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Free Movement of Services and

Establishment
1. Distinguishing Between the Different Fundamental Freedoms
The provision of services should be distinguished from other freedoms.

Movement of persons: The service providers, the established persons and workers are all involved in
economic activities. However, their movement in EU law is regulated by a different set of rules, albeit
based on the same rationale. The rationale common to all these freedoms is the requirement of equal
treatment highlighted by the AG Mayras in Van Binsbergen.

Workers and service providers: the distinguishing feature between the free movement of workers and
service providers is the provision of a service in a self-employed capacity, whereas workers are under
someone else’s supervision.

Services and establishment: they are both provided on a self-employed basis. The feature that allows
us to tell them apart is whether the person concerned is present in the host Member State
permanently or temporarily; in the latter case the situation comes under Freedom to Provide Services:

Case C-55/94 Gebhard [1995] ECR I-4165

25. The concept of establishment within the meaning of the Treaty is therefore a very broad
one, allowing a [Union] national to participate, on a stable and continuous basis, in the
economic life of a Member State other than his State of origin and to profit therefrom, so
contributing to economic and social interpenetration within the [Union] in the sphere of
activities as self-employed persons [..].

26 In contrast, where the provider of services moves to another Member State, the provisions
of the chapter on services, in particular the third paragraph of [Article 57 TFEU], envisage that
he is to pursue his activity there on a temporary basis.

Services and goods: often goods are supplied for provision of services. In such scenarios the rules on
services must be applied. In a case concerning lease of goods, the Court said:

Case C-451/99 Cura Anlagen [2002] ECR I-3193

18. In relation to [the question whether the rules on services or goods apply], this Court would
point out that leasing constitutes a service within the meaning of [Article 57 TFEU]. It consists
of an economic activity provided for consideration. The fact that that activity implies the
handing over of goods by the lessor to the lessee, in the main proceedings in this case a motor
vehicle, cannot invalidate that classification since the supply relates not so much to the goods
themselves as to their use by the lessee, the goods in question remaining the property of the
lessor.

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As with all four fundamental freedoms, we need to establish the scope of the prohibition in the
Treaties on the restriction of free movement of services and establishment.

2. Provision of Services: Defining a ‘Service’

Article 57 TFEU is the main provision allowing us to define what constitutes a ‘service’ for the purposes
of applying the Treaty prohibition on restricting freedom of movement of services.

Article 57 TFEU

Services shall be considered to be ‘services’ within the meaning of the Treaties 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.

Article 57 TFEU helps us to clarify a number of issues:

• The phrase ‘in so far as they are not governed by the provisions relating to freedom of
movement for goods, capital and persons’ indicates that the provisions on free movement of
services are residual in nature (Joined Cases 286/82 and 26/83 Luisi and Carbone [1984] ECR
377): they apply as long as the provisions on goods, capital and persons do not apply. Note
that at the time when the original version of the Treaty was drafted, services did not occupy
the same place in economy as they do today. See also the Cura Anlagen case above.
• The second paragraph gives us some examples of services.
• The first and third paragraphs also help to discern the elements of a ‘service’- see below.
• The phrase ‘under the same conditions as are imposed by that State on its own nationals’ in
the third paragraph indicates that there should be no discrimination in a host Member States
regarding the provision of services.

In order to apply the Treaty provisions on free movement of services, we need to establish the
presence of ‘a service’ within the meaning of the Treaty. In order to do so, the following elements
following from Article 57 TFEU and from the Court’s case law have to be established:

Remuneration: According to the first paragraph of Article 57 TFEU services ‘are normally provided for
remuneration’. This demonstrates the economic or commercial nature of the activities performed.

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Case C 263/86 Humbel [1988] ECR 5365

17. The essential characteristic of remuneration thus lies in the fact that it constitutes
consideration for the service in question, and is normally agreed upon between the provider
and the recipient of the service.

In this case the state education was considered not to constitute a service, since the element of
remuneration was missing, and the state was not engaged in a gainful activity. This demonstrates the
requirement for an economic link.

