Funded by the European Union Right of establishment

Funded by the European Union Right of establishment Course number: EUI 21/5 A-5 Lecturer: Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Internal Market Four freedoms of Internal Market Implemented by a Consortium led by GFA Consulting Group Gmb. H Free Movement of Goods Free Movement of Persons Free Movement of Services Free Movement of Capital and Payments Including Right of Establishment

Funded by the European Union Introduction • 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). Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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 shortterm 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Sources of law Art. 49 -55 TFEU Right of establishment Sources of Law Art. 56 -62 TFEU Free movement of services Implemented by a Consortium led by GFA Consulting Group Gmb. H Directive 2006/123 on services Directive 2005/36 on recognition of qualifications Directive 2004/38 on citizens rights

Funded by the European Union Right of establishment 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. ’ Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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. ’ Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Definition • 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’. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Definition • Case C-55/94 Gebhard: ‘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. ’ Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Establishment Categories of establishment Implemented by a Consortium led by GFA Consulting Group Gmb. H Primary: new activity in another Member State Secondary: establishment in the other MS by already existing entity

Funded by the European Union Art. 49 TFEU: scope of application • 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). Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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-profitmaking’. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Art. 49 TFEU: substance • 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Art. 49 TFEU: substance • Case C-55/94 Gebhard: 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union Establishment and companies Implemented by a Consortium led by GFA Consulting Group Gmb. H Case 81/87 Daily Mail Case C-212/97 Centros Case C-208/00 Überseering Case C-196/04 Cadbury Schweppes Case C-210/06 Cartesio

Funded by the European Union Restrictions • 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 Piergio Gambelli and Others). Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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). Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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). Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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). Implemented by a Consortium led by GFA Consulting Group Gmb. H

Funded by the European Union 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. Implemented by a Consortium led by GFA Consulting Group Gmb. H