← The hardest concepts in European Union law
In one breath
Freedom of establishment lets a person or company set up and carry on a business on a stable and continuous basis in another Member State, while freedom to provide services covers temporary cross-border activity. The line between them matters because different rules and different host-State conditions apply.
The picture
The shopfront and the travelling stall
A cheese-maker from one town wants to sell in another. She may take a lease on a shopfront on the high street, hang a sign, hire a clerk and trade there year after year. Or she may drive in once a month with a stall for a market day. The town can ask a shopkeeper to follow its rules on licences, qualifications and inspections. The stallholder is a visitor, and the town may not impose the full set of shopkeeper’s rules on someone who is already controlled at home and who stays only briefly.
The Treaty draws the same line. Establishment (Article 49) covers pursuing activity as a self-employed person and setting up and managing undertakings under the conditions the host State lays down for its own nationals. Services (Articles 56 and 57) cover activity provided for remuneration, normally temporarily, which the provider may carry out in the host State under the same conditions as that State imposes on its own nationals. Duration, regularity, periodicity and continuity help decide which applies (Gebhard).
Where the picture stops working
A stall can turn into a shopfront without anyone noticing. The Treaty rules are not just about the nature of the stay: a provider who is based in one State and directs its activity at another may still be established there, and the provision of services may include recipients who travel to the provider. The picture also hides company law. Companies lawfully formed in one State have a right to set up branches in another, a question of establishment, not of services.
How it really works
- 1Know where the rule comes from. Establishment is governed by Article 49 and services by Articles 56 and 57 of the Treaty on the Functioning of the European Union. The criteria for telling them apart come mainly from the Court’s case law.
- 2Characterise the activity. Is it carried on on a stable and continuous basis in the host State (establishment), or provided temporarily across a border (services)? The assessment looks at duration, regularity, periodicity and continuity (Gebhard).
- 3Apply the equal-treatment rule. Both freedoms prohibit discrimination on grounds of nationality (Reyners; Van Binsbergen), and both are directly effective.
- 4Test non-discriminatory restrictions. National measures that hinder or make less attractive the exercise of the freedoms must be applied in a non-discriminatory manner, be justified by imperative requirements in the general interest, be suitable to secure the objective, and not go beyond what is necessary (Gebhard).
- 5Treat companies as established where formed. A company lawfully formed in one State may set up a branch in another, even if it does no business in the first (Centros), though abuse can be assessed case by case.
Why people get it wrong
- Thinking the two freedoms are interchangeable. The host State’s power to impose its own conditions differs between them.
- Believing that “temporary” means a fixed number of months. The Court looks at the whole pattern, not a set number.
- Assuming that only discriminatory rules are caught. Restrictions that hinder access are also caught.
- Treating a branch or agency as services. A permanent presence in the host State points to establishment.
- Overlooking the nationality rules. Both freedoms were first used to strike down nationality requirements for professions.
A worked example
The facts are invented
An architect, Soren, based in Country A, wins a contract to design a hospital in Country B. He plans to visit for site meetings over eighteen months, but keeps his office and staff in A. Country B demands that he register with its professional body and open a local office. His activity is limited in time, tied to one project, and carried on from his home base, which points to services.
Country B may require compliance with rules justified by the public interest, such as proof of qualifications, but may not impose a full establishment regime without justification. If Soren instead decides to open a permanent office in B, hire local staff and take commissions from the local market, he becomes established there, and B may apply its rules for local architects, provided they do not discriminate on grounds of nationality or unjustifiably hinder him.
Try it
A professional based in one Member State wins a single project in another and visits only for the duration of the project. Which freedom is mainly engaged?
Landmark authorities
Read the sources themselves; this list is a starting point.
- Reyners v Belgian State, Case 2/74, 1974
- Van Binsbergen v Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid, Case 33/74, 1974
- Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano, Case C-55/94, 1995
- Centros v Erhvervs- og Selskabsstyrelsen, Case C-212/97, 1999
Where to go next
More hard concepts in European Union law
- Harmonisation and the internal market (Internal market)
- Free movement of goods (Internal market)
- Free movement of workers and Union citizenship (Internal market)
- Competition law: agreements and dominant positions (Competition law)
This page is an educational overview. It is not legal advice and not a substitute for the sources: the statute, the rule, the case itself. EU law is made by the Union’s institutions under powers that the Member States have conferred on it in the Treaties, and it is applied by national courts and the Court of Justice together. The national law of each Member State still governs most of private and criminal law. Each page says whether the idea comes from the Treaties, from regulations and directives, or from the Court of Justice’s case law. Each page states the usual formulation of the rule and names landmark decisions; check the primary sources, and the law of your own Member State, before relying on any rule.