Other cases indicative of what constitutes remuneration:

• Writh (Case C-109/92 [1993] ECR I-6447): private education could constitute a service when it
is financed essentially out of private funds - by students or their parents - and where the
provider intends to make an economic gain.
• Schindler (Case C-275/92 [1994] ECR I-1039): lotteries case - the importation of lottery
advertisements and tickets into a Member State with a view to the participation by residents
of that State in a lottery operated in another Member State relates to a 'service' within the
meaning of the Treaty.
• SPUC v Grogan (Case C-159/90 [1991] ECR I-4685): issuing information about the identity and
location of clinics in another Member State providing abortion is not a ‘service’ since the
information was not distributed on behalf of an economic operator established in another
Member State. But abortion performed in another Member State did constitute a service for
the purpose of free movement rules.
• Geraets-Smits and Peerbooms (C-157/99 [2001] ECR I 5473): hospital services paid for on the
basis of an insurance system, sickness insurance fund, was considered to be a service.

Temporary Nature: The third paragraph of Article 57 TFEU highlights the feature which principally
distinguishes services from establishment; that is their temporary nature.

Case C-55/94 Gebhard [1995] ECR I-4165

27. As the Advocate General has pointed out, the temporary nature of the activities in question
has to be determined in the light, not only of the duration of the provision of the service, but
also of its regularity, periodicity or continuity. The fact that the provision of services is
temporary does not mean that the provider of services within the meaning of the Treaty may
not equip himself with some form of infra structure in the host Member State (including an
office, chambers or consulting rooms) in so far as such infrastructure is necessary for the
purposes of performing the services in question.

Here are some cases where the Court interpreted the nature of ‘temporary’ service provision:

• Schnitzer (Case C-215/01 [2003] ECR I-4847): the decision whether an activity is a temporary
service provision or establishment is for the national court to make on a case by case basis.
• Trojani (Case C-456/02 [2004] ECR I-7573): an activity carried out on a permanent basis, or at
least without a foreseeable limit to its length, would not be considered as provision of service.

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Cross-border provision: The Treaty rules on free movement of services can be applied once a cross-
border element has been established. This follows from Article 56 TFEU which is the main rule
prohibiting restrictions on free movement of services:

Article 56 TFEU

Within the framework of the provisions set out below, restrictions on freedom to provide services
within the Union shall be prohibited in respect of nationals of Member States who are established
in a Member State other than that of the person for whom the services are intended.

How does article 56 TFEU apply:

Case 33/74 van Binsbergen (1974). A Dutch national, Mr Kortmann, who practised in his own country
as a legal adviser and representative in social security matters, was engaged by Mr van Binsbergen in
the Netherlands as his legal representa- tive. His client had then moved his home to Belgium and
corresponded from there with the Dutch court, so it seemed as if he was ‘established’ in Belgium. The
court registrar told him he could no longer act for van Binsbergen, as under Dutch social security
procedures legal representation of persons in social security matters could only be fur- nished by
persons established in the Netherlands.

The Court ruled that Article 56 TFEU specifically applied to a situation where a serv- ice provider (here,
a lawyer, Mr Kortmann) was prevented from providing a service because of residence in another
Member State. The Court stated:

“A requirement that the person providing the service must be habitually resident within the territory
of the state where the service is to be provided may, according to the circumstances, have the result
of depriving [Article 59 EEC (now Article 56 TFEU)] of all useful effect”

Thus while assessing any breach of article 56: three consideration should be made;

a. Whether the rule in question is causing any hindrance to provide services.

b. Whether such hinderance is Distinctly applicable measure or indistinctly applicable measure
(Both of which are prohibited, Note however for DAM, only treaty derogations are available),
c. Whether the hinderance can be objectively justified if proportionate?

Cases C–76/90 Säger and Case 279/80 Webb

This provision indicates that there must be an element of crossing the border between different
Member States for Freedom to Provide Services law to be applicable. Three types of services:

• The service itself moves from one Member State to another; (Alpine investment case)
• The service provider moves; van Binsbergen and Case C–224/97 Ciola (1999)

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• The service recipient moves (see case 186/87 Cowan – British tourist was mugged in Paris;
under French law only French residents were entitled to compensation for having been a
victim of crime. Court held that the fact that Mr Cowan had been in Paris as a recipient of
services resulted in the situation being within the Treaty’s scope of application and that
excluding non-residents from the entitlement to compensation was in breach of the non-
discrimination principle.

Health care cases:

A growing number of cases have concerned the receipt of services that fall under social security
schemes. Specifically in relation to health care, a common question arises relating to eligibility for
service provision in different Member States where the service recipient travels to other countries to
receive health care and then bills their own health service provider for the treatment received.

a. Kohll v Union des Caisses de Maladie (1998)

b. Geraets-Smits v Stichting Ziekenfonds VGZ and Peerbooms v Stichting CZ Groep
Zorgverzekeringen (2001),
c. Watts (2006
d. Commission v France (2010)
e. CaseC–173/09Elchinov(2010)

Note, that although Article 56 TFEU is drafted in a language of service provision, it has been decided
that the Treaty rules also relate to the freedom to receive services (Joined Cases 286/82 and 26/83
Luisi and Carbone [1984] ECR 377).

3. ‘Restrictions’ on Free Movement of Services

A national rule restricting the freedom to provide services must be compatible with the requirements of Article 56.
To do so it must satisfy a four-part test, as follows: (Säger)

• the rule must be non-discriminatory

• the rule must be justified by imperative requirements in the general interest
• the rule must be suitable for the attainment of the objectives it pursues
• the rule must not go beyond what is necessary to attain its objectives.

“The freedom to provide services may be limited only by rules which are justified by impera- tive reasons relating to
the public interest and which apply to all persons and undertakings pursuing an activity in the State of destination
in so far as that interest is not protected by rules to which the person providing the service is subject in the State in
which he is estab- lished. In particular, these requirements must be objectively necessary in order to ensure
compliance with professional rules and must not exceed what is necessary to attain these objectives.”

Rush Portuguesa (1990) Portuguese workers employed by a company providing services in Belgium
were required to be in the possession of work permits at a time when Portuguese citizens did not have
full free movement rights in Community law because of transitional arrange- ments associated with
Portugal’s accession to the Community. The workers were sub- ject to the rules of employment and social
security in their own country. The Court ruled that such a rule was incompatible with Article 56 TFEU.

Arblade and Leloup(1999)

Case 341/05 Laval (2007)

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Non-discrimination: As in the case of free movement of goods the Treaty prohibition on restricting the
free movement of services is also based on the rationale of abolishing discrimination. We can find this
rationale in the third paragraph of Article 57 TFEU above. This prohibition of discrimination would
include both distinctly and indistinctly applicable measures.

That direct discrimination is prohibited was confirmed in the case of Gouda:

Case C-288/89 Gouda [1991] ECR I-4007

10. Article [56 TFEU] entails, in the first place, the abolition of any discrimination against a
person providing services on the grounds of his nationality or the fact that he is established in
a Member State other than the one in which the service is provided.

Another example of direct discrimination can be found in FDC (Case C-17/92 [ECR I-2239]) on film
distribution: Spanish law required that in order to be granted a license to dub foreign films film
distributors should also distribute a Spanish film at the same time.

Gouda also confirmed that indirect discrimination as well is prohibited under Article 56 TFEU:

Case C-288/89 Gouda [1991] ECR I-4007

12. In the absence of harmonisation of the rules applicable to services, or even of a system of
equivalence, restrictions on the freedom guaranteed by the Treaty in this field may arise in the
second place as a result of the application of national rules which affect any person established
in the national territory to persons providing services established in the territory of another
Member State who already have to satisfy the requirements of that State’s legislation.

Often, indirect discrimination takes a form of dual burden rules, e.g. a requirement to be established
before providing a service:

Case C-76/90 Säger [1991] ECR I-4221

13. In particular, a Member State may not make the provision of services in its territory subject
to compliance with all the conditions required for establishment and thereby deprive of all
practical effectiveness the provisions of the Treaty whose object is, precisely, to guarantee the
freedom to provide services.

Market Access: The Court’s case law on free movement of services has incorporated the market access
test in order to tackle also the non-discriminatory barriers to trade. A number of cases exemplify this
approach, including Säger, which firmly established the market access test in this area.

Case C-76/90 Säger [1991] ECR I-4221

12. … that [Article 56 TFEU] requires not only the elimination of all discrimination against a
person providing services on the ground of his nationality but also the abolition of any
restriction, even if it applies without distinction to national providers of services and to those
of other Member States, when it is liable to prohibit or otherwise impede the activities of a
provider of services established in another Member State where he lawfully provides similar
services.

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Note that in Alpine Investment, a case concerning a ban on cold calling to sell financial products, the
Court rejected a call to make a Keck-like distinction in terms of selling arrangements (para 36-37) in
the area of free movement of services and instead relied on the market access test.

Case C-384/93 Alpine Investment [1995] ECR I-1141

38. A prohibition such as that at issue is imposed by the Member State in which the provider
of services is established and affects not only offers made by him to addressees who are
established in that State or move there in order to receive services but also offers made to
potential recipients in another Member State. It therefore directly affects access to the market
in services in the other Member States and is thus capable of hindering intra-[Union] trade in
services.

39. The answer to the second question is therefore that rules of a Member State which prohibit
providers of services established in its territory from making unsolicited telephone calls to
potential clients established in other Member States in order to offer their services constitute
a restriction on freedom to provide services within the meaning of [Article 56 TFEU].

This case together with Schindler (C-275/92 [1994] ECR), a case concerning a ban on lotteries, marked
a step towards a more general reliance on the market access test. The application of the test can be
traced in the following cases:

• Commission v Italy (Case C-131/01 [2003] ECR I-1659): case concerning an Italian requirement
for foreign patent agents to be registered on the Italian patent register before providing a
service in Italy.
• Gourmet (Case C-405/98) [2001] ECR I-1795): a prohibition on advertising had a particular
effect on the cross-border supply of advertising, given the international nature of the
advertising market.

Thus, both discriminatory measures and non-discriminatory measures impeding market access, i.e.
hindering the provision of services across the border are prohibited unless they can be justified with
reference to certain derogations.

Illegal services:
Customs and Excise v Schindler (1994) – ban on lotteries was held to be justified under ‘…social and
cultural grounds and the concern to pre- vent fraud. This was in addition to the protection of players and
maintenance of order in society.”

Questore di Verona v Zenatti (1999)- case regarding right to take bets on sporting events, ECJ held such
rules can be justified under public interest derogations if applies proportionally.

Liga Portugesa de Futebol Profissional (2009) here again the issue was regarding the betting licence
which was granted to one company and another company which tried to conduct betting online was fined
by the authorities, the ECJ in this regard held “ national legislation is appropriate for ensuring attainment
of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic
manner’. As such the Court concluded that the fight against crime ‘may constitute an overriding reason of
public interest’ that was capable of justifying such restrictions in the games- of-chance sector.”

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However, in Gambelli and Others (2003) the Court refused to apply the usual justifications. Gambelli
concerned Italian rules restricting the provision of internet gambling services to state-run or state-
licensed organisations. The Court stated:

“In so far as the authorities of a Member State incite and encourage consumers to participate in lotteries, games of
chance and betting to the financial benefit of the public purse, the authorities of that state cannot invoke public order
concerns relating to the need to reduce opportunities for betting in order to justify measures such as those at issue in the
main proceedings.”

Anomar [2003] Portuguese rules restricting the right to operate games of chance or gambling only to
casinos in permanent or temporary gambling areas breached Article 56 TFEU.

In Marc Michael Josemans the issue was regarding drugs being served in Dutch coffee-shops. the Court
ruled that the measure was justi- fiable in light of the legitimate aim of combating drug tourism.
Moreover, the Court ruled that the measures were suitable and proportionate, as they did not prevent
non- residents from entering establishments that do not sell cannabis, and particularly in light of the fact
that other measures to prevent drug tourism had proven ineffective.

Cases regarding gaming and Human Rights:

Omega (2004), Here, combat games provided participants with the opportunity to fight and fire weapons
in simulated scenarios using lasers. Germany argued that such games is against their constitutional
norms. The Court of Justice ruled:

“Since both the Community and its Member States are required to respect fundamental rights, the protection of those
rights is a legitimate interest which, in principle, justifies a restriction of the obligations imposed by Community law,
even under a fundamental free- dom guaranteed by the Treaty such as the freedom to provide services.”

4. Freedom of Establishment
As in the case of free movement of services, the rules regulating freedom of establishment concern
provision of services. However, as noted above, the main distinction is the length of the service
provision. Establishment is an economic activity which takes place on a ‘stable and continuous’ basis
(Case C-70/95 Sodemare [1997] ECR I-3395).

Article 49 TFEU

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[..] restrictions on the freedom of establishment of nationals of a Member State in the territory
of another Member State shall be prohibited. Such prohibition shall also apply to restrictions
on the setting-up of agencies, branches or subsidiaries by nationals of any Member State
established in the territory of any Member State.

Freedom of establishment shall include the right to take up and pursue activities as self-
employed persons and to set up and manage undertakings, in particular companies or firms
within the meaning of the second paragraph of Article 54, under the conditions laid down for
its own nationals by the law of the country where such establishment is effected.

The freedom of establishment therefore applies to both natural and legal persons.

What is ‘establishment’?

Case C-221/89 Factortame [1991] ECR I-3905: ‘[Establishment means] the actual pursuit of an
economic activity throughout a fixed establishment in another Member State for an indefinite period’.

We should also distinguish between primary and secondary establishment:

• Primary establishment: an individual leaves one Member State to set up a permanent

establishment in another Member State;
• Secondary establishment: an individual maintains an establishment in one Member State and
sets up a professional base in another Member State. For instance, in the case of Klopp (Case
107/83 [1984] ECR 2971) concerning a restriction on practicing as an advocate while
remaining a member of the bar in another Member State.

After determining that the freedom of establishment is concerned, we need to ascertain whether the
restriction in question is caught by the prohibition in Article 49 TFEU.

5. ‘Restriction’ on Freedom of Establishment

Non-Discrimination: Similar to the freedoms considered before, the principle of non-discrimination is
one of the grounds for prohibiting restrictions on freedom of establishment. The following phrase in
Article 49 TFEU is indicative of the prohibition of discrimination: ‘under the conditions laid down for
its own nationals’. Here are some cases demonstrating this approach:

• Reyners (Case 2/74 [1974] ECR 631): a Belgian rule preventing a qualified Dutch national from
practising as a lawyer on the grounds of his nationality in Belgium - direct discrimination.
• Commission v Austria (certification) (Case C-1671/07 [2008] ECR I-10671): Austrian legislation
requiring nationals of eight new Member States to prove that they would not be working as
employees by producing a certificate demonstrating they were a member of a partnership or
a limited liability company - direct discrimination.
• Gullung (Case 292/86 [1988] ECR 111): French requirement for all lawyers to be registered at
the Bar before practising - indirect discrimination, although could be justified with reference
to ensuring ‘the observance of moral and ethical principles and the disciplinary control of the
activity of lawyers’.
• Vlassopoulou (Case 340/89 [1991] ECR 2357): non-recognition of foreign qualifications is a
restriction, but can be justified for relating to the organisation of the profession etc. However,

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there is an obligation on the national authorities to examine properly the basis for the
qualifications held by a citizen of another Member State and to inform the person of the
reasons why the qualification is not accepted. See further Lecture 13 on recognition of
qualifications.

Market Access: In line with other freedoms, the restrictions on freedom of establishment are not
confined to discriminatory measures only, and also include those which despite applying equally to
the nationals of the Member State in question, nevertheless impede the freedom of establishment.

Case C-55/94 Gebhard [1995] ECR I-4165

37. It follows, however, from the Court’s case-law that national measures liable to hinder or
make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must
fulfil four conditions: they must be applied in a non- discriminatory manner; they must be
justified by imperative requirements in the general interest; they must be suitable for securing
the attainment of the objective which they pursue; and they must not go beyond what is
necessary in order to attain it.

Thus, we can see the same rationale underpinning the prohibition of restrictions on free movement
of goods, services and establishment.

6. Derogations from Free Movement of Services and Freedom of

Establishment
As in the case of free movement of goods trade restrictions in these areas can be justified with
reference to Treaty derogations and other grounds not listed in the Treaties.

Treaty-based derogations:
Article 51 TFEU

The provisions of this Chapter shall not apply, so far as any given Member State is concerned,
to activities which in that State are connected, even occasionally, with the exercise of official
authority.

Article 52 TFEU

The provisions of this Chapter and measures taken in pursuance thereof shall not prejudice the
applicability of provisions laid down by law, regulation or administrative action providing for
special treatment for foreign nationals on grounds of public policy, public security or public
health.

Although these are the rules regulating freedom of establishment, by virtue of Article 62 TFEU, the
provisions above apply also to free movement of services.

Article 51 TFEU contains a general derogation on activities related to the exercise of official authority:

• Case 2/74 Reyners [1974] ECR 631: it has to be interpreted restrictively.

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If activities connected with the exercise of official authority are separable from the professional
activity in question taken as a whole, Art.51 does not apply – e.g.:

• Professional activities of a lawyer is separable from exercise of judicial power (Reyners)

• Private security services separable from the exercise of police powers (C-283/99 Comm. v.
Italy)
• Ambulance services separable from the management of a public health care system (C-160/08
Comm. v. Germany)
• Authentication function of notaries separable from judicial recognition of authenticated
documents (C-47/08 Comm. v. Belgium)

Article 52 provides three derogations of public policy, public security and public health, all of
which have to be interpreted restrictively:
• Commission v Spain (lotteries) (Case C-153/08[2009] ECR I-9735): Spain could not use
the public policy derogation to justify income tax exemptions for certain Spanish
charitable lotteries. The public policy derogation based on preventing money laundering
and tax evasion was ruled out as it was too general.
• Sjöberg and Gerdin (Joined Cases C-447-448/08 [2010] ECR I-6921): Sweden successfully
relied on public policy ground to justify a restriction on promotion of internet gambling.
• Regione Sardegna (Case C-169/08 [2009] ECR I-10821): protection of environment could
not be raised as derogation for the reason of public health protection.

This list of derogations is exhaustive and direct discrimination can be justified only with reference
to this list:

Case C-288/89 Gouda [1991] ECR I-4007

[..] national rules which are not applicable to service without discrimination as regards their
origin are compatible with [Union] law only in so far as they can be brought within an express
exemption, such as that contained in [Article 52 TFEU].

That the list is exhaustive was confirmed in FDC (Case C-17/92 [ECR I-2239]): Spain could not rely on
the derogation of cultural policy to justify a directly discriminatory measure.

Court-developed justifications:
Similar to the development of ‘mandatory requirements’ in the context of Free Movement of Goods
law, the Court has accepted further justifications for restrictions on free movement of services and
establishment, as long as the restrictions in question satisfy certain conditions. Here they are often
referred to as ‘objective justifications’ or ‘imperative requirements’.

Along the same lines Van Binsbergen has set most of these conditions for free movement of services,
while Gebhard has done so for freedom of establishment (note that Gebhard applies across
freedoms):

Case C-55/94 Gebhard [1995] ECR I-4165

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37. It follows, however, from the Court’s case-law that national measures liable to hinder or
make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must
fulfil four conditions: they must be applied in a non-discriminatory manner; they must be
justified by imperative requirements in the general interest; they must be suitable for
securing the attainment of the objective which they pursue; and they must not go beyond
what is necessary in order to attain it.

Case 33/74 Van Binsbergen [1974] ECR 1299

‘[..] taking into account the particular nature of the services to be provided, specific
requirements imposed not the person providing the service cannot be considered incompatible
with the Treaty where they have their purpose the application of … rules justified by the
general good… which are binding upon any person established in the State in which the service
is provided …’

Thus, we can discern the following conditions in order to rely on a derogation not provided in the
Treaties:

• Pursuit of a legitimate aim: ‘in general interest’, ‘general good’. Note, that pursuing a purely
economic aim will not be justified (Case C-372/04 Watts [2006] ECR I-4325).
• The restriction must be equally applicable to national and foreign persons (service providers
or established persons).
• The restriction must be proportionate.
• This group of derogations is non-exhaustive and it depends on the Member State convincing
the Court that the conditions above are satisfied.

As in the context of Free Movement of Goods, the Treaty-based grounds can justify both
discriminatory and non-discriminatory measures infringing the fundamental freedoms. Discriminatory
measures can only be justified on Treaty-based grounds – the judge-made imperative requirements
in the public interest cannot justify discriminatory measures.

7. Mutual Recognition of Qualifications

An issue that often arises when service providers or established persons move across borders in
pursuit of economic activity in other Member States is the recognition of foreign professional
qualifications in the host state.

The Court considered the issue of mutual recognition of qualifications in the absence of harmonisation
in its case law:

Case 222/86 Heylens [1987] ECR 4097: in the absence of harmonisation Member States are entitled
to regulate the knowledge and qualifications necessary to pursue a specific occupation. However,
Member States must assess the foreign qualifications of an applicant in good faith.

13. [T]he procedure for the recognition of equivalence must enable the national authorities to
assure themselves, on an objective basis, that the foreign diploma certifies that its holder has
knowledge and qualifications which are, if not identical, at least equivalent to those certified
by the national diploma. That assessment of the equivalence of the foreign diploma must be

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effected exclusively in the light of the level of knowledge and qualifications which its holder
can be assumed to possess in the light of that diploma, having regard to the nature and
duration of the studies and practical training which the diploma certifies that he has carried
out.

• Case 340/89 Vlassopoulou [1991] ECR 2357: there is an obligation imposed on the host Member
State to examine thoroughly the basis for the qualifications held by a Union national, to inform
the person of the reasons of not accepting the qualification and to respect the rights of the person
in that process. This case implied that there is an obligation on the Member States to give reasons.
• Linguistic competence: Member States are entitled to impose language requirements (see Case
C-424/97 Haim (No 2) [2000] ECR I-5123).

Many of the difficulties related to the recognition of professional qualifications have been overcome
by way of the EU harmonising the relevant law applicable self-employed persons. Article 53 of the
TFEU grants the EU the power to do so:

Article 53 TFEU

In order to make it easier for persons to take up and pursue activities as self-employed persons,
the European Parliament and the Council shall, acting in accordance with the ordinary
legislative procedure, issue directives for the mutual recognition of diplomas, certificates and
other evidence of formal qualifications and for the coordination of the provisions laid down by
law, regulation or administrative action in Member States concerning the taking-up and
pursuit of activities as self- employed persons.

Initially, the approach towards harmonisation was sectoral or vertical, regulating such professions as
nurses, pharmacists, architects, lawyers. Subsequently, a horizontal approach was preferred by
adopting a directive which applies across various sectors and is a fallback for all activities not regulated
by the vertical directives. Directive 2005/36/EC is the horizontal measure currently in force.

Note that the Directive applies to a ‘regulated profession’ (see Article 3 definitions) which was also
clarified in a number of cases:

Arvanitis (Case C-164/94 [1996] ECR I-135)

Fernandez de Bobadilla (Case C-234/97 [1999] ECR I-4773)

There are a number of provisions of the Directive which you should familiarise yourself with:

• Article 53: Member States are entitled to demand linguistic competence from persons
benefiting from the recognition of professional qualifications;
• Article 5 on Principle of the free provision of services;
• Article 13 on general conditions for recognition;
• Article 14 on adaptation period and aptitude test;
• Article 16 on recognition of professional experience to permit the pursuit of the activities
listed in Annex IV;
• Article 21: access to medical professions upon evidence of qualification, with harmonised
standards for training.

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8. The Services Directive

The Services Directive 2006/123/EC was adopted with an aim of liberalising the market in services as
it lagged behind other freedoms in the internal market. Its aim was to remove barriers to free
movement of services, including burdensome procedures for obtaining permits, requirements
regarding permanent base and others.

The Services Directive applies both to services provided on a temporary basis and services provided
by those established in other Member States, that is to say its scope covers both free movement of
services and freedom of establishment. It regulates a wide range of services, although with a number
of notable exceptions. Such exceptions include inter alia financial services, healthcare services,
transport services covered by Title V of the TFEU, gambling services and others.

The Directive applies subject to the Treaty rules on the right of establishment and the free movement
of services (Article 3 of Services Directive).

One of the notable simplifications of the Directive is the introduction of the points of single contact in
Article 6 aimed at creating only one point for completing all procedures and formalities.

As regards the freedom of establishment, Chapter III of the Directive regulates three sets of national
measures:

• Authorisation procedures: Article 10

• Prohibited requirements: Article 14
• Requirement to be evaluated: Article 15

As regards the free movement of services, Article 16 is the most important provision which has
attracted much discussion. It is the scope of the Article that has become a contentious issue:

Services Directive, Article 16

1. Member States shall respect the right of providers to provide services in a Member State
other than that in which they are established.

The Member State in which the service is provided shall ensure free access to and free exercise
of a service activity within its territory.

Member States shall not make access to or exercise of a service activity in their territory
subject to compliance with any requirements which do not respect the following principles:

(a) non-discrimination: the requirement may be neither directly nor indirectly discriminatory
with regard to nationality or, in the case of legal persons, with regard to the Member State in
which they are established;

(b) necessity: the requirement must be justified for reasons of public policy, public security,
public health or the protection of the environment;

(c) proportionality: the requirement must be suitable for attaining the objective pursued, and
must not go beyond what is necessary to attain that objective.

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2. Member States may not restrict the freedom to provide services in the case of a provider
established in another Member State by imposing any of the following requirements:

(a) an obligation on the provider to have an establishment in their territory;

(b) an obligation on the provider to obtain an authorisation from their competent authorities
including entry in a register or registration with a professional body or association in their
territory, except where provided for in this Directive or other instruments of Community law;

(c) a ban on the provider setting up a certain form or type of infrastructure in their territory,
including an office or chambers, which the provider needs in order to supply the services in
question;

(d) the application of specific contractual arrangements between the provider and the
recipient which prevent or restrict service provision by the self-employed;

(e) an obligation on the provider to possess an identity document issued by its competent
authorities specific to the exercise of a service activity;

(f) requirements, except for those necessary for health and safety at work, which affect the
use of equipment and material which are an integral part of the service provided;

(g) restrictions on the freedom to provide the services referred to in Article 19.

3. The Member State to which the provider moves shall not be prevented from imposing
requirements with regard to the provision of a service activity, where they are justified for
reasons of public policy, public security, public health or the protection of the environment
and in accordance with paragraph 1. Nor shall that Member State be prevented from applying,
in accordance with Community law, its rules on employment conditions, including those laid
down in collective agreements.

While Article 16 clearly incorporates the principle of non-discrimination, it is not clear whether the
phrase ‘free access to and free exercise of a service activity’ in Article 16(1) is inclusive of the market
access test. This raises the question of the scope of Article 16: is it the same as the scope of Article 56
TFEU? Another contentious issue following from Article 16 is that of derogations: how do you think
the formulation in Article 16 differs from the previous practice?

Consider the following question:

‘The prohibition of restrictions on free movement of services and establishment has transgressed the
rationale of discrimination’.

Critically analyse this statement with reference to case-law.

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