The difference between Establishment and Services

The free establishment and services fall under the article 49-54 TFEU.

TFEU: – Treaty of Founding of the European Union, signed in March 25ht, 1957

  • The Free Establishment means when you set up a business or a company in another Member State and you are permanent there. This law falls under the
  • Article 49-54 TFEU
  • Permanent. Treaty of Founding of the European Union, signed in March 25ht, 1957
  • Services: when you provide your service in another MES and after the service is ended, are back to your country. This falls under the Article 56-62 of the TFEU
  • Temporary

This is called temporary and falls under the services.

Here the Article 49 has important points, which defines the types of Estaablishments.

Article 49 (1): Is, when you already have established a Company or a Business in one of the MES,  and now you are extending it and opening the branch in another MES.

This is called Secondary establishment.  

Article 49(1) Primary and secondary Establishment,


the Article 49(2) is about prohibition of unequal treatment.

According to Article 49 (1), any discriminatory measures are prohibited.

The discrimination between the resident of the poarticular MES over the resident from another MES is prohibited.

Article 49 (2)

Prohibits unequal treatment

Freedom of establishment would be Directly Effective,

Directly effective, Reyners (1974)

Meaning: The Individual or the Company wil be able to bring the case to the State.

  • Equivalent qualifications Interpreted broadly:

Meaning: If you have a qualification of implementing activity in your member state, you have right to do the same activity in another Member state.

This is also falling under Directive Effect.

Dirrective Effect is focused on harmonization of the qualifications across the whole EU.

Article 49 (2) has been broadened beyond discrimination to unjustified restrictions: (Gebhard 1995)

  • National measures liable to hinder or make less attrative those exercise of fundamental freedom “Must fulfill four conditions:

Meaning: If you want to restrict fredom of establishment, you must meet the 4 severe following

1.Non -descriminatory,


3. Must be focused on attainment of the particular objective,

4. They must not go beyond what is neessary to achieve that objective conditions, in order that restriction to apply to the EU Court of Justice:

  1. They must be aopied in a NON-DISCRIMINATORY manners.
  2. They must be JUSTIFIED by imperative requirements in the general interest.
  3. They must suitable for ATTAINMENT OF THE OBJECTIVE which they pursue.
  4. They must NOT GO BEYOND what is necessary in order to attain it.

A person can rely om ARTICLE 49, with respect to their own MES, where they have exercised any profession, and can return to own MES, to apply that profession.


  • Knoor (1979)

A dutch man, who went to Belgium to exercise a profession and return to the Netherlands, to apply it. As a result, he received a result of Discriinatory Measure. Here, he brought the case under the Article 49, and despite being a dutch by nationality, he went against Dutch authorities.

Article 54.

Free establishment of the Companies

This article states that Companies should be treated the same way as the Individuals, in terms of Fre establishment (Article 49)., as the companies have Legal personalities.

But here another questions:

The Companies have different rules in different MES.

  • Article 54 – Companies should be treated in the same way as individuals.
  • Difficult as Company Law varies from State to State, but the ECJ has pushed on based on the overall objective of the Article.

Centros (1999)

The ECJ had to deal with this variation and pushed a statement, that as it is focused on the objective of the freedom of establishment and basically trying to distinguish some of the distinctions between the different countries.

In 1999 the case between the UK and Danish Companies.

In the UK you could set a company by 1 pound and in Den Mark with thousands.

In 1999 Centros established the Company in the UK and carried out secondary establishment company back to Den Mark. (Article 49 (1), Primary and seocndary establishment under article 49 Free establishment). The Court of Justice allowed this.

 – Obstacles:

Once the company is set in one of the MES, the company has right to set the conditions for incoorporation and the related rules.

When you register the company in the Member State, that State has right to set an dictate the rules and conditions for incooperation and related rules and lawas.

A very sound example was the

  • Daily Mail in 1988

Daily Mail is a British Newspaper and in 1988 they tried to move

Their establishment over to the Netherlands and avoid taxes.

However, the part of the British Law on establishment set the rules that before leaving, they have to pay TAX to the TREASURY.

The case went to the court, after they refused to pay.

The court stated:

Once you are established in the UK, or in another Member State, you have to abide by those rules. Meaning: Before you leave the UK, you would have to pay your TAX BILL.

Freedom of Establishment and Services
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The opinions on this blog are of the authors themselves and do not necessarily represent the opinions or policies of ELfR.

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