5 - Freedom of Establishment: Articles 49-55 TFEU

Question 1

What is a freedom of establishment?

Answer 1

• Permits a company/ firm/ self-employed person to maintain a permanent presence in MS for purpose for engaging in economic activity.

Question 2

What are the main TFEU articles governing the freedom of establishment?

Answer 2

• Articles 49 - 55 TFEU

Question 3

What complements freedom of establishment?

Answer 3

• Articles 56 to 62 TFEU

- Which govern the freedom to provide services.

Question 4

What does Article 49 TFEU make clear?

Answer 4

• Requirement to abolish restrictions on freedom of establishment
• Extends to restrictions on secondary forms.

Question 5

Where is the term “self employment” defined?

Answer 5

• Jany v Staatsecretaris van justice.
• There are 3 acts of self employment
  1. Outside relationship of subordination concerning choice of that activity, working conditions and conditions of remuneration
  2. Under that persons own responsibility
  3. In return for remuneration paid to that person directly and in full.

Question 6

Who does Article 54 TFEU extend to? Which articles complement article 49?

Answer 6

• Extends freedom of establishment to companies.
• Articles 50 + 53 complement Article 49 by respectively providing for the issuing of directives.
• For the purpose of attaining free movement of establishment and for mutual recognition of professional qualifications.

Question 7

Where are establishments versus services defined?

Answer 7

• Establishments are defined Under article 49 TFEU.

- Services are defined under Article 56 TFEU.

Question 8

What is the definition of “establishment”? Give an example.

Answer 8

• Permanent presence
• By a person, firm or company
• In a MS
• For economic purposes
• For example, a company or person relocating to another MS on a permanent basis to pursue business there, or by setting up a permanent branch in another MS.
• This is governed by Article 49 TFEU.

Question 9

Steymann v Statsecretaris van Justice?

Answer 9

• Held: it was clear from this article that activities carried out on permanent basis
• Or in any event, without a foreseeable limit to its duration
• Did not fall within the Treaty provisions, governing the freedom to provide services.

Question 10

Commission v Germany (‘Insurance Services’)?

Answer 10

• The view of establishment found in Steymann was echoed in this case.
• Held: “an undertaking of another MS which maintains a permanent residence in the MS in question comes within the scope of provisions of the Treaty on the right of establishment.”

Question 11

R v Secretary of State for Transport (Factortame 2)

Answer 11

• Said that the concept of establishment ‘involves the actual pursuit of an economic activity through a fixed establishment in another MS for an indefinite period’

Question 12

In which case was the basis for distinguishing between establishment and services repeated and developed further?

Answer 12

• Gebhard v Consiglio Procuratori Milano.
• Held: the concept of establishment within the meaning of the Treaty is broad - allowing EU national to participate
• On a stable and continuous basis
• In the economic life of a MS other that his state of origin
• And to profit therefrom
• So contributing to economic and social interpretation with the Union.
• This is contrasted with the situation in which the person moved to another MS to provide services there on a temporary basis.

Question 13

What were the 3 natures of the activities in question when defining

Answer 13

1. Regularity
2. Periodicity
3. Continuity
   • On this basis the court said activities of German national who had practiced as a lawyer from chambers in Italy for several years
   • And had then set up his own chambers in Italy
   • Fell within the chapter on freedom of establishment.

Question 14

What is a key feature of establishment from Gebhard?

Answer 14

• Key feature is “stable and continuous” basis
• On which the economic/ professional activity is carried on and the fact that an established base exists
• Within the host MS.

Question 15

Does Article 49 TFEU meet the Van Gend en Loos criteria? Why?

Answer 15

• Not capable of satisfying VGEL criteria of “unconditionality” for a treaty article to have direct effect.

Question 16

What happened in Reyners v The Belgian State?

Answer 16

• Ruled that Article 49 TFEU was capable of having direct effect.
• Since the end of the transition period.
• “laying down the freedom of establishment shall be attained at the end of the transitional period”.
• As a result, Reyners who was a Dutch National who got his legal education in Belgium, was able to bring a claim in national courts against the Belgian Bar for refusing him entry since he was not Blegian.

