page_title: European Union law
section_title: Establishment and services
hierarchical_section_title: European Union law / Free movement and trade / Establishment and services
caption_attribution_description: English: Buses travel through the junction of Threadneedle Street, Cornhill, Prince's Street, King William Street and Mansion House Street in the City of London.
context_page_description: European Union law is a system of rules operating within the member states of the European Union. Since the founding of the Coal and Steel Community after World War II, the EU has developed the aim to "promote peace, its values and the well-being of its peoples". The EU has political institutions, social and economic policies, which transcend nation states for the purpose of cooperation and human development. According to its Court of Justice the EU represents "a new legal order of international law".
  The EU's legal foundations are the Treaty on European Union and the Treaty on the Functioning of the European Union, unanimously agreed by the governments of 27 member states. New members may join, if they agree to play by the rules of the organisation, and existing members may leave according to their "own constitutional requirements". People are entitled to participate through the Parliament, and their national governments in shaping the legislation the EU makes.
context_section_description: As well as creating rights for "workers" who generally lack bargaining power in the market, the Treaty on the Functioning of the European Union also protects the "freedom of establishment" in article 49, and "freedom to provide services" in article 56. In Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano the Court of Justice held that to be "established" means to participate in economic life "on a stable and continuous basis", while providing "services" meant pursuing activity more "on a temporary basis". This meant that a lawyer from Stuttgart, who had set up chambers in Milan and was censured by the Milan Bar Council for not having registered, should claim for breach of establishment freedom, rather than service freedom. However, the requirements to be registered in Milan before being able to practice would be allowed if they were non-discriminatory, "justified by imperative requirements in the general interest" and proportionately applied. All people or entities that engage in economic activity, particularly the self-employed, or "undertakings" such as companies or firms, have a right to set up an enterprise without unjustified restrictions. The Court of Justice has held that both a member state government and a private party can hinder freedom of establishment, so article 49 has both "vertical" and "horizontal" direct effect. In Reyners v Belgium the Court of Justice held that a refusal to admit a lawyer to the Belgian bar because he lacked Belgian nationality was unjustified. TFEU article 49 says states are exempt from infringing others' freedom of establishment when they exercise "official authority". But regulation of an advocate's work (as opposed to a court's) was not official. By contrast in Commission v Italy the Court of Justice held that a requirement for lawyers in Italy to comply with maximum tariffs unless there was an agreement with a client was not a restriction. The Grand Chamber of the Court of Justice held the Commission had not proven that this had any object or effect of limiting practitioners from entering the market. Therefore, there was no prima facie infringement freedom of establishment that needed to be justified.
  In regard to companies, the Court of Justice held in R (Daily Mail and General Trust plc) v HM Treasury that member states could restrict a company moving its seat of business, without infringing TFEU article 49. This meant the Daily Mail newspaper's parent company could not evade tax by shifting its residence to the Netherlands without first settling its tax bills in the UK. The UK did not need to justify its action, as rules on company seats were not yet harmonised. By contrast, in Centros Ltd v Erhversus-og Selkabssyrelsen the Court of Justice found that a UK limited company operating in Denmark could not be required to comply with Denmark's minimum share capital rules. UK law only required £1 of capital to start a company, while Denmark's legislature took the view companies should only be started up if they had 200,000 Danish krone (around €27,000) to protect creditors if the company failed and went insolvent. The Court of Justice held that Denmark's minimum capital law infringed Centros Ltd's freedom of establishment and could not be justified, because a company in the UK could admittedly provide services in Denmark without being established there, and there were less restrictive means of achieving the aim of creditor protection. This approach was criticised as potentially opening the EU to unjustified regulatory competition, and a race to the bottom in legal standards, like the US state of Delaware, which is argued to attract companies with the worst standards of accountability, and unreasonably low corporate tax. Appearing to meet the concern, in Überseering BV v Nordic Construction GmbH the Court of Justice held that a German court could not deny a Dutch building company the right to enforce a contract in Germany, simply because it was not validly incorporated in Germany. Restrictions on freedom of establishment could be justified by creditor protection,
caption: The Court of Justice in Centros Ltd held that people can establish a UK company or any other, to do business EU-wide, but must comply with proportionate requirements in the public interest,[257] such as the basic labour right to a voice at work.[258]
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