Freedom of Establishment Flashcards
(18 cards)
Definition
Right of EU nationals and companies to set up and properly operate economic activities with stability and continuity in another MS
Article 49 TFEU
(Legal basis)
Primary rule
Prohibits MS from restricting freedom of establishment to nationals of another MS
Article 54 TFEU
(Legal basis)
Applies the rights of nationals to companies and firms
Scope
Person/entity is national of the EU
Carrying out an activity of an economic nature (not social)
Stable and continuous presence, not temporary like a service
Gebhard test
Restrictions
Direct discrimination, indirect, hindrances
Direct discrimination is always illegal
Indirect discrimination (e.g. residence requirements) need justification
- Tend to get shot down due to undermining mutual recognition
Hindrances (e.g. registration fees) can be qualified as restrictions and shot down
Justification
(Easier to justify in service or establishment)
Must prove that the restriction is absolutely necessary (e.g. public policy)
Must be legitimate, proportionate, and not arbitrary
Easier to justify for establishment because MS have more of a say when an entity will stay with them long term
Reyners case
Bans direct discrimination
Cannot be disallowed from becoming a lawyer just because one is from another MS
Gebhard case
Establishment requirements (stability + profit)
Daily mail case
Company cannot rely on freedom of establishment to move management to another MS if against home MS rules
National incorporation laws determine companies’ right to move across borders
Centros case
You cannot incorporate in MS (entry) with the easiest rules and then do business in another MS (your originally desired one)
Bans “forum shopping” for the best company law, limiting mutual recognition
Inspire art case
MS cannot add extra conditions for foreign companies to enter
Commission v. Italy case
Discriminatory administrative rules = restriction
Primary establishment
Opening first business
Secondary establishment
Opening a branch/subsidiary
Companies’ dual test (Art. 54 TFEU)
Company needs incorporation AND principal place of business in the EU
Golden rule
Companies enjoy the same rights as natural persons
Incorporation doctrine
Valid companies if paperwork indicates them under the law of a MS
EX: UK and IE
Real seat doctrine
Valid companies if their main HQ is in the same country as where it is incorporated
EX: DE and FR