Question 17

What was established in Reyners re Article 49 TFEU?

Answer 17

• Established that Article 49 can have direct effect VERTICALLY against the state.
• Question remained open as to whether Article 49 also had horizontal direct effect against private parties.

Question 18

What was the conclusion of Wouters JW Savelburgh and Price Waterhouse v Algemene Raad Van de Netherlands ?

Answer 18

• Court indicated that Article 49 also applied at least to regulatory organisations and associations not governed by public law.

Question 19

What were the findings in International Transport Workers Federation v Viking Line?

Answer 19

• Question of horizontal direct effect was specifically confronted
• This arose from a decision by Viking Line to transfer the registration of its ferry from Finland to Estonia, to reduce labour costs.
• Union representing its Finnish employees and workers federation threatened strikes and boycotts.
• Held: article could be relied upon against a trade union group. Took into account the function of trade unions in drawing up collective agreements to regulate paid work collectively.

Question 20

How was the concept of “Official Authority” in Article 51 defined in Reyners v Belgian State?

Answer 20

• That which arises from the sovereignty and majesty of the state.
• Implies power of enjoying the prerogatives outside the general law.
• Issue before the court of justice was whether the whole of the legal profession was exempt from the treaty, because it comprised activities connected with the exercise of official authority.
• Typical professional activities of an “advocat” did not fulfil this requirement.

Question 21

What was the exclusion in Commission v Greece?

Answer 21

• Court of justice continued to interpret the exception under Article 51 narrowly.
• Excluded from the official authority exception the professional activity of road traffic experts
• Who appeared as witnesses in court rooms.

Question 22

Commission v Italy (Data Processing)

Answer 22

• Design, programming and operation of data processing systems
• For public authorities
• Was held NOT to fall within the official authority exception because it was of a technical nature and therefore, unrelated to the exercise of official authority.

Question 23

Commission v Italy (Lottery Computerisation System)

Answer 23

• Reached the same conclusion as commission v Italy (data processing)
• Relation to the provision of operation of a computerisation system for a national lottery.
• Held not to fall within the official authority exception - because it was of a technical nature and therefore unrelated to the exercise of official authority.

Question 24

Thijssen v Control voor de Verzekeringen?

Answer 24

• Held: the post of commissioner of insurance companies did not fall within the exception, since although the post involved monitoring companies and reporting infringements of the penal code
• It lacked the final powers to stop insurance companies from pursuing certain policies

Question 25

Ministre Public v Auer?

Answer 25

• French national with Italian Vet Medicine qualification
• Being prosecuted in France for practicing without authorisation from relevant authority.
• His applications had been rejected on the grounds that his qualification was not equivalent to that required in France
• Held: he could not rely on Article 49 as in each MS - the article only concerns nationals of other MS.

Courts accepted that in principle it would have been possible for the applicant to have relied upon 2 directives in that case.

Question 26

Knoors v Secretary of State for Economic Affairs?

Answer 26

• Reiterated the findings from Ministre Public v Auer.
• Dutch national - got his qualifications + experience as a plumber in Belgium.
• Went back to Netherlands and had applied for authorisation to carry on his trade there.
• Application was rejected on the grounds that he lacked the correct Dutch qualifications.
• Held: Article 49 could not apply to purely internal situations.

Question 27

What is the crucial difference between the cases of Auer and Knoors?

Answer 27

• Knoors: the deadline for the date of implementation had passed and so the directive could have direct effect.
• Auer - the deadline had not expired, directive in that case did not have direct effect and could not be relied upon.

Question 28

What happened in the case of Auer v Ministry Public (No 2)?

Answer 28

• Held: directives now had direct effect and provided him with a right to practice as a vet surgeon in France so long as the requirements of the directives were satisfied.

Question 29

Can Article 49 itself be applicable in the home state of a MS national in the absence of a directive?

Answer 29

• Yes, as long as there is a sufficient cross border element involved.
• This shift took place in Asscher v Statesecretary van finance.

