EU Free movement

  1. Article 45 TFEU
    States that ‘Freedom of movement for workers shall be secured within the Union’.

    Note that people exercising these rights are often referred to as ‘migrant workers’.

    (Amplified and clarified by 1612/68- now 492/2011)

    Article 45(2) provides that migrant workers must not suffer ‘discrimination based on nationality’ as regards their ‘employment, remuneration and other conditions of work and employment’.

    - For example, you cannot refuse to employ someone because he is foreign, or pay him less than a worker who is a national of the host State.  Nor can you make him work longer hours, or refuse to give him the normal ‘perks’ of his job

    Article 45(3) includes rights to ‘move freely within the territory of Member States’, which implies a right to enter each separate Member State.  It also grants a right to ‘stay’ in a host State while working and ‘remain’ thereafter, subject to conditions – these are rights of residence.
  2. Article 49 TFEU
    Deals with the rights of self-employed people and their businesses, stating that ‘restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited

    This means that a Union citizen is free to set up and run a business permanently in a host State.

    This bans both distinctly applicable (directly discriminatory) and indistinctly applicable measures that actually hinder freedom of establishment.

    This article has direct effect- Reyners
  3. Article 56 TFEU
    Deals with the free movement rights of self- employed people and their businesses, stating that ‘restrictions on freedom to provide services within the Union’ shall be prohibited

    This means that a Union citizen is free to provide temporary services to people in a host State, without being based there permanently. It prohibits measures that restrict this freedom.

    This article has direct effect- Van Binsbergen
  4. Lawrie-Blum
    Article 45 TFEU; free movement of workers; what is a 'worker'?

    A worker is a person who:

    (a) performs services for another person;

    (b) under the control of that other person; and

    (c) receives remuneration.
  5. Directive 2004/38
    Article 45 TFEU; free movement of workers; searching for work

    Article 3(1) states that Directive 2004/38 covers two categories of people:

    ■ Union citizens who move from their home State to another Member State – a ‘host State’; and

    ■ ‘family members’ who may accompany them.

    The main rights granted are rights of:

    - exit (Article 4)

    - entry (Article 5)

    - residence for up to three months (Article 6),

    - residence for longer than three months (Article 7) and

    - permanent residence (Articles 16 and 17)

    in relation to all Member States.

    Under Article 6 all Union citizens have an initial right of residence of three months in other Member States; they do not have to be pursuing any economic or other activity - Article 6(1).

    Article 6(2) extends this right to non-Union national family member ‘accompanying or joining’ the migrant Union citizen.

    Article 7 provides for the right of residence in a host State for longer than three months.  It applies to Union citizens who fall into the following categories, all set out in Article 7 itself:

    • ■ workers and the self-employed;
    • ■ people with sufficient resources to support themselves, and with sickness insurance;
    • ■ students who declare that they have sufficient resources to support themselves during their course and who have sickness insurance (this includes children at school); and
    • ■ family members of the above, whatever their own nationality.

    Article 16 deals with the right of permanent residence for Union citizens and their family members.  According to Article 16, this right arises after five years’ continuous legal residence in a host State.

    Articles 17 and 18 grant this right prior to five years’ residence to the following workers and self-employed people, plus their family members , in certain situations, eg where the migrant Union citizen has retired or become permanently incapable of work.

    Note too that Article 17(4) even grants family members permanent residence rights – subject to conditions – where the worker/self-employed person has died before gaining his or her own permanent residence rights.

    The documents needed to exercise these rights are as follows:  

    (a) Right of exit from a Member State (Article 4) (for Union citizens: ID card or passport; for family members who are not themselves Union citizens: passport).

    (b) Right of entry to a host State (Article 5): as for exit, except that non-Union citizens may also be required to obtain a visa by the Member State which they seek to enter.  However, the host State must give ‘every facility’ to obtain such a visa, and it must be free of charge and issued as quickly as possible.

    (c) Right of residence in a host State for up to three months (Article 6).  Both Union citizens and their family members of other nationalities are required only to hold a valid ID card or passport during their stay.

    (d) Right of residence in a host State for longer than three months (Article 7) – dealt with in Article 8.  Registration with the authorities of the host State may be required, resulting in the issue of a registration certificate. 

    Article 8(3)–(5) lists the documents which may be required upon registration.

    Article 6(1) of the Directive grants all Union citizens a right of residence of up to three months in other Member States; there is no need for them to be carrying on an economic or any other activity during that period.

    Article 14(4)(b) of the Directive also provides that Union citizens who entered the host State to look for work may not be expelled for as long as they can provide evidence that they are still looking for work and have a genuine chance of being engaged.
  6. Levin
    Article 45 TFEU; free movement of workers; what is a 'worker'?

    The ECJ confirmed that a part-time worker is a ‘worker’ under Article 45 TFEU, provided the work is ‘effective and genuine’, and not ‘on such a small scale as to be regarded as purely marginal and ancillary
  7. Kempf
    Article 45 TFEU; free movement of workers; what is a 'worker'?; part-time workers

    Kempf, a German national, was a part-time music teacher.  He supplemented his  income, which was below subsistence level, with State  benefits.

    The ECJ confirmed again that a part-time worker was a ‘worker’ – even if he supplements his income by ‘other lawful means’ including ‘public funds’ (State benefits).
  8. Steymann
    Article 45 TFEU; free movement of workers; what is a 'worker'?; part-time workers

    Steymann, a German  national, was a member of a Bhagwan religious community in The Netherlands  which provided for the material needs of its members. In return, he carried out various activities, including plumbing.

    The ECJ held that even an unpaid worker for a religious community could be a   ‘worker’. This was because his work   contributed towards the community’s   economic activities and the benefits he   received from the community in return were a kind of ‘indirect’ wage.
  9. Bettray
    Article 45 TFEU; free movement of workers; what is a 'worker'?; part-time workers

    Bettray, a drug addict, was undertaking therapeutic work as part of a drug-rehabilitation programme.

    The scheme was designed to reintegrate people who were temporarily incapacitated into the  workforce. They received payment and were treated, as far as possible, as ordinary employees.

    The work carried out by a drug addict as part of a rehabilitation scheme did not make him a ‘worker’. The purpose of the work was to   benefit him, not to carry out economic activity.
  10. R v Saunders
    Article 45 TFEU; free movement of workers

    S, a British national, had pleaded guilty to a charge of theft. She accepted an order from an English court to go back to Northern Ireland and not to return to England or Wales within three years. She returned to England to work, so when prosecuted for breaching the order, she challenged it under what is now Article 45 TFEU.

    The ECJ ruled that it was a wholly domestic situation which fell outside the scope of Article 45.
  11. Micheletti
    Article 45 TFEU; free movement of workers; nationality

    This case illustrates the consequences of differing nationality rules very clearly.

    M, a dual national of Argentina and Italy, wanted to enter Spain as a worker. He relied on his Italian nationality to do this. Italy recognised his Italian nationality.

    The Spanish authorities refused him entry because Spain recognised only his Argentinian nationality, as Argentina was his last country of residence.

    The ECJ ruled that it was Italian law that was decisive; as M was an Italian national under Italian law, then he was a national of a Member State and Spain had to recognise his Italian nationality. The Declaration on Nationality confirmed the ECJ’s ruling.
  12. Van Duyn
    Article 45 TFEU; free movement of workers; direct effect & Treaty exceptions

    Article 45 TFEU has direct effect.

    Miss van Duyn, a Dutch national, was refused leave to enter the UK to work for the Church of Scientology because the UK Government considered the group’s activity to be socially harmful. Miss van Duyn challenged the Government’s refusal in the High Court.

    The Church of Scientology was not a banned organisation. The ECJ made it clear in para 17 that current association with a group or body could constitute ‘personal conduct’ for the purposes of what is now Article 27(2) of Directive 2004/38, and also that the activities of the group or body do not necessarily have to be illegal for a Member State to deny entry to or expel its members (see para 19, and note in particular the reference to ‘socially harmful’ activities).

    If the organisation is banned, this is likely to strengthen the MS's case.
  13. Directive 2004/38 (marriage)

    Article 12 provides that a non-EU citizen can retain the right of residence, provided that he has lived in the UK for at least one year.

    Departure of spouse

    Article 12(1) provides that the non-EU spouse can stay provided they have custody of children enrolled in an educational establishment, until they complete their studies.

    • Divorce
    • Article 13(1) provides this makes no difference where the spouse is also an EU citizen.

    Article 13(2) provides that this will not result in the loss of the right to residence, provided the conditions of para (a)-(d) are met.
  14. Directive 2004/38 (family members)
    'Family members' for the purpose of the directive are:

    - Spouses- Article 2(2)(a)

    - Registered partners, provided it is equivalent to marriage and recognised by the host MS- 2(2)(b)

    - Direct descendents under the age of 21 or dependents (including spouse or partner)- 2(2)(c)

    - Any other family members, irrespective of nationality, not falling within the definition of 2(2) who are 'dependants of the household of the Union citizen having the primary right of residence, or where serious health grounds strictly require the personal care of the family member- 3(2)(a)- lesser rights

    - The partner with whom the Union citizen has a durable relationship 'duly attested' s3(2)(b)- lesser rights
  15. Diatta
    Article 45 TFEU; free movement of workers; family members; 'spouse'

    Diatta concerned a Senegalese woman married to a French man.  She went to live with him in Germany, where he was working.  Later, she left him and moved into separate accommodation with the intention of divorce.  The German authorities argued that she was no longer entitled to live in Germany – they said that she was no longer a true ‘spouse’, since she was no longer living with her husband.

    Mrs Diatta was still a ‘worker’s spouse’.  The ECJ stated that there was no need for a migrant worker’s spouse to live in the same accommodation as the worker.  Mrs Diatta was still married to her husband so she still had the right to live in Germany as the spouse of a migrant worker, even though they were separated.
  16. Sandhu
    Article 45 TFEU; free movement of workers; family members; 'spouse'

    In Sandhu, an Indian national had married a German and they lived in England. When the marriage broke down, his wife returned to Germany with their son. He was informed by the authorities that his right to remain in the UK had ended on his wife’s return to Germany.

    Sandhu went beyond separation. In Diatta, the migrant worker remained in the host State, Germany. However, in Sandhu the migrant worker returned to her home State, leaving her spouse behind.

    Once the migrant worker having the primary right of residence had left the UK, the spouse could no longer have a secondary right to stay there. This is the approach that the House of Lords took, holding that the spouse lost his right to remain in the UK once the migrant worker had left the country.

    Their Lordships refused to make what is now an Article 267 TFEU reference, considering Diatta already covered the matter. However, there has been considerable academic criticism of this decision, and many academics think the ECJ would have taken a different view.
  17. Surinder Singh
    Article 45 TFEU; free movement of workers; family members; 'spouse'

    In Surinder Singh, a British woman returned to the UK after working in Germany.  Her Indian husband, Surinder Singh, came with her; he had been living with her whilst they lived in Germany.  Later, they separated.  The UK authorities then argued that Mr Singh had no right to remain in the UK as he was no longer the spouse of a migrant worker – his wife had ceased to be a migrant worker at the point when she returned to the UK from Germany. However, Mr Singh invoked EU Law to challenge this argument.

    In Surinder Singh, the ECJ held that returning migrant workers should be allowed to bring their spouses home with them.  If this were not permitted, workers would be deterred from leaving their home country to exercise their rights of free movement. Accordingly, a spouse of a Union citizen who is returning to his or her home State has the same rights of entry and residence as a spouse of a Union citizen who is moving to another Member State. This principle only applies where the Union citizen has previously activated his or her rights of free movement by moving to another Member State; it would not apply to a Union citizen returning to his or her home State from outside the EU.
  18. Directive 2004/38 (exclusion and deportation)
    A MS may exclude or deport under the 'public policy, public security or public health' derogations in Article 45(3).

    However, these grounds for exclusion:

    (a) may not be used for ‘economic ends’ - Article 27(1), ie as an excuse to keep out foreigners and thereby benefit a host State’s own nationals (less competition for jobs and businesses);

    (b) must be proportionate - 27(2). In this context, exclusion and deportation should be used only when really necessary – not just because, say, a State dislikes an individual;

    (c) must be based ‘exclusively on the personal conduct of the individual concerned’ - Article 27(2). A State cannot therefore exclude or deport someone for a personal characteristic (eg sex, skin colour) – only for something they have actually done;

    (d) may not be carried out on the grounds of previous criminal convictions ‘in themselvesArticle 27(2). In order to justify exclusion or deportation, a criminal conviction would therefore have to show the criminal concerned to be a threat to ‘public policy, public security or public health’ – the only permitted grounds. Mass murder would qualify – a speeding conviction would probably not.
  19. R v Bouchereau
    Article 45 TFEU; deportation & Directive 2004/38

    Here, Bouchereau, a French national working in the UK, was convicted for the second time within six months of unlawful possession of drugs.  The magistrate wanted to recommend him for deportation.

    Article 3(2) of Directive 64/221 provided that ‘previous criminal convictions shall not in themselves constitute grounds’ for refusing entry to or deporting a migrant worker (again repealed and replaced by similar wording in Article 27(2) of Directive 2004/38).

    In para 28, the ECJ indicates that past convictions are only relevant in so far as the person constitutes a ‘present threat’; this will be the case if the past conviction shows a propensity to reoffend.

    However, in para 29, there is a suggestion that in some circumstances, past conduct alone may be enough. Note the references in para 35 to ‘genuine and sufficiently serious threat’ and ‘fundamental interests of society’.

    The derogations must therefore be applied proportionately (eg deportation or exclusion should not be ordered for minor ‘threats’).
  20. Adoui and Cornuaille
    Article 45 TFEU; deportation & Directive 2004/38

    The Belgian authorities refused residence permits to two French nationals who were working as prostitutes. Belgian law did not prohibit prostitution, but incidental activities such as soliciting were prohibited.

    The ECJ ruled that a Member State could not refuse residence to a non-national where the Member State did not adopt against its own nationals acting in the same manner ‘repressive measures or other genuine measures intended to combat such conduct’.
  21. Carpenter
    Article 45 TFEU; deportation & human rights

    This case s hows that human rights considerations may assist a person’s attempt to fight exclusion or deportation. A Filipino national who had overstayed her tourist visa married Mr Carpenter, a British national who ran a business selling advertising space in journals. A lot of this business was in other Member States. The British authorities wanted to deport Mrs Carpenter. Mr Carpenter argued this infringed his rights under what is now Article 56 TFEU (also applies to Art. 45)

    However, Mr Carpenter had triggered the application of Article 56 TFEU by providing services to businesses in other Member States, so the ECJ went on to consider whether a right of residence in favour of the spouse might be inferred from the principles or other rules of EU Law.

    EU Law recognises the importance of family life, and also respects fundamental rights guaranteed by the European Convention on Human Rights. Therefore deporting Mrs Carpenter breached Article 8 of the Convention; it was a disproportionate interference with Mr Carpenter’s right to family life.
  22. Commission v France
    Article 45 TFEU; the right to equal treatment; distinctly applicable (directly discriminatory) measures

    The French Maritime Code required French merchant ships to employ a ratio of three French crew to one non-French. This was direct discrimination and so infringed Article 45 TFEU.
  23. Allue
    Article 45 TFEU; the right to equal treatment; indistinctly applicable indirectly discriminatory measures

    Italian law provided that teachers of foreign languages could enter into fixed-term contracts for only one year, whilst teachers of other subjects were able to enter into indefinite contracts.

    This was not direct discrimination, as an Italian national teaching a foreign language was subject to this limitation, whilst a foreign national who taught, for example, history was not.

    However, foreign nationals were much more likely to be teaching foreign languages than Italian nationals, so the law indirectly discriminated against them.

    Justification of indistinctly applicable measures

    The Italian Government tried to justify the indirect discrimination on the basis of proper university management, ie to ensure that universities had the necessary funds to pay foreign language teaching assistants.

    Whilst the ECJ accepted that proper university management was a legitimate aim, the means being used to achieve it were disproportionate. Dismissing surplus foreign language teachers would be more proportionate than limiting the duration of their contracts.
  24. Bosman
    Article 45 TFEU; the right to equal treatment; indistinctly applicable non-discriminatory measures; Derogations from Article 45; justification for indistinctly applicable measures

    In this case, Jean- Marc Bosman, a Belgian footballer, wanted to leave his Belgian club (RC Liege) to move to a French club (US Dunkerque). It was argued that various UEFA rules effectively prevented this movement (UEFA is the governing body of football in Europe). One of these rules was indistinctly applicable, the rule that when a footballer moved from one club to another at the end of his contract, a transfer fee was payable. This applied to all footballers, irrespective of nationality,  moving between clubs anywhere in Europe – whether within one Member State or between Member States.

    However, the ECJ held that such a rule could potentially inhibit free movement of footballers between Member States and thus breach Article 45 TFEU

    • Justifcation of indistinctly applicable measures

    • Applied the Cassis approach to Article 45.The
    • rules could be justified if they ‘pursued a legitimate aim compatible with the Treaty and were justified by pressing reasons of public  interest’.

    • This restates the Cassis approach that a measure must be ‘necessary’ for a ‘mandatory requirement’ of the State. The ECJ’s further remark that ‘application of those rules would still have to be such as to ensure achievement of the aim in question and not go beyond what is necessary for that purpose’ reflects once again the need for measures to be proportionate.
  25. Regulation 492/2011
    Article 45 TFEU; secondary legislation

    Article 1(2) gives workers the right to take up employment with the same priority as nationals of the host Member State.

    Article 3(1) of the Regulation allows conditions ‘relating to linguistic knowledge required by reason of the nature of the post to be filled’. For example, it may be essential for a salesman in the UK to speak English, so the refusal of such a job is reasonable and a UK company would not be breaching the regulation. In Groener, a Dutch woman was refused a job in an Irish College because she failed a test in the Irish language. The ECJ confirmed that such language conditions could be imposed – for example, in order to protect national culture – but stressed that they must apply to all applicants (nationals and non-nationals) and be proportionate.

    Article 6(1) of the Regulation provides that, generally, engagement and recruitment must not be subject to discriminatory tests or other criteria. However, if such tests apply to all applicants they will not be discriminatory.

    Article 7(1) of the Regulation says workers have the right not to be discriminated against (‘treated differently’) on grounds of nationality in relation to any conditions of employment: this amplifies slightly the basic right in Article 45(2) TFEU. In particular, Article 7(1) mentions remuneration. If a worker is being paid less because of his nationality, the employer is in breach of Article 7(1); the same point arises with hours of work.

    Article 7(3) of the Regulation applies specifically to training; workers should be given ‘access to training in vocational schools and retraining centres’ on the same terms as national employees. Unless an employer can show some justifiable reason for not sending a worker on a course which is not connected with his nationality, there is a potential breach of Article 7(3).

    Article 7(2) guarantees migrant workers 'the same social and tax advantages as national workers', which covers non-contractual entitlement. In Cristini v SNCF, it was confirmed that social advantages should be interpreted broadly and covered fare reduction cards in this case.
  26. Article 45(3) TFEU
    Derogations from Article 45; justification for directly discriminatory/ distinctly applicable measures

    This contains the general derogations: ‘limitations justifi ed on grounds of public policy, public security or public health’ .

    Note that these derogations have always been very narrowly interpreted by the courts; if there is any doubt as to whether or not a measure fits within them, it will be deemed not to do so.

    Note too that the Article 45(3) TFEU justifications are unique in free movement law in that they can be used by individuals accused of hindering free movement as well as by Member  States.

    This was confirmed in the case of Bosman.  In that case, as you will recall, it was UEFA that was hindering free movement – not any particular Member State.
  27. Article 45(4) TFEU
    Derogations from Article 45; justification for directly discriminatory/ distinctly applicable measures

    Article 45(4) TFEU means that the rights conferred by Article 45 do not apply to ‘employment in the public service’. There is no definition of this expression in the Treaty, but the ECJ has considered what it means.

    The ECJ has given a very narrow scope to the words ‘employment in the public service’ in Article 45(4). A particularly important case on this point is  Commission v Belgium:

    Paragraph 10 of the ruling makes the point that this provision removes a particular range of jobs from the ambit of the rest of the Article. Paragraph 10 goes on to point out that the holders of these posts have a ‘special relationship of allegiance’ to the State.

    Paragraph 11 notes that there is a problem, however. This is that authorities in the Member States have assumed various economic and social responsibilities, which, on a wide definition could be ‘employment in the public service’ (the case concerned, for example, nurses and various railway employees).

    If these posts (which, according to the ECJ, do not fall within the public service ‘properly so called’) did come within the provision, the consequences would be unfair; a State could remove too wide a range of jobs from the protection of Article 45 TFEU (ie in effect, reserve them for nationals of that State only).

    The last sentence of para 12 in effect gives the ‘test’ of employment in the public service; note the references to ‘the exercise of powers conferred by public law’ and ‘safeguarding the general interests of the State’. The court does not give examples, but it is likely that the provision will cover, for example, judicial appointments, senior civil service posts and appointment of police officers.

    In a follow-up judgment, the ECJ held that the exclusion in Article 45(4) TFEU did not apply to the posts being considered in the case (train drivers, hospital nurses, plumbers and electricians, with the City of Brussels)
  28. Article 57 TFEU
    Services shall be considered to be ‘services’ within the meaning of this Treaty where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.

    ‘Services’ shall in particular include:

    (a) activities of an industrial character;

    (b) activities of a commercial character;

    (c) activities of craftsmen;

    (d) activities of the professions.

    Without prejudice to the provisions of the Chapter relating to the right of establishment, the person providing a service may, in order to do so, temporarily pursue his activity in the Member State where the service is provided, under the same conditions as are imposed by that State on its own nationals.
  29. Gebhard
    Freedom to provide service (Art.56) or freedom of establishment (Art.49)? 'establishment' or 'services'

    This concerned a German lawyer, Mr Gebhard, who set up an office in Milan. It became important to ascertain whether he was providing temporary legal services in Italy (Article 56 TFEU), or was in fact established permanently in Italy (Article 49 TFEU).

    Mr Gebhard was claiming that he could take advantage of the Lawyers’ Services Directive, which covers only those providing services temporarily in another Member State, not those who have become established. It allows such people to provide legal services in other Member States on a temporary basis.

    Mr Gebhard was established in Italy (para 28). He was pursuing his profession on a ‘stable and continuous basis’ (paras 25, 28). A provider of services, on the other hand, pursues his activity ‘on a temporary basis’.

    Factors to be taken into account in deciding whether an activity is temporary include not only its duration, but also its ‘periodicity, continuity and regularity’. (Note para 27, however: a provider of services may still ‘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 providing the services in question’.)
  30. SPUC v Grogan
    Article 57 TFEU; what are services?

    Article 57 says they are normally provided for remuneration.

    The ECJ accepted that abortion was a commercial service within the meaning of Article 60 (now Article 57 TFEU). However, the Students’ Union failed in this case.

    It had not distributed the information (about abortion services in London) on behalf of the English abortion service providers. There was no commercial motive in what the Students’ Union had done – it had merely been seeking to ensure that women students were fully informed of their options if they became pregnant.

    The Students’ Union, therefore, was not providing services under EU Law. The State was consequently free to ban its distribution of this information – this ban was not a breach of (now) Article 56 TFEU.
  31. When does Article 56 TFEU apply?
    (a) When the provider of services goes to another Member State to provide services there.

    This is the most common situation

    (b) When the provider of services moves to another Member State to provide services to nationals of his own Member State.

    For example, a British estate agent might work temporarily in Spain, to provide advice to British people seeking to buy property there.

    (c) When no individuals actually move but services are provided purely by post, telephone, fax, Internet, etc.

    This was confirmed in the case of  Alpine Investments.

    (d) When an EU citizen or business providing services in a host State wishes to employ workers who are not themselves EU citizens.  The case of  VanderElst confirmed that the right to provide services includes a right to use one’s own workforce.  In that case, the fact that the workers concerned had permits to work in Belgium (the home State of the business) was sufficient to allow them to be used for work on a services contract in France.

    • (e) When nationals of one Member State travel to another Member State and receive services there.
    • This last category is perhaps surprising; this situation does not appear to be envisaged by the wording of Article 56 TFEU. However, the ECJ has clearly stated in its case law that Article 56 applies in this situation too. For example, the ECJ confirmed that individuals have rights to receive medical services and tourism services in other Member States (Luisi and Carbone)

    In  Cowan the ECJ used Article 56 TFEU in a particularly creative way.  Cowan, a British national, was attacked and robbed while visiting France as a tourist. The French authorities refused him criminal injuries compensation because he was not a French national. He invoked EU Law to challenge the refusal. The ECJ held that Mr Cowan was entitled to compensation.  In its judgment, the ECJ took as its starting point the general principle of non- discrimination now enshrined in Article 18 TFEU. This forbids discrimination on grounds of nationality on any Treaty matter. The ECJ noted that this principle found expression in other specific Treaty provisions, including the freedom to provide services.  The judgment then pointed out that the ECJ had already held in Luisi and Carbone (above) that the freedom to provide services included the freedom for recipients of services to go to another Member State to receive a service. The ECJ was quite clear that tourists such as Mr Cowan were recipients of services. Paragraph 17 indicated that the protection of persons from harm in the host State (and the right to compensation if harm occurred) on the same terms as nationals of that State was a natural consequence of freedom of movement.  The ECJ’s ruling in Watts illustrates the ECJ’s willingness to continue widening the scope of Article 56 TFEU.

    In previous cases, the ECJ had ruled that Article 56 applied to State medical services funded through insurance schemes. Thus, if a patient could not be treated in his home State without undue delay, he could seek treatment in another Member State at the expense of the insurance scheme. In Watts, the ECJ confirmed the same principle applied to the National Health Service.
  32. Articles 54 & 62 TFEU
    Article 54 says Article 49 TFEU covers companies and firms.

    Article 62 TFEU applies Article 54 TFEU to businesses providing temporary services
  33. Centros
    Companies and Article 49 TFEU

    This case shows how a business can take advantage of the single market to set up a company in a Member State with a light regulatory regime and then establish a branch back in its home State, thereby avoiding restrictions in its home State. Under Danish law it is possible to form a company only if it has a minimum share capital of DKK 200,000 (about £25,000); English law imposes no such requirement.

    Two Danish nationals formed Centros Ltd in England with a share capital of £2, and then relied on Article 49 TFEU to set up a branch in Denmark. The Danish authorities refused to register the Danish branch.

    The ECJ ruled that the conduct of the two Danish nationals was legitimate, even though the purpose was to avoid the Danish requirements.
  34. Sodemore SA
    Article 49; indistinctly applicable measures that restrict freedom of establishment

    Non-discriminatory indistinctly applicable measures which inhibit free movement may not be discriminatory at all. A good example in the context of freedom of establishment can be found here.

    This case concerned Italian rules that required certain activities (eg running homes for the elderly) to be carried out by only non profit-making organisations. It was argued that this was a restriction on freedom of establishment: businesses would be discouraged from carrying out such activities if they were not allowed to make a profit from their work – including businesses from other Member States.

    An interesting point about this case is that only businesses from other Member States could use Article 49 TFEU to challenge the Italian rules. Italian businesses would not have been able to do so.

    As with free movement of workers, both types of indistinctly applicable measure which inhibit freedom of establishment are capable of being justified in exactly the same way.
  35. Marks & Spencer v Halsey
    Article 49; indistinctly applicable measures that restrict freedom of establishment

    TFEU, but the ECJ has often been quick to fi nd a ‘Union element’, and individuals (including businesses) have then been able to use Article 49 TFEU in their home State.

    This has been particularly important for businesses, as is shown by the ECJ’s ruling here.

    Marks & Spencer’s French and Belgian subsidiaries had suffered substantial losses. UK tax law allowed parent companies based in the UK to claim tax relief for losses incurred by British subsidiaries, but not by foreign subsidiaries.

    Marks & Spencer therefore challenged the refusal to grant it relief for its French and Belgian losses under Article 49 TFEU. The ECJ ruled that the exclusion of tax relief for losses incurred by subsidiaries established in another Member State hindered the exercise by that parent company of its freedom of establishment, as it deterred it from setting up subsidiaries in other Member States. It thus constituted a restriction on freedom of establishment within the meaning of Article 49 TFEU, and consequently had to be justified by the UK tax authorities.

    This also provides another example of a non-discriminatory restriction on free movement which may nevertheless hinder free movement.
  36. Van Binsbergen
    Article 56 TFEU; indistinctly applicable measures that restrict freedom of services

    The Dutch law stated that only persons ‘established in Holland’ could act as legal advisers in social security cases. This is indistinctly applicable – it makes no reference to nationality, only to persons ‘established in Holland’, which could include both Dutch nationals and foreigners. (However, remember that Dutch nationals are much more likely to be ‘established in Holland’ than are foreign nationals, and thus more likely to meet this requirement. This was therefore an indistinctly applicable measure that arguably actually inhibited the freedom of lawyers from outside Holland (The Netherlands) to provide services there.)

    If the Dutch law had said that ‘only Dutch nationals can act as legal advisers’, that would have been a distinctly applicable measure, with reference made to nationality.
  37. Sager
    Article 56 TFEU; indistinctly applicable measures that restrict freedom of services

    Some indistinctly applicable measures which inhibit free movement may not be discriminatory at all. A good example in the context of freedom to provide services can be found here.

    An English company provided patent renewal services in Germany, eg it informed its clients when patent renewal fees were due and paid the fees on their behalf if asked to do so. However, this breached a German law which prohibited limited companies from carrying on this type of activity; only professionals acting in their personal capacity were allowed to do so.

    The German law was non-discriminatory as it also applied to German companies; nevertheless it infringed Article 56 TFEU as it prevented an English company from providing the service in Germany.

    An English company was able to challenge a German law in circumstances when a German company would not have been able to do so.
  38. Alpine Investments
    Article 56 TFEU; indistinctly applicable measures that restrict freedom of services

    A Dutch investment company ‘cold- called’ potential customers in other Member States; this was held to be an offer of ‘services’ within the meaning of Article 56 TFEU.

    A Dutch law prohibited such cold-calling by all businesses established in The Netherlands – including cold-calling of people both inside and outside The Netherlands. It was argued that this Dutch law was a restriction on the Article 56 TFEU freedom to provide services in any Member State: the law restricted the provision of services by Dutch established businesses – including provision of services to people in other Member States.

    This is also another example of a non-discriminatory restriction on free movement.
  39. Viacom
    Outer limits of Arts. 49 & 56

    Articles 49 and 56 TFEU have a very wide scope, even covering non-discriminatory measures that hinder free movement. Potentially this could open the way for businesses to challenge a vast number of national laws which have at best a very tenuous connection with free movement.

    For example, a British business could try to argue that French employment legislation, by giving employees greater rights than the equivalent British legislation, is an obstacle to free movement as it discourages British businesses from establishing themselves in France.

    However, the ECJ’s ruling in  Viacom shows that the ECJ is alert to this danger. G, a French company, instructed an Italian company to place advertisements on billboards in Genoa. V had to pay the local authority a municipal advertising tax of 226.92 euros. G refused to reimburse V, arguing that the tax infringed Article 56 TFEU. The billboards were managed by the local authority. The ECJ stated that the tax (which applied to all businesses, national and non-national) was modest in amount in relation to the service being provided by the local authority, and so did not constitute a restriction on free movement.
  40. Article 51 TFEU
    Justifying a breach of Articles 49 & 56; Treaty exceptions (for distinctly applicable measures)

    Under Article 51 TFEU, a State could argue that its measure is not covered by Articles 49 or 56 at all, since it relates to activities connected ‘with the exercise of official authority’.

    The ECJ  considered its scope in Reyners. In this case, Belgian legislation stated that only Belgian nationals could be admitted to practise as lawyers, or ‘avocats’.

    Mr Reyners, who was Dutch, argued that this law was a distinctly applicable measure which prevented his establishing himself as a lawyer in Belgium.

    Belgium attempted to rely on the then Article 55 EEC – now Article 51 TFEU – that the profession of ‘avocat’ was connected with the ‘exercise of official authority’. Belgium argued that because of this, freedom of establishment did not apply, and its law restricting the profession to Belgians only did not breach EU Law.

    The defence did not succeed. The ECJ said in para 52 that most of the work of an avocat (consultation, legal assistance, representation in court) could not be considered work connected with the ‘exercise of official authority’.

    Note that the Court, typically, construed the Treaty exception narrowly, deciding in favour of the person arguing against the State.
  41. Article 52(1) TFEU
    Justifying a breach of Articles 49 & 56; Treaty exceptions (for distinctly applicable measures)

    Under Article 52(1) TFEU, a State could argue that its measure is justifi ed on grounds of ‘public policy, public security or public health’. You have noted throughout this Unit that these three derogations are common to all of the free movement areas.

    Omega, a German company, ran a laser game facility (supplied by a British company which triggered the application of Article 56 TFEU to the case) where players shot at each other with laser guns.

    The police in Bonn banned the ‘playing at killing’ game, as the simulated homicide and trivialisation of violence were contrary to fundamental values and so constituted a danger to public order.

    When Omega challenged the ban, the authorities sought to justify it under the ‘public policy’ exception. As the authorities were relying on a Treaty exception, the ECJ did not consider it necessary to decide whether the ban was distinctly or indistinctly applicable. The ECJ stated that its case law made it clear that public policy could be relied on only if there was a genuine and sufficiently serious threat to a fundamental interest of society, and as circumstances varied from country to country, national authorities had a margin of discretion, although they had to act proportionately.

    In this case, by banning only the laser game which involved ‘playing at killing’ people, and not other laser games, the authorities had not gone further than necessary to attain their objective, namely the level of protection of human dignity which the national constitution sought to guarantee. The ban was therefore proportionate.
  42. Cassis approach to Articles 49 & 56
    Arts 49 & 56: justification of indistinctly applicable measures

    Applies to Article 49 for establishment (Gebhard) and Article 56 for services (Alpine Investment)

    Wording of Cassis approach

    In Gebhard, the ECJ said that a State could defend measures that actually hinder freedom of establishment on the following basis:

    (i) such measures must be non-discriminatory (ie indistinctly applicable);

    (ii) they must be ‘justified by imperative requirements in the general interest’;

    (iii) they must be ‘suitable for securing the attainment of the objective which they pursue’; and

    (iv) ‘they must not go beyond what is necessary in order to attain it’.

    Note that when the ECJ stated in its first criterion that such measures must be ‘non- discriminatory’, it meant that the measures must not be directly discriminatory. Therefore the approach set out by the ECJ in Gebhard can be used to justify both types of indistinctly applicable measures, namely indirectly discriminatory measures and non-discriminatory restrictions on free movement.

    Nb- Alpine investments established this test applies in exactly the same way to services for Art. 56
  43. Commission v Italy
    Applying the cassis approach to justify indistinctly applicable measures
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