EU Law Allows Freedom of Establishment for Firms and Individuals in Other Member States

Introduction

The legal effects and scope of the EU has been properly illustrated in the scenario presented. One of such is the consequence when there is a direct clash between EU law and National legislation. This can be illustrated as follows.

Botan Burgers, which is the Polish company with Poland being part of the European Union wanting to setup business in the Olympic Park are on correct legal grounds as the provisions in the European Community Law clearly allows freedom of establishment for firms and individuals of other member states in regions of other member states. Even if it is argued that the Olympic Games are for a short period and temporary in nature, the ‘Freedom to Provide Services’ (Article 56 TFEU) would apply and enable it to carry on business. “The provision of services applies in the case of a “temporary pursue of the activity”. The temporary nature of the provision of services does, however, not exclude the service provider to “equip himself with some form of infrastructure in the host Member State (including an office, chambers or consulting rooms) in so far as such infrastructure is necessary for the purposes of performing the services in question.“.

Order custom essay EU Law Allows Freedom of Establishment for Firms and Individuals in Other Member States with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

It is as per the basic principle of freedom of establishment and the same also has a basis in Articles 49-55 of the TFEU. For a clearer understanding of the concepts of freedom of establishment for nationals of particular state trying to setup up business in another member’s state, relevant facts of Article 49 and Article 54 should be looked at. To better understand the freedom of establishment, Article 49 and Article 54 tend to be read together. As per Article 49 restricting the freedom of establishment to nationals of a Member State in the region of another Member State is prohibited. Freedom of establishment includes the right to pursue and take up activities on a self employed basis and also to manage and create undertakings, especially firms or companies within the meaning of the second paragraph of Article 54. The second paragraph defines ‘firms or companies’ as ‘firms or companies 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.’ The right of establishment, therefore, is granted both to natural and legal persons; this is clearly illustrated in Sodemare v Regione Lombardia.

Sodemare was a company based in Luxembourg and it mainly provided sheltered accommodation for elderly residents. This company was refused approval to enter into contracts with public authorities in the place called Lombardy in Italy; the contracts would have enabled Sodemare to carry on its business and get paid or reimbursed for some of the health care services it provided. The reason for refusal was that as per Lombard law such contracts could only be entered and were available to non profit making bodies. This was challenged by Sodemare who claimed that it violated Article 49 because it affected its ability to run business in Italy.

The ruling was in favour of Sodemare and this judgement was very important from the point of view of freedom of establishment.

As regards to Article 52 of the Treaty, which is to be referred together with Article 58 thereof, it must be noted that the right of establishment with which these provisions are concerned is granted both to natural persons who are nationals of a Member State of the Community and to legal persons within the meaning of Article 58. Subject to the exceptions and conditions laid down, it allows all types of self-employed activity to be taken up and pursued on the territory of any other Member State, undertakings to be formed and operated and agencies, branches or subsidiaries to be set up.

The teeth of this principle is that natural persons, who are nationals of a Member State, and Community companies may take up economic activity in any Member State in a stable and continuous way and cannot be discriminated against based on nationality (Article 49 TFEU) or the mode of incorporation (Article 49 and Article 54 TFEU).

Freedom to Provide Services

The ECJ noted in that respect that the “it is therefore not necessary to consider whether the foundation acts as a service provider“. Despite the supplementing character, the freedom to provide services is required as another distinct freedom because the cross border provision of services may be effected without any actual goods being physically moved, without (secondary) establishment and without relocation of any capital across the border. Although Article 50(1) EC defines ‘services’ as services not being governed by the provisions relating to freedom of movement of capital, goods and persons, it does not establish any particular order of priority between the freedom to provide services and the other fundamental freedoms. The provision of services applies in the case of a “temporary pursue of the activity”. The temporary nature of the provision of services does, however, not exclude the service provider to “equip himself with some form of infrastructure in the host Member State (including an office, chambers or consulting rooms) in so far as such infrastructure is necessary for the purposes of performing the services in question”. Furthermore, the mere fact of having some kind of infrastructure in the Host State does not per se preclude the application of the freedom to provide services. The freedom to provide services is distinguished from the free movement of goods by the fact that services are intangible. The provision of services can however require importing respective auxiliary materials.

The above right of freedom to provide services could be clearly illustrated using the Reinhard Gebhard v. Consiglio dell’Ordine degli Avvocati e Procuratori di Milano[5]case.

Reinhard Gebhard, a German national, obtained a law degree at the University of Tiibingen in Germany. He is authorized to practice as a Rechtsanwalt in Germany and was admitted to the Stuttgart Bar in 1977. Although he does not have chambers of his own in Germany, he works as an “independent collaborator” in a set of chambers there.