Question 30

What shift took place in Asscher v Statesecretary van finance?

Answer 30

• After this the courts accepted that Article 49 can itself be applicable in the home state of a MS national in the absence of a directive
• As long as there is a sufficient cross border element.
• Asscher was director of companies in both Belgium and Holland
• Was taxed at higher rate in Holland as a non resident who was getting income from outside of Holland
  Challenged this using Article 49.
• Differences are prima facie discriminatory
  But could be justified by the MS if the differences between the 2 groups were genuine objective differences.

Question 31

What happened in the Nino case?

Answer 31

• Article 49 TFEU will not be applicable to situations where there is no element going beyond a purely national setting.
• Held: Article 49 did not apply to the prosecutions of 4 Italian nationals who qualified as therapists in Italy, and provided treatment in Italy without being granted authorisation to practice as medical doctors there.
• The prosecutions involved situations that were purely internal to Italy.

Question 32

What is Reyners an example of?

Answer 32

• The fact that measures that directly discriminate on the basis of nationality will clearly breach Article 49.

Question 33

In which case was the scope of Article 49 expanded beyond such direct discrimination?

Answer 33

• Thieffry v Coseil L’Odre the Avocats Paris
• Belgian national with a Belgian doctorate in law - who had practiced as an advocate in Belgium.
• He obtained French uni recognition of hi qualifications as being equivalent to a French degree. Passed examinations for a certificate to practice as an “avocat” in France.
• Parisian Bar refused him admission to the training stage of avocat - bc he lacked a degree in French Law.
• Held: it was incumbent on the competent public authorities to ensure that national legislation and practice is applied in accordance with the objectives of the freedom of establishment, subject to the observance of professional rules justified by the general good.
• Therefore it was an unjustified restriction to refuse to admit a person to a profession where his qualification had been recognised as an equivalent qualification by the competent authority of the country of establishment.

Question 34

What was the conclusion of the case of Thieffry?

Answer 34

• it was an unjustified restriction to refuse to admit a person to a profession where his qualification had been recognised as an equivalent qualification by the competent authority of the country of establishment.

Question 35

Explain the case of Odre des Avocats v Klopp?

Answer 35

• Rule of the Parisian Bar which prevented members maintaining offices in other MS was held to restrict the freedom of establishment
• Since it prevented a German lawyer from successfully applying for membership.
• This was notwithstanding that it applied irrespective of the nationality of the applicant.

Question 36

What was established in the Gebhard case?

Answer 36

• German national who wanted to be a professional lawyer for several years
• Disciplined for using the title of “lawyer” without getting formal recognition of his qualifications.
• Court of justice made it clear that national measures that are liable to hinder or make less attractive the exercise of the freedom of establishment constitute a restriction on that freedom.

Question 37

What happened in the case of Caixa Bank France v Minister of the Economy?

Answer 37

• National measures which are liable to hinder or make less attractive the exercise of the freedom of establishment constitute a restriction on that freedom.
• Held: any national measures which ‘prohibit, impede, or render less attractive’ the pursuit of an occupation in more than one MS is sufficient to amount to a restriction under Article 49.

Question 38

Which article TFEU contains the derogations that justify the restrictions on the right of establishment?

Answer 38

• Article 52 TFEU

- Same derogations as provided in respect to the free movement of persons.

Question 39

What happened in the case of Commission v UK (Open Skies)?

Answer 39

• When companies are concerned
• The derogations are regulated by the Treaty alone and by the general principles of EU law including the principle of proportionality.
• UK entered air services agreement with USA - provided for operating authorisations to be granted by the USA and to American airlines by the UK.
• HELD: agreement directly discriminated against the airlines of other MS which were established in the UK because it excluded them from benefits accorded to British airlines.
• Could not be justified under Article 52 derogation
• Because: the refusal authorisations were not limited to circumstances where an airline poses a threat to public policy
• And in any event, there was no direct link between any threat to the public policy of the UK and the generalised discrimination against EU airlines in the agreement.

