Right of establishment Course number: EUI21/5A-5

Right of establishment Course number: EUI21/5A-5 Lecturer:

Aims of the lecture • To familiarize participants with freedoms of the Internal Market and restrictions permitted by TFEU and case-law of the Court of Justice, • To allow participants to understand the basics of right of establishment, • To facilitate understanding of the differences between the right of establishment and free movement of services, • To enhance the general knowledge of EU affairs among the Ukrainian civil servants.

Four freedoms of Internal Market

Right of establishment and freedom to provide services are two fundamental freedoms of the internal market, alongside free movement of persons, free movement of goods, capital & payments, Right of establishment is inextricably linked to free movement of persons as both freedoms share the same rules governing residence of natural persons (see Directive 2004/38/EC on citizens’ rights). Introduction

Right of establishment permits engagement of individuals in self-employment activity in the host country, It also permits legal persons to set-up branches or movement of companies, Free movement of services facilitates short-term movement to provide or receive a service, NOTE: it is governed by primary and secondary legislation, NOTE: jurisprudence of the Court of Justice is essential. Introduction

Sources of law

Art. 49 TFEU: ‘restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. It shall also apply to restrictions on the setting-up of agencies, branches and subsidiaries by nationals of any Member State established in the territory of any Member State.’ Right of establishment

It particularly includes: ‘rights to take up and pursue activities as self-employed person and to set up and manage undertakings under the conditions laid down for its own nationals by the law of the country where such establishment is effected.’ Right of establishment

No definition of establishment in TFEU, Article 4(4) of Directive 2006/123/EC on services: ‘‘establishment’ means the actual pursuit of an economic activity, as referred to in Article 43 of the Treaty, by the provider for an indefinite period and through a stable infrastructure from where the business of providing services is actually carried out’. Definition

Case C-55/94Gebhard: ‘the concept of establishment within the meaning of the Treaty is very broad one, allowing a Community national to participate, on a stable and continuous basis, in the economic life of a Member State other than his State of origin and to profit there from, so contributing to economic and social interpenetration within the Community in the sphere of activities as self-employed.’ Definition

Categories of establishment

Jurisprudence of the Court of Justice: Art. 49 TFEU is binding not only for the Member States but also on the private bodies, including trade unions, Accordingly, it produces vertical and horizontal direct effect (see, case 2/74 Reyners v. Belgium and C-438/05 Viking Line), It creates rights for natural persons (Art. 49 TFEU) as well as legal persons (art. 45 TFEU). Art. 49 TFEU: scope of application

Art. 55 TFEU: ‘Companies or firms’ means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making’. Art. 49 TFEU: scope of application

Art. 49 para. 1 TFEU: restrictions in the freedom of establishment are prohibited, This, implicitly, extends to direct and indirect discrimination, NOTE: scope of the prohibition is much broader. Art. 49 TFEU: substance

When there are no special rules on the pursuit of economic activity in the host state, national of any Member States is entitled to establishment, If, in particular sectors there are additional conditions which have to be fulfilled then a person wishing to rely on the right of establishment must comply with them, Court of Justice: Article 43 TFEU prohibits the Member States from laying down in their laws conditions for the pursuit of activities by persons exercising their right of establishment there which differ from those laid down for its own nationals. Art. 49 TFEU: substance

Case C-55/94Gebhard: such conditions must fulfil four requirements: applied in the non-discriminatory manner, justified by the imperative requirements in the general interest, suitable for securing the attainment of the objective which they pursue, not go beyond what is necessary. Directive 2006/123/EC provides further rules in relation to service providers. Art. 49 TFEU: substance

Establishment and companies

Art. 52 TFEU allows for restrictions to right of establishment on grounds of public policy, public security or public health (subject to proportionality test), See case-law on setting up of pharmacies (example: case C-531/06 Commission v. Italy), See also case-law on gambling outlets (example: case C-243/01 PiergiorgioGambelli and Others). Restrictions

NOTE: restrictions in relation to residence rights of natural persons relying on Article 49 TFEU may be imposed as per Directive 2004/38/EC on citizens’ rights. Restrictions

Art. 51 TFEU: right of establishment does not apply to activities which are connected, even occasionally, with the exercise of official authority, Court of Justice: Art. 51 TFEU has to be interpreted restrictively as an exception to the rule, Member States are – in general terms – not allowed to exempt the entire profession but only the activities, which are linked to exercise of official authority. Restrictions

Examples: lawyer (Case 2/74 Reyners), teaching profession or running of private education centres (Case 147/86 Commission v. Greece), operation of data processing systems for public authorities (Case C-3/88 Commission v. Italy), insurance auditors (Case C-42/92 Thijssen). Restrictions

technical inspection of vehicles (Case C-438/08 Commission v. Portugal), bets and lottery sales (Case C-272/91 Commission v. Italy), private security (inter alia, Case C-114/97 Commission v. Spain). Restrictions

public ambulance services (Case C-160/08 Commission v. Germany), inspection bodies in the field of organic production of agricultural products (Case C-404/05 Commission v. Germany), profession of notary (inter alia, Case C-53/08 Commission v. Austria). Restrictions

Things to remember • Right of establishment is one of fundamental freedoms of the Internal Market, • It prohibits restrictions, which includes direct and indirect discrimination, • It applies to individuals (self-employment) and companies, • Restrictions are permitted on grounds listed in TFEU and developed further in case-law of the Court of Justice.

Right of establishment Course number: EUI21/5A-5