Legal basis

Articles 26 (internal market), 49 to 55 (establishment) and 56 to 62 (services) of the Treaty on the Functioning of the European Union (TFEU).


Self-employed persons and professionals or legal persons within the meaning of Article 54 TFEU who are legally operating in one Member State may: (i) carry on an economic activity in a stable and continuous way in another Member State (freedom of establishment: Article 49 TFEU); or (ii) offer and provide their services in other Member States on a temporary basis while remaining in their country of origin (freedom to provide services: Article 56 TFEU). This implies eliminating discrimination on the grounds of nationality and, if these freedoms are to be used effectively, the adoption of measures to make it easier to exercise them, including the harmonisation of national access rules or their mutual recognition (2.1.6).


A. Liberalisation in the Treaty

1. ‘Fundamental freedoms’

The Freedom of Establishment, as set out in Article 49 TFEU (ex Article 43 TEC) enables an economic actor; a person or an undertaking , [1] (Kaczorowska.A., 2010, pp. 715.) to pursue economic activities, stably and continuously in one or more Member States, without impediments created by those Member States. (Craig.P. and De Burca. G., 2003, pp. 772.) Unlike the freedom to provide services set out in Article 56 TFEU, which deals with the pursuit of an economic activity by a person in another Member State without having the principal or secondary place of business in that State, the freedom of establishment concerns the permanent installation in another Member State in order to pursue an economic activity. The two freedoms nevertheless are closely related. (Kaczorowska.A., 2010, pp. 696 to 697.)

Articles 49 and 56 TFEU apply to direct discrimination; where the applicant is treated by the host state authorities or employers, less favourably than the latter treats or would have treated, in the same circumstances, an individual who is a citizen of the host state such as in Grzelczyk C-184/99. Both Articles also apply to indirect discrimination where the host state authorities or employers apply a condition, criterion or procedure which, although apparently impartial, in practice operates to the particular detriment of non-host state citizens as in Bressol C-73/08, where a quota of 30% for non-resident students in certain courses of study indirectly discriminated against nationals from other Member States

In its first paragraph, Article 49 abolishes domestic member state restrictions on the freedom of establishment, including primary establishments such as companies as well as secondary establishments including agencies and branch offices etc. (OJ 115 , 09/05/2008 P. 0067 – 0067.) In Grogan C-159/90, services in Article 49 were considered to be as such, where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement of goods, capital or persons. (Woods.L., 2010, pp. 160.)The first paragraph also sets out the scope of Article 49 TFEU establishing that it cannot be employed by nationals against their own member state. (OJ 115 , 09/05/2008 P. 0067 – 0067.) Article 49 TFEU in its second paragraph goes on to define the freedom of establishment as the ability of the self-employed to be able to pursue their activities on an equal footing with the nationals of the member state in which they are established. (OJ 115 , 09/05/2008 P. 0067 – 0067.)

The development of the scope of Article 49 has been largely contingent upon the case law of the ECJ and subsequently upon secondary legislation produced by the institutions. In Reyners v. Belgium C-2/74, one of the earliest cases in this area, a Dutch national, was prohibited from practicing as an advocate in the Belgian courts, for lack of Belgian nationality. The question before the court was whether such discrimination, prohibited by Article 49 (ex Article 43 TEC) and Article 56 TFEU (ex Article 49 TEC) (OJ 115 , 09/05/2008 P. 0067 – 0067.) was actionable on a directly effective basis. In the definitive case in this area; Van Gend en Loos C- 26/62, a treaty provision is directly effective if it were unconditionally precluding any further member state implementation. In the case of Reyners, Article 43 TEC required the issue of directives by the Commission to give effect to the Article, which had not been created at the time. In spite of this the ECJ held Article 43 and its central principle of non-discrimination on the grounds of nationality, to be directly effective allowing Reyners to invoke the Freedom of Establishment directly. Reyners demonstrates the ECJ’s interventionist stance; that it is not disinclined to employ direct effect to counter Community non-compliance, where member states have failed to meet their treaty obligations. Significantly the claim made by Belgium and rejected by the ECJ in this case was that the imposition of the freedom of establishment would impinge upon the exercise of official authority. (Kaczorowska.A., 2010, pp. 701.)