Question 40

What is the “imperative requirements in the general interest” justification?

Answer 40

• Additional grounds for justification
• Equivalent of Mandatory Requirements for the movement of goods / pressing reasons in the public interest for the free movement of persons.

Question 41

What is a case example of pressing reasons in the pubic interest for the free movement of persons?

Answer 41

• Kraus v Land Baden
• Union Royale Belge des Society de Football Association
• “overriding reasons in the public interest”

Question 42

What is the origin of the idea that a restriction can be justified by an imperative requirement?

Answer 42

• Thieffry.
• In relation to an indistinctly applicable restriction
• Accepted that freedom of establishment, was subject to the need for national professional rules justified by the general good.
• Therefore the freedom could maybe be opened up to justifications on grounds that fell outside the derogations of Article 52.

Question 43

What did the judgement in the Klopp case illustrate?

Answer 43

• The question of whether the freedom of establishment, can be opened up to derogations outside those that are in Article 52.
• Held: a rule that prevented members of the Paris Bar from maintaining officers in other MS was a restriction to their freedom of establishment.
• This was in the interests of the proper administration of justice.
• Restriction was unnecessary + disproportionate.

Question 44

What is a modern formulation for the conditions of justifying a restriction to freedom of establishment?

Answer 44

• Gebhard
• Held: national measures that are liable to hinder, or make less attractive the exercise of freedom of establishment must satisfy 4 conditions in order to be justified.

Question 45

Who do the provisions of establishment apply to?

Answer 45

• Firms, companies, individuals

- Firms = 2+ persons who carry on business in common with a view to profit. Aka a partnership.

Question 46

R v Secretary of State for Transport, ex parte Factortame?

Answer 46

• Companies get similar rights to freedom of establishment as individuals
• Held: the requirements of the Merchant Shipping Act breached Article 49.
• Because they required the majority of shareholders in a company owning UK ships, to be British.
• Requirement applied irrespective of if shareholder was a person, or another company.
• Held: this discriminated against both persons and companies who were nationals from other MS.

Question 47

What is the significant difference between companies and individuals in Article 54?

Answer 47

• Article 54 requires company to be profit making. Company must be formed in accordance with the law of MS.
• Registered office / central admin/ principal place of business must also be within the Union. Unsure which of these should be the ‘connecting factor’.
• Natural persons can rely on Article 49 for non-profit making economic activities.

Question 48

What are the 3 things that could be considered the ‘connecting factor’ to determine which MS’s legal jurisdiction governs the company?

Answer 48

1) Registered office
2) Central administration
3) Principal place of business

Question 49

What is the “incorporation doctrine” that is used to identify whether which connecting factor determines which MS legal jurisdiction governs the company?

Answer 49

• Identifies connecting factor as the place where the company was legally incorporated
• And has its registered office.
• This doctrine is used in UK/Ireland/Netherlands/Scandinavia

Question 50

What is the “REAL SEAT doctrine” that is used to identify whether which connecting factor determines which MS legal jurisdiction governs the company?

Answer 50

• Connecting factor = place where company central administration is located.
• Used in Belgium, France, Hungary, Germany, Greece, Lux, Portugal, Spain
• Principal place of business may alternatively be treated as connecting factor.

Question 51

What 2 things can the choice of doctrine determine?

Answer 51

1. Affects whether or not foreign company is recognised as valid legal entity. Real seat doctrine - will determine validity of foreign company.
2. Whether or not company is able to transfer its central administration to another MS. Incorporation doctrine = will permit company incorporated in MS to transfer its central administration to another MS with its legal capacity.

Question 52

What is a company able to do if they satisfy Article 54?

Answer 52

• Use the freedom in Article 49

- To set up agencies, branches or subsidiaries in other MS without restriction

Question 53

What happened in the case of Segers v Bestuur?

Answer 53

• Involved a subsidiary
• Still a subsidiary even if the company conducts no business of any kind in the MS in which it was incorporated
• And does it all through an agency/ branch / subsidiary in MS.
• Result - effect of ensuring traders a wide freedom of choice as to where they could incorporate a company.
• Can take advantage of more lenient regulatory regimes in some MS such as UK and trade somewhere else.

Question 54

Which case tried to put a stop to the practice of solely operating through a subsidiary (as was established in Seger?)

Answer 54

• Centros Ltd v Erhervs
• Centros = incorporated in the UK
• Bought by 2 Danish Nationals who lived in Denmark.
• Never actually traded from the UK or anywhere else.
• Held: this was not, in itself, an abuse of the right of establishment to set up a company in MS who have least restrictive laws and then set up branches elsewhere.

Question 55

In which case was the conclusion reached in Centros v Erhervs (that companies can choose to be incorporated in the least strict place and then trade elsewhere) reiterated?

Answer 55

• Kamer van Koophandel Fabric v Inspire Art.
• Company incorporated in UK
• Owned and run by Dutch national who only traded through a Netherlands branch. Dutch law said that foreign company that established branches in the Netherlands had to maintain share capital at least equal to the minimum share capital required by Dutch companies.
• Held: this impeded freedom of establishment and infringed Article 49.

Question 56

Which case established the mutual recognition of companies by MS? What is mutual recognition?

Answer 56

• Principle that company that has been incorporated in the law of one MS must be recognised as a valid company with legal capacity in other MS.
• Uberseeing v Nordic Construction Company.
• Company incorporated in the Netherlands then was bought by 2 German nationals living in Germany.
• New owners transferred its central administration to Germany.
• German law did not recognise the capacity of a company that had been incorporated outside of Germany so they had no capacity to bring proceedings against contractor for defective work unless it reincorporated in Germany.
• Held: it is a precondition of freedom of establishment that companies are recognised by any MS in which they wish to establish themselves.

Question 57

Why does the Daily Mail case differ from Uber Seeing case?

Answer 57

• Daily Mail = concerned relations between a company and the MS under whose laws it had been incorporated.
• Did not concern the way in which one MS treats a company which is validly incorporated in another MS.

Question 58

Which right is described as IMPLICIT in the right of freedom of establishment?

Answer 58

• Right to enter and reside.
• Detailed rules about this are in Directive 2004/38. (rights of entry and expulsion for Union citizens and their families)

Question 59

Commission v Italy (Italian housing)

Answer 59

• This falls under “social rights”
• Article 49 - nationals of a MS exercising their freedom of establishment have access to certain social rights on same basis as nationals of host MS.
• Held: italian legislation allowing only Italian nationals to purchase / lease housing built with the help of public funds and to obtain reduced rate mortgage was in breach of Article 49.

Question 60

What was the first mutual recognition directive?

Answer 60

• 80/48
• Covered all regulated professions that required a uni degree
• Meant that it covered all of these professions not yet covered by a specific directive.

Question 61

If someone is applying for admission to a profession as a migrant from another MS, what are the minimum requirements they must have?

Answer 61

• There are 5 qualification levels

- Applicant must hold qualification at least equivalent to the level prior to that required in the host state.

Question 62

When would a migrant from another MS have to do an aptitude test or 3 year adaptation period before joining a profession?

Answer 62

• If training duration is one year shorter than required by host MS
• Applicants training covered different matters from those that are covered by qualification required by host MS
• Regulated profession in host MS comprises 1+ regulated professional activities which do not exist in corresponding profession in applicants home MS.

Question 63

What was first established in Thieffry v Conseil of the order des Advocats

Answer 63

• EU own principle of mutual recognition of qualifications
• Belgian national. Belgian diploma in law. Practiced as advocate in Belgium.
• Applied to French University to study for certificate to practice as an ‘advocat’ in France.
• Application was accepted, after French uni recognised his diploma as being equivalent to French law degree.
• Held: not allowing him to practice was “unjustified restriction on that freedom”

Question 64

UNECTEF v Heylens?

Answer 64

• Developed principle of mutual recognition and applied in situations BEYOND freedom of establishment.
• Any decision by host MS concerning mutual recognition of the equivalence of qualifications must have an objective basis
• This case regarded the freedom of workers under Article 45.
• Belgian football trainer with Belgian qualification - subject to prosecution by French football trainers union for working in France.
• Held: in the absence of harmonising Directive, MS are entiteld to regulate such qualifications but they had to assure themselves of the equivalence of the foreign diploma.

Question 65

What do the cases of Heylens and Thieffry have in common?

Answer 65

• National law had provided for the recognition of equivalent foreign qualifications by a competent national authority.

Question 66

What happened in the case of Vlassopoulou v Ministry of Justice?

Answer 66

• Courts extended their approach to recognition of equivalent foreign qualifications
• Greek national with Greek law degree, had practiced German law in Germany before applying for admission to the bar.
• Refused because he had not passed German qualifications.
• Held: authorities must take into consideration the knowledge and qualifications of the applicant certified by her foreign diploma and compare these to those required by the national qualification.

VLASSO = Knowledge and qualifications must be taken into account, have to compare those that are required by the national qualification

Question 67

What happened in the case of Fernandez de Bobadilla v Museum National del Prado?

Answer 67

• Vlasspoulou principles applied to situation
• National of MS was seeking to rely in her own MS on qualification awarded in another MS
• Another case concerning free movement of workers under Article 45
• Spanish national who undertook post grad course in fine arts restoration in UK with a grant from Spanish museum, Prado.
• Applied to work there permanently - after working there temp for 3 years.
• Rejected because her UK qualification had not bee recognised as equivalent to the relevant Spanish degree.
• Held: she was entitled to rely on Vlassopoulou principles in her own MS because she had acquired her professional qualification in another state.
• They made the grant to her to enable her to undertake the postgraduate qualification at issue - had already employed her on temporary basis in the post to be filled
• Therefore was ‘ideally placed’ to assess her actual knowledge and abilities compared to knowledge and abilities of holders of the relevant Spanish qualification.

Question 68

What is credited - initial qualification which was obtained outside the EU or subsequent practical experience in the EU?

Answer 68

• Only subsequent practical experience in the EU can be credited.
• Initial non EU qualification carried no right of acceptance by MS.

Question 69

What does the case Tawil-Albertini v Minister of Social Affairs tell us about qualifications obtained outside the EU?

Answer 69

• French national got dentistry qualification in Lebanon.
• This was recognised in Belgium as equivalent to its national requirements
• When he applied in France they would not accept his Lebanese qualification because it was not included in Directive 78/686 (mutual recognition by MS of dentistry qualifications)
• Held: the fact that one MS accepted the equivalence of qualifications does not bind other MS where those qualifications were not listed in the directive.

Question 70

What does the case of Haim v Kassenzahnartliche Vereinigung Nordhein tell us about equivalence of qualifications obtained outside the MS?

Answer 70

• Applicants diploma in Dentistry was obtained in Turkey but he practised in Belgium + was allowed to practise in Germany
• German authority would not let him practice within the German social security system because he had not completed the 2 year training period as required by German law.
• Held: could not rely on Directive 78/686 as it only applies to qualifications obtained in MS.
• Applied Vlassopoulou - held that it was not permissible under Article 49 for national authority to refuse to register a person who had lawfully practised in another MS without first examining whether his experience corresponded what is in the relevant harmonising directive.

Question 71

Hocsman v Minister of Employment & Solidarity

Answer 71

• Argentinian doctor who qualified as a doctor there.
• His qualification had been recognised in Spain - because it was recognised as equivalent to Spanish MBBS.
• Took further training in Spain and got diploma in that specialism
• Moved to France - refused to let him practice medicine there because his Argentinian qualification did not allow him to practice medicine there.
• Held: applicant COULD rely on Article 49 Directly even though there was a harmonising directive and his Argentinian qualification did not satisfy this directive.
• Person who does not satisfy the requirements of a mutual recognition directive could still rely on the principles derived from those cases
• Therefore - ensured that acquisition of skills must always be taken into account.