In the internal market the restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. The freedom of establishment includes the right to take up and pursue activity as self-employed persons and to set up and manage undertakings, in particular companies or firms under the same conditions laid down for its own nationals of the country where such establishment is effected. Companies or firms means societies constituted under the civil or commercial law, including cooperative societies, and other legal persons governed by public or private law.
The right of establishment covers natural and legal persons. In the case of legal entities the right of establishment includes to set up a branch or a subsidiary of an existing company in another Member State. The right of establishment of the legal entities is also regulated among the company law directives. Similar to the exemption of the free movement of workers the right of establishment can be restricted on the ground of public policy, public security or public health. But these exemptions can be applied in duly justified cases and if they are proportionate. The exemptions from the freedom of establishment is also possible if the services concerned are exercised by official authorities ( Article 45 of the EC Treaty).
Services are defined as those provided for remuneration as so far as they are not governed by the provisions relating to freedom of movement of goods, capital or persons. Where goods are supplied in the context of the provision of service they will be governed by the provision relating to services as far as the goods are ancillary to the services provided.
It is essential to make difference between the right to establishment and provide services. Both apply to business or professional activity pursued for profit, for remuneration. The right of establishment is a right to install itself, set up a company in another Member State permanently or semi-permanently. The freedom of services means the right to provide services on a temporary basis. In this case it is not necessary to reside in the State in which the service is provided. According to the Case C55/94 Gebhard the temporary nature of the activity should be determined by the duration, regularity, periodicity and continuity of the service. It should be mentioned that according to the jurisprudence of the ECJ a person could be established in more Member States in the case of a company, by setting up branches or subsidiaries. The freedom to provide services applies to those services which have cross border element. It is also important that service is provided for remuneration. In this respect those services which are paid by the public sector, by the state do not come under the freedom to provide services (for example educational services, or some healthcare services, social services).
The prohibition on discrimination is also applied to services. According to the prohibitions Member States may not introduce different conditions for service providers from another Member State. The ECJ interpreted in many cases the freedom to provide services. The directive 73/148/EEC on the abolition of restriction on movement and residence within rhe Community for nationals of Member States with regards to establishment and the provision of services lay down the detailed rules.
In the legislative level the freedom to provide ruling is worked out, however some problems still exist in practice. The service sector has a paramount importance in the EU. Both in terms of number of employed people and GDP produced the services sector has an increasingly dominant role. However administrative obstacles still exist and the real internal market in the field of services has not been fulfilled.
In order to change this situation the Commission submitted a new proposal on the new Services Directive in January 2004. It should be mentioned that around 60% of economic activity in the European Union is covered by services. The new proposal provides a legal framework to eliminate the obstacles to the freedom of establishment for service providers and the free movement of services between the Member States, giving the providers and recipients of services the legal certainty they need in order to exercise these two fundamental freedoms enshrined in the Treaty.
The Commission has published a report on the situation of the liberalised professions in the EU. The report can be found on http://www.europa.eu.int/scadplus/leg/en/lvb/l23015.htm website.
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