Article 2 of Law No. 31/82 provides that nationals of Member States authorized to practice as lawyers in the Member State from which they com shall be permitted to pursue lawyers’ professional activities on a temporary basis in contentious and non-contentious matters in accordance with the detailed rules laid down in this title. For the purpose of the pursuit of the professional activities referred to in the preceding paragraph, the establishment on the territory of the Republic either of chambers or branch office is not permitted.

On October 14, 1991, Gebhard applied to the Milan Bar Council to be entered on the roll of members of the Bar. His application was based on Council Directive 89/48/EEC of December 21, 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years’ duration’ and of his having completed a ten- year training period in Italy. On December 30, 1992, the Milan Bar Council took a decision, by which they imposed on Gebhard the sanction of suspension from pursuing his professional activity for six months. The Milan Bar Council did not take a formal decision on Gebhard’s application to be entered on the roll of the Milan Bar. Gebhard appealed this decision to the Consiglio Nazionale Forense (National Bar Council). His appeal was directed not only against the sanction that was imposed on him but also against the implied rejection of the Milan Bar Council to be entered on the roll.

Before the National Bar Council, Gebhard argued that he was entitled to pursue his professional activity from his own chambers in Milan, referring to Council Directive 77/249/EEC of March 22, 1977 to facilitate the effective exercise by lawyers of freedom to provide services, implemented in Italy by Law No. 31/82, the same law as Gebhard was alleged to have infringed. Directive 77/249/EEC draws a distinction between (a) activities relating to the representation of a client in legal proceedings or before public authorities and (b) all other activities. Article 4(1) of the Directive provides that “activities relating to the representation of a client in legal proceedings or before public authorities shall be pursued in each host Member State under the conditions laid down for lawyers established in that State with the exception of any conditions requiring residence, or registration with a professional organization, in that State.” The National Bar Council stayed the disciplinary proceedings and referred to the Court two questions on the interpretation of Directive 77/249/ EEC, namely whether the Italian law which prohibits lawyers established in another Member State who provide services in the territory of the Italian Republic from opening chambers or a principal or branch office in Italy is compatible with the Directive, and as to what criteria have to be applied in assessing whether activities are of a temporary nature.

The UK high court will have to set aside the bye law which was created by the Olympic Games Regulations 2011, under Section 7 of the regulations which allows only UK citizens to own or operate businesses at the Olympic Games venues. This bye law is contrary to the many provisions and articles in the European Community Act which have been discussed above especially ones which allow members in other national state to setup establishment in UK and to provide services.

The UK high court is unlikely to seek an Article 267 reference for this case and is very likely to rule in favour of Botan Burgers. However, in case an article 267 reference is sought whereby the UK high court puts a question to the Court of Justice of the European Union (ECJ) either on the interpretation of relevant parts of the TFEU or relevant secondary legislation or on the constitutionality of relevant secondary legislation, then the ECJ based on the relevant provisions is likely to rule in favour of Botan Burgers and advise the UK high court to proceed accordingly. It should be noted here that the purpose of ECJ here is to try to ensure a uniform application of EU law throughout the European Union.

In conclusion, OMT giving advice to the it should be noted that the ECJ would set aside this legislation to allow EU law prevail. Therefore, s.7 of the Olympic Games Regulation should be adjusted to conform to EU law in other to ensure uniformity in the application of EU law.

References

1. Chalmers, Damian; Davies, Gareth & Monti, Giorgio (2010); “European Union Law: Cases and Materials”, Cambridge University Press, 2nd edition, ISBN 0521121515, 9780521121514, page 858
2. Chalmers, Damian; Davies, Gareth & Monti, Giorgio (2010); “European Union Law: Cases and Materials”, Cambridge University Press, 2nd edition, ISBN 0521121515, 9780521121514, page 235
3. Joan, Paul & Kapteyn, George (2008); “The law of the European Union and the European Communities: with reference to changes to be made by the Lisbon Treaty”; 4th Edition, Kluwer Law International, ISBN 9041128166, 9789041128164 page 191
4. Joan, Paul & Kapteyn, George (2008); “The law of the European Union and the European Communities: with reference to changes to be made by the Lisbon Treaty”; 4th Edition, Kluwer Law International, ISBN 9041128166, 9789041128164 page 264
5. Weatherill, S (2010); “Cases and materials on EU Law“; Oxford University Press, 9th edition, ISBN 0199562253, 9780199214013

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer