Lecture 1 of the Course European Law, Utrecht University (2016/2017) 

European Law: Lecture 1, 14-11-2016,

The freedom of establishment & free movement of services

Sybe A. de Vries

The course will include the social dimension of the internal market. We are going to focus on the freedom of establishment & free movement of services. It all started with the freedom of goods.

Set-up for the lecture: What is actually happening in Europe? This is the context of this course. We’re going back to the basics for free movement, what are the basis principles, and we will be zooming in at establishment and services.

Context

Just after the second World War (1956), Churchill pleaded for a united Europe. We know now that the situation is really different, with the Brexit, but also with other Party leaders, pleading in favour of leaving the European Union. Why do we have the EU in the first place and why do we have an internal market? What was the aim of the common market and political cooperation? The main aim was that a Third World War should be prevented.  Creating peace was and has always been the core of the European project. This is very important still, now that a lot is changing, for example now that Trump is going to be president of the United States of America.

What is going to happen after the Brexit, for the internal market? Europe is currently in a crisis. What is the effect of Brexit? Video:

• The free movement of goods: 50% of the trading goods is with the EU, so there will be costs of loss in investment, development and innovation. The UK will have to comply with all the regulation that the EU has laid down. The UK would have to negotiate each deal independently. Other countries will be dealing with a small country, instead of a big supranational organisation.
• The free movement of persons: 600.000 persons immigrated to the UK. The majority of those people came from outside the EU. Those migrants who will be working in the UK, what will happen to them? Secondly, what about Britains wanting to work in other EU countries, of people who want to go on holiday? Right now they have the right to move, to receive medical healthcare or use roaming in other EU countries. This will all disappear. There will be costs for a number of people. The UK will be able to control the borders; the EU immigrations will pay taxes. Immigration is based by economic growth, there will be a demand for labor.
• Free movement of services: Many large companies are based in the UK and provide services to other States, like Siemens. They will relocate if the UK would leave the EU. This is a significant loss for the UK.
• Free movement of capital: with Brexit there will be an impact. The price of having to comply with the EU regulations, would be very high.

There will be a lot of disadvantages. The UK will have a single market, but for trading outside the borders, the UK will have to comply with regulations, and not be able to say anything about that. Brexit comes with a cost, losing access to market, all of the integration will have to be unravelled in some form, there will be a lot of uncertainty, there is no clear legislation yet for after the Brexit, EU red tape will be replaced by UK red tape (lots of paperwork).

The Basis for Free Movement

The Basis for free movement is Article 26 TFEU: Internal Market. There are two forms, negative and positive integration. The main provision defining the internal market is: an area without internal borders, so that there is free movement of goods, persons, services and capital. The Schengen deal helped with realising that goal, it is now a part of the EU-law.

Negative integration is being referred to as applying the Treaty rules, for Member States to restrict the rules of free market. The European Commission can control the Member States and start an infringe-procedure before the Court of Justice of the EU. These rules have direct effect, so that means that also the national courts are involved in the process. Citizens can invoke the rules too, before the national courts. If the court comes to the conclusion that the rule violates the Treaty or other EU-law, then he will have to set the national rule aside (Van Gend & Loos).

Positive integration is being referred to as to justify the restrictions, even discriminatory. So there is still a possibility for the Member States to apply their national rules instead of the EU-law. They can uphold their national laws. The EU legislator will have to come up with a common standard, to prevent this. There has to be a common standard, mostly via a directive.

A directive has to be implemented in national law. Directives do not have direct effect if they’re not implemented. When they are implemented, they have direct effect for the aim and result.

Non-discrimination

Another Basis for free movement is Article 18 TFEU; Principle of non-discrimination. This is a general principle and the cornerstone of the internal market. The Court has not only prohibited discrimination, but also other restrictions. It’s not always clear from a Treaty itself. Discrimination is not distortion (Cassis de Dijon): there were different requirements on the minimum of alcohol content of alcoholic beverages.  This French law was not discriminatory, because it applied to all the States, but the result of the fact that we have different rules in Europe, was problematic, because France could not sell the beverages to Germany. This would cost France a lot of money. These types of rules are also prohibited by the EU.

Common characteristics free movement rules

The free movement rules are part of the internal market. Secondly, there must be an economic activity. This applies for all the freedoms. The third common characteristic, not only discrimination is prohibited, but all restrictions; there may be no distinction of market access. Treaty exceptions and the Rule of Reason exceptions, and no internal situation (Angonese case).

Establishment & services – preliminary remarks

There’s a broad scope of application and a functional approach. Establishment applies to natural persons & legal persons (companies). It applies to all of freedoms. All kinds of economic policies are being made subject to establishment. Natural persons van be economically active (workers) and economically non-active (citizenship).

Non economically active persons is an area of sensitivity.

Article 56 TFEU and Article 57 TFEU talk about services, within the meaning of the Treaties, get remuneration, including medical services (this is also a service like art. 56 and 57 TFEU) and lawfulness (Josemans case: discriminatory licence policy, but the dealing of drugs is not a normal internal market subject, this is in fact a legal activity, this means that it is not a product that is subject to normal transactions).   

The rules are addressed to Member States, but they can also have a horizontal direct effect (Viking case and Wouters case). The horizontal direct effect is limited, but it can apply. Even though the scope of competition law and the free movement law are different, doesn’t mean they can’t apply both (Viking 48-55).

Freedom of establishment

There should be an engagement in the economic life of another State, for a longer period of time (par. 25, Gebhard case).