 as extending to situations with a cross-border element---Knoor for directives, Asscher for Art 49 itself:
? ?? ? Knoor---re Dutch national in Holland, has Belgium plumbing qualification---no Art 49, as internal, but could rely on Direct Effect of a Directive: Dutch national working as a plumber in Belgium. He returns to Netherlands, where he wants to work as a 6
plumber. But he's refused authorisation in the Netherlands to do so, on grounds he didn't have the requisite Dutch qualifications.. He's trying to rely on a Directive 64/427, which required MS to accept the activity pursued in another MS as sufficient evidence of ability. to work in the Netherlands. He's trying to use it, to rely upon the experience he gained as a plumber in Belgium. o ECJ: Art 49 could not apply to purely internal situations. o However, ECJ went on to hold: this did not prevent Knoors relying on the directive, as the directive had defined the scope of its own applicability in terms that drew no distinction between the nationals of the MS, and those of other MSs. o It asserted this interpretation of the Directive was justified by the requirements flowing from the free movement provisions of the Treaty: 'these liberties, which are fundamental to the Community system, could not be fully realised if MS could refuse to grant the benefit of EU law to those of their nationals who have taken advantage of facilities existing in the freedom of movement & establishment, and have acquired trade qualifications in another MS. o So rationale: uphold FoM and FoE? qualifications gained by these liberties should be upheld by interpretation of the directive.
? ?? ? Crucial difference between Auer and Knoors o Court had also accepted in Auer that, in principle, it would have been possible for the applicant to have relied upon 2 directives. o However, crucial difference: in Knoors, the deadline for the implementation of the directive had passed, and so the directive could have direct effect. CF Auer, the deadline had not expired, so no direct effect.
??? ? In Auer v Ministere Public (No 2), a few years later (1983), by this time the deadline for implanting the Directive had passed, France had failed to implement. This time, ECJ held that the directives now had direct effect, and provided him with a right to practice as a vet in France (so long as the requirements of the directives were satisfied). o In Auer, no Art 49, and directive didn't have DE as implementation date not passed (CF Knoors)---but Auer (No 2), implementation date of directives passed, directives had DE. [[Auer---re French national in France with Italian qualifications in veterinary med]].
? ?? ? In Asscher v Staatssecretaris van Financien (1996), Court goes further: Art 49 can itself be applicable in the home state of a MS, you can rely on Art 49 directly against your home state, in the absence of a directive (as in Knoors), if there's a crossborder dimension [re Dutch national, resident in Belgium, companies in Belgium and Holland, taxed higher rate by Holland]: 7
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