The ECJ has developed the effectiveness of Article 49 in this respect in cases such as Thieffry v Conseil de l’Ordre des Avocats a la Cour de Paris C-71/76, where a Belgian national who had practiced in Belgium as an advocate for a number of years, obtained a French certificate of equivalence regarding his qualifications and a certificate of aptitude for the profession of avocat. He was subsequently refused admission to the Paris bar for lack of a degree in French law. (Schneider.H & Claessens.S., 2007, pp. 4.). At the time no detailed directives for the implementation of Article 49 (then Article 52) or equivalences for particular professions had been adopted. The ECJ nevertheless held that “…a person subject to community law cannot be denied the practical benefit of that freedom, solely by virtue of the fact that the directives provided for by Article 57 of the treaty have not yet been adopted”. The position in Thieffry shows the ECJ’s zeal in implementing Article 49 in its early case law. Although a landmark case in the area of mutual recognition of qualifications this ruling has been criticised for failing to distinguish between professional and academic qualifications. The recognition of qualifications for academic purposes is also probably without of Community competence. (Schneider.H & Claessens.S., 2007, pp. 5.). This case was followed by UNECTEF v Heylens C-222/86, where the ECJ held that in the absence of harmonizing directives Member States could regulate the qualifications and knowledge required for particular occupations. (Craig.P. and De Burca. G., 2003, pp. 775.)

In Ordre des avocats au Barreau de Paris v Onno Klopp. C-107/83 dual qualified a German lawyer who had the requisite German qualifications and requirements for admission to the Paris Bar was refused admission on the basis that he wanted to retain his professional residence in Germany as well as establish in France, which was held to be contrary to the French rule of unicité de cabinet, (only one professional residence). The ECJ held that to maintain this rule would prevent lawyers from other Member States from exercising their right of establishment by integrating in the legal profession of another Member State and it declared that the existence of a second professional residence in another Member State did not present any obstacle to the application of rules of professional conduct in the host Member State. The unicité de cabinet requirement also existed in other Member States, and as a result of the Klopp ruling this requirement was abolished both nationally and across the EC on the basis of being indirectly discriminatory on grounds of nationality or residence.

The Klopp case was followed by Vlassopoulou v. Ministerium vur Justiz Baden Wurttemberg C-340/89 where a Greek lawyer registered with the Athens Bar , was refused her application for admission as a lawyer, by the German Ministry for Justice, Federal and European Affairs of the Land Baden-Wuerttemberg, on grounds of not having adequate qualifications. Mrs. Vlassopoulou had a number of Greek diplomas as well as a doctorate in law from a German university and at the time practiced under the responsibility of one of her German colleagues in the German firm she worked for. The ECJ, moving beyond the direct effectiveness of the non-discrimination core of Article 49, required the national authorities to consider and compare the knowledge and skills of the community applicant with those required by the domestic qualification, even in the event of a lack of harmonizing legislation. In Vlassopoulou the Ministry was required to recognise the qualification, if found to be equivalent or otherwise assess if any knowledge or training the applicant received in the host member state sufficed for what the applicant’s qualification lacked. A member state cannot refuse entry to a profession simply on the basis of a lack in qualification, but simultaneously Article 49 cannot exclusively be relied on to impose a duty on the member state to provide facilities for the applicant to reach the requisite level of competence. (Craig.P. and De Burca. G., 2003, pp. 776.)

The ECJ has strengthened the effectiveness of Article 49 since Reyners where only the non-discrimination core was directly effective in the absence of other legislation. Similarly in Thieffry and Vlassopoulou, the lack of harmonizing or mutual equivalence legislation were no basis to discriminate for the purposes of establishment. In Vlassopoulou the ECJ were aware of the content of the then unimplemented Directive 89/48/EEC, which regarded the mutual recognition of higher education. Commentators (Schneider.H & Claessens.S., 2007, pp. 7.) suggest that the ruling in Vlassopoulou was informed by the impending directive although it was not actually applicable to this case.

