National and Kapodistrian University of Athens Law school European Law MARKET FREEDOMS II Smaragda Rigakou rigakou.law@gmail.com
Free Movement of Capital a.63-66 TFEU: All restrictions on the movement of capital between MS and between MS and third countries shall be prohibited. WHATEVER IMPEDES CAPITAL MOVEMENT, EVEN NOT DISCRIMINATORY Prohibited by a. 63 TFEU 11/12/2014 Market Freedoms, Smaragda Rigakou 2
Free Movement of Capital Directive 88/361: Non-exhaustive list of restrictions on the free movement of capital: prohibition on the creation of a mortgage in a foreign country; restrictions on share dealings and golden shares; restriction on the acquisition and disposal of property; prior administrative authorization for investments in property; measures that dissuade residences from obtaining loans or making investments in other MS; etc. 11/12/2014 Market Freedoms, Smaragda Rigakou 3
Free Movement of Capital Maastricht Treaty completely revised the provisions on free movement of capital, with effect from 1 st January 1994. Direct Taxation (e.g. income tax): within MS competence. MS can impose taxes However, the MS must exercise such competence constituently with the EU law and avoid discrimination on grounds of nationality 11/12/2014 Market Freedoms, Smaragda Rigakou 4
Free Movement of Capital Exceptions a.65 (1) TFEU: MS may apply tax provisions that distinguish between tax-payers who are not in the same position with regard to their place of residence or with regard to the place where their capital is invested This cannot lead to arbitrary discrimination or disguised restrictions. ECJ: If residents and not residents are in a comparable position Any different taxation is discriminatory 11/12/2014 Market Freedoms, Smaragda Rigakou 5
Free Movement of Capital Exceptions a.65 (2) TFEU: MS may adopt prerequisite measures: to prevent infringements of national law and regulations, in particular in the field of taxation; for prudential supervision of financial institutions; regarding declarations of capital movements; justified by public policy and public security. 11/12/2014 Market Freedoms, Smaragda Rigakou 6
Free Movement of Capital Exceptions Grounds of overriding public interest ECJ open ended list Burden of proof on the MS Narrowly interpreted Proportionality test General presumption of tax evasion could not justify a measure compromising a Treaty Article 11/12/2014 Market Freedoms, Smaragda Rigakou 7
Free Movement of Capital Relevant case law: C-35/08, Verkooijern: income tax exception/tax evasion reasons/purely economical-> not accepted by the ECJ C-54/99, Scientology International: prior authorization for capital investments/public policy/accepted C-503/99, Commission v Belgium: golden share in gas & electricity companies/public security/accepted 11/12/2014 Market Freedoms, Smaragda Rigakou 8
Free Movement of Workers Free movement of persons: employed persons (workers) self- employed (establishment) Economical dimension: labour as factor of production optimal allocation of resources maximize value of labour Social dimension: Equality of treatment/ European solidarity an ever closer Union of the peoples of Union, integration of peoples of Europe 11/12/2014 Market Freedoms, Smaragda Rigakou 9
Free Movement of Workers 45 TFEU: Freedom of movement of workers should be secured within the Union. Abolition of any discrimination based on nationality regarding employment, remuneration and rest working conditions Vertical and Horizontal Effect: The above obligations apply both to the MS and private actors (Case C-281/98, Angonese) 11/12/2014 Market Freedoms, Smaragda Rigakou 10
Free Movement of Workers Rights (subject to public policy, public security or public health limitations): - To accept offers of employment actually made - To move freely with the territory of MS - To stay in a MS for the purpose of employment - To remain in the MS after having be employed The above rights shall not apply to employment in public service. 11/12/2014 Market Freedoms, Smaragda Rigakou 11
Free Movement of Workers Definition of worker: Any person who pursues employment & activities which are effective and genuine, to the exclusion of activities on such a small scale to be regarded as purely marginal and ancillary Rela onship of subordina on ( self-employment) Fundamental to the EU Broadly interpreted Means towards the creation of internal market Right of worker to raise his/her standard of living 11/12/2014 Market Freedoms, Smaragda Rigakou 12
Free Movement of Workers Part- time workers? Trainees? Objective criteria: services of economic value; under the directions of another person; remuneration. ECJ: does not accept the argument re abuse of rights. 11/12/2014 Market Freedoms, Smaragda Rigakou 13
Free Movement of Workers Job seekers? Actively seeking work not workers but covered under the protective scope of a. 45 TFEU. ECJ s purposive approach wider scope Rights enumerