Friday, 4 April 2008

EU TFEU: Right of establishment

Are you interested in working as a self-employed person, setting up shop in another EU country? Do you manage an agency, a branch or a subsidiary in another member state of the European Union?

The right of establishment, also known as the freedom of establishment, is an expression of the principle of free movement within the internal market.

The EU’s Treaty of Lisbon preserves your right of establishment on equal grounds.

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In the Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) has nothing substantial to say about Article 43 of the Treaty establishing the European Community (TEC). Cf. OJ 17.12.2007 C 306/54.

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Unchanged does not mean unimportant, so we turn to the latest consolidated version of the existing treaties, in 29.12.2006 C 321 E/59:

CHAPTER 2
RIGHT OF ESTABLISHMENT

Article 43 TEC

Within the framework of the provisions set out below, 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 48, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.

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Although there are no specific amendments, there are still details to check before we now for sure how the corresponding Article of the Treaty on the Functioning of the European Union (TFEU) is going to look according to the Lisbon Treaty.

The annexed Tables of equivalences tell us that we have arrived at a new chapter: Chapter 2 ‘Right of establishment’. They also tell us that Article 43 TEC first becomes Article 43 ToL, and later will be known under the new number Article 49 TFEU (17.12.2007 C 306/208).

As always, we have to watch out for possible horizontal amendments, mentioned on OJ 17.12.2007 C 306/41 and the following pages. (Here, there seem to be none.)

We notice a referral to another Article, which means that we have to check the numbering and that the referral remains substantially correct.

In order to make it easier to read this post on a stand-alone basis, we start by indicating the location of the Article (using the Tables of equivalences, OJ 17.12.2007 C 306/207-208).

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Here is what the Article should look like, according to the Treaty of Lisbon:

Part Three ‘Policies and internal actions of the Union’

Title III (renumbered Title IV) ‘Free movement of persons, services and capital’

Chapter 2 ‘Right of establishment’

Article 43 TFEU (ToL), renumbered Article 49 TFEU

Within the framework of the provisions set out below, 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 48 [ToL, renumbered Article 54 TFEU], under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.

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In Article III-22 of the draft Treaty establishing a Constitution for Europe, the European spoke more directly to the potential entrepreneurs in the second subparagraph, without altering the substance of the provision (OJ 18.7.2003 C 169/32):

Subsection 2
Freedom of establishment

Article III-22 Draft Constitution

Within the framework of this Subsection, 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.

Nationals of a Member State shall have the right, in the territory of another Member State, 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 III-27, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, subject to the provisions of the Section relating to capital.

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The IGC 2004 took over the draft text in Article III-137 of the Treaty establishing a Constitution for Europe, with only technical adjustments (OJ 16.12.2004 C 310/61).

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Even more focused on institutional questions and economical concerning amendments without substantial impact, the IGC 2007 reverted to the current TEC text.

From a reader’s point of view it was not a ‘failed Constitution’. Only ratification failed, and as a result we lost a host of small improvements, too, ending up with two slightly less well adapted treaties than the whole one on offer a few years ago.

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This time, instead of suggesting further reading from the web, I would like to recommend turning to a textbook on the subject of freedom of establishment. An alternative in English is:

Josephine Steiner, Lorna Woods and Christian Twigg-Flesner: EU Law (Oxford University Press, Ninth Edition, 2006), pages 446 to 467.


Ralf Grahn