This effect of Article 49 TFEU by its second paragraph means that the freedom of establishment is applicable by the same conditions to migrants within the EU, as it would be to the nationals of the host member state. (Kaczorowska.A., 2010, pp. 698.). The EU person an undertaking is thus required to conform to the domestic rules and regulations which the member state applies to particular professions. This basis however cannot be used so as to preclude citizens of other member states from their right to establishment. However aside from the developments of Article 49 by the case law of the ECJ, the Council adopted Directive 2005/36/EC on the Recognition of Professional Qualifications, which came into force in 2007, replacing Directive 89/48/EEC and related directives. (Kaczorowska.A., 2010, pp. 726.). Under the new directive Nationals of Member States have the right to pursue a profession in a Member State other than the one in which they have obtained their professional qualifications. (OJ L 255 30.9 2005. 22) The Member States must implement a uniform, transparent and flexible regime for recognition of qualifications. They can however insert preconditions, particularly where public health or safety is involved. The Member States also retain the right to determine minimum qualifications. (OJ L 255 30.9 2005. 22) They may not specify named national qualifications and comparison between the migrant and national qualification must be made. Other features of Directive 2005/36/EC include an adaptation period of up to three years for the migrant candidate or otherwise the opportunity to undergo an aptitude test as well as an allowance for competent bodies to test the language capacities of a candidate who seeks entrance into a regulated profession in another Member State. (OJ L 255 30.9 2005. 22)

The next phase of the development of the freedom of establishment came with a series of cases in the 1990’s . The position of the application of Article 49 has subsequently become similar to the application of the other community freedoms, where all impediments become subject to Article 49 unless they can be justified. Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano C-55/94 concerned a German citizen who became subject to disciplinary proceedings by the Milan Bar for pursuing a professional activity as a lawyer in Italy and for using the title of avvocato although he was not admitted as a member of the bar and his training, qualifications and experience were not formally recognised in Italy. Gebhard referred to Directive 77/249/EEC to facilitate the effective exercise by lawyers of freedom to provide services claiming he was entitled to pursue his professional activity from his own chambers in Milan. In this case the ECJ confirming the position in C-415/93, Union Royal Belge des Socie’tgs de Football Association ASBL v. Jean Marc Bosman held that any hindrance to the fundamental freedoms must objectively be justified by the Member State in order to avoid violation of the Treaty. (Schneider.H & Claessens.S., 2007, pp. 4.).

In an earlier case Kraus v. Land Baden-Württemberg C-19/92, the applicant, a German lawyer who followed a postgraduate programme in Edinburgh University refused to apply to the appropriate authority for the compulsory authorization to use it. The local ruling was that the individual authorization was absolutely necessary for the use of a foreign title, which was appealed by Kraus. This case was notable as it dealt with the reliance of Article 49 by a national in his own member state and resulted in the ability of citizens to invoke Article 49 in their own member state provided there is a community element [3] . (Craig.P. and De Burca. G., 2003, pp. 799.). The ECJ rejected the compulsory authorization requirement in favour of Kraus for lack its adequate justification as in Bosman. Regarding both the Kraus and Gebhard cases the ECJ established the extent of a general prohibition on any discriminatory or non-discriminatory restriction on the freedom of establishment. The ECJ went on to hold that national measures which hinder the exercise of fundamental freedoms must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it. (Craig.P. and De Burca. G., 2003, pp. 784.). In addition such restrictions must be subject to the principle of proportionality . (Schneider.H & Claessens.S., 2007, pp. 8.).

According to Advocate General Mayras in Binsbergen v. Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid, C-33/74, the principle of equal treatment on grounds of nationality set out in Article 18 of the TFEU (ex Article 12) is the basis to the freedoms of movement of persons, services and establishment. The freedom of movement of services under Article 56 overlaps with the freedom of establishment under Article 49 where the degree of connectivity between the self-employed candidate is such that he may be said to established rather than simply providing services. (Sagar V. Dennemeyer & Co Ltd C-76/90) (Craig.P. and De Burca. G., 2003, pp. 776.).

Nevertheless unlike the freedom of establishment, the free movement of services deals with the domestic laws of both the host state and the state of the service provider’s origin, who by its effect is only subject to some of the host state’s regulations, creating the requirement for a “cross-border element” as in C-352/85 Bond van Adverteerders v NL for the application of Article 56 as opposed to Article 49. (Kaczorowska.A., 2010, pp. 737.). In the Gebhard case the ECJ held that treaty provisions related to the supply of services are only applicable when those provisions related to establishment do not apply and vice versa.

Article 56 itself creates a general prohibition on restrictions to the freedom to provide services. In order to benefit from this right the person (legal or natural) must be established within a member state of the Union, lacking which the right does not apply. Article 57 creates a non-exhaustive list as to what constitutes services, i.e provided for remuneration (Belgium v Humbel C-263/86) and not governed by the provisions relating to the other freedoms. (Craig.P. and De Burca. G., 2003, pp. 801.) The services must be economic in nature and be an economic activity provided for the remuneration as in Gravier V Liege C-293/83.

Article 56 is directly effective as held in the Binsbergen case. Here a Dutch legal advisor was prevented from continuing to represent his client for having transferred his place of residence from the Netherlands to Belgium under Dutch law. This restriction was indirectly discriminatory as it would be much harder for a non-national to achieve than a national. (Fairhurst.J., 2007, pp. 418.). This case also set out that indirectly discriminatory or non-discriminatory restrictions are compatible with the application of Article 56 if in pursuit of a legitimate public interest and inter-alia objectively justified by application of the proportionality test. (Fairhurst.J., 2007, pp. 418.).

Directive 98/5/EC of the European Parliament and the Council was enacted to allow professional practice, on a permanent basis of lawyers in a Member State other than that in which their qualification was obtained. (Kaczorowska.A., 2010, pp. 698.). The Directive requires registration with the relevant authorities of the host State, and suggests that pursuit of activity for a period of three years in the host State, results in the skills necessary to integrate into the host state’s legal profession. Lawyers can if necessary be required to take an aptitude test limited to the law of procedure and the rules of professional conduct of the host Member State. (OJ L 77, 14/3/1998 P. 0036 – 0043.)

Lawyers and their movement across the common market have featured in many of the freedom of establishment and provision of services cases. Lawyers benefit from both the ability to establish themselves in other member states and the ability to provide services across frontiers. Along with the relevant case law, a number of directives have been implemented specifically for lawyers to operate in the Union. Directive 77/249/EEC deals with the provision of services (OJ L 78/17) and is consolidated in Directive 2005/36/EC along with the (now repealed) specific harmonising directives for lawyers 1989/48/EC and 1992/51/EC. Directive 2005/36/EC has specific implications for lawyers across the EC, such as the recent removal of the two year practice requirement for foreign qualified lawyers to sit the QLTT under the Qualified Lawyers Transfer Regulations 1990 in the UK. (The Law Society. 2006)

Directive 98/5/EC on the right of establishment, applies to self employed lawyers who have professional qualifications from their home states and seek to practice of a permanent basis in another member state. This directive is “a complete harmonization” for the right of establishment for lawyers across the EC. (Kaczorowska.A., 2010, pp. 736.). Such lawyers would use the title they obtained in their member state and register with the authorities of the host member state. They would be able to advise on home and host state law, with some limited reservations protecting notaries’ monopolies. (Kaczorowska.A., 2010, pp. 736.). In C-506/04 Graham Wilson v. Conseil de l’ordre des avocats du barreau de Luxembourg, the ECJ held that member states were not allowed to impose further conditions in the area covered by the directive. Here Wilson, a UK barrister practised in Luxembourg for nearly a decade, when the local Bar Council refused to register him as practising under his home-country laws unless he passed a linguistic test. He challenged the decision arguing that the local rules requiring a lawyer to “be proficient in the language of statutory provisions as well as the administrative and court languages”. The ECJ held in favour of Wilson, that as long as the lawyer held the appropriate Bar registration documents to practice in the member state, he would be allowed to do so subject to professional conduct rules but may not handle cases requiring specific linguistic knowledge. (Fairhurst.J., 2007, pp. 453.).In effect the Wilson case gives EU lawyers the freedom to practice beyond their national frontiers without language tests

Considering the developments in the freedoms of establishment and services, from the days of Reyners onwards, as well as the relevant secondary legislation, it is thus not the case that “there is much more union legislation required in order to facilitate the right of a lawyer to practice in another member state”. The mobility of lawyers is highly demonstrative of the effectiveness of the freedoms of establishment and provision of services.

The right of establishment includes the right to take up and pursue activities as a self-employed person and to set up and manage undertakings, for a permanent activity of a stable and continuous nature, under the same conditions as those laid down by the law of the Member State concerned regarding establishment for its own nationals.

Freedom to provide services applies to all of those services normally provided for remuneration, insofar as they are not governed by the provisions relating to the freedom of movement of goods, capital and persons. The person providing a ‘service’ may, in order to do so, temporarily pursue her or his activity in the Member State where the service is provided, under the same conditions as are imposed by that Member State on its own nationals.

2. The exceptions

Under the TFEU, activities connected with the exercise of official authority are excluded from freedom of establishment and provision of services (Article 51 TFEU). This exclusion is, however, limited by a restrictive interpretation: exclusions can cover only those specific activities and functions which imply the exercise of authority; and a whole profession can be excluded only if its entire activity is dedicated to the exercise of official authority, or if the part that is dedicated to the exercise of public authority is inseparable from the rest. Exceptions enable Member States to exclude the production of or trade in war material (Article 346(1)(b) TFEU) and to retain rules for non-nationals in respect of public policy, public security or public health (Article 52(1)).

B. Services Directive — towards completing the internal market

The Services Directive (Directive 2006/123/EC of 12 December 2006 on services in the internal market), which strengthens the freedom to provide services within the EU, was adopted in 2006, with an implementation deadline of 28 December 2009. This directive is crucial for completing the internal market, since it has a huge potential for delivering benefits for consumers and SMEs. The aim is to create an open single market in services within the EU while at the same time ensuring the quality of services provided to consumers in the Union. The full implementation of the Services Directive could increase trade in commercial services by 45% and foreign direct investment by 25%, bringing an increase of between 0.5% and 1.5% in GDP (Commission communication ‘Europe 2020’). The directive contributes to administrative and regulatory simplification and modernisation. This is achieved not only through the screening of the existing legislation and the adoption and amendment of relevant legislation, but also through long-term projects (setting up the Points of Single Contact and ensuring administrative cooperation). The implementation of the directive has been significantly delayed in a number of Member States in relation to the original deadline. Its successful implementation calls for sustained political commitment and widespread support at European, national, regional and local levels.

Role of the European Parliament

Parliament has been instrumental in liberalising the activities of the self-employed. It has ensured a strict delimitation of the activities that may be reserved for nationals (e.g. those relating to the exercise of public authority). It is also worth mentioning the case that Parliament brought before the Court of Justice against the Council for failure to act with regard to transport policy. That case, brought in January 1983, led to a judgment of the Court (Case No 13/83 of 22 May 1985) condemning the Council for failing to ensure free provision of international transport services or lay down conditions enabling non-resident carriers to operate transport services within a Member State. This was in breach of the Treaty. The Council was thus obliged to adopt the necessary legislation. The role of Parliament has grown with the application of the codecision procedure provided for in the Treaty of Maastricht, and now of its successor, the ordinary legislative procedure, to most aspects of freedom of establishment and provision of services.

Parliament also played a crucial role in the adoption of the Services Directive, and is closely following its implementation. In addition, it is putting pressure on the Member States to fulfil their obligations under the directive and to ensure its proper implementation. On 15 February 2011, Parliament adopted a resolution on the implementation of the Services Directive 2006/123/EC[1], and on 25 October 2011 a resolution on the Mutual Evaluation Process of the Services Directive[2]. Following the Commission communication of 8 June 2012 on the implementation of the Services Directive, Parliament’s Committee on the Internal Market and Consumer Protection (IMCO) prepared a report on ‘Internal Market for services: state of play and next steps’, which was adopted in plenary on 11 September 2013[3].

On 7 February 2013, Parliament also adopted a resolution with recommendations to the Commission on the governance of the Single Market[4], emphasising the importance of the services sector as a key area for growth, the fundamental character of the freedom to provide services, and the benefits of full implementation of the Services Directive.

Parliament has, as a matter of priority, worked on legislative proposals concerning telecommunications services, such as a regulation on electronic identification and trust services for electronic transactions in the internal market (Regulation (EU) No 910/2014) and a regulation laying down measures concerning the European single market for electronic communications and to achieve a Connected Continent (COM(2013) 0627, leading to adoption of Regulation (EU) 2015/2120 of 25 November 2015 laying down measures concerning open internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union). Parliament is concerned with financial services in the area of access to basic payment services[5] and consumer credit and mortgage credit (Directive 2014/17/EU), and also with package travel and assisted travel arrangements (COM(2013) 0512). The Mortgage Credit Directive (2014/17/EU) will increase consumer protection by enforcing minimum regulatory requirements that Member States are required to meet to protect individuals with credit agreements on residential property. This directive should be implemented by the Member States by March 2016 and will help to ensure that consumers are informed and financially capable of paying their mortgage loan. Additionally, the Directive on Better Regulated and Transparent Financial Markets (2014/65/EU) aims to ensure regulation and transparency of EU-wide financial markets. Parliament is also involved in legislating on innovative services such as the life-saving in-vehicle emergency eCall (COM(2013) 0316), and in the verification of implementation of the Universal Service Directive and the 112 emergency number[6]. On 28 April 2015, Parliament voted to make eCall technology mandatory in all new vehicles after April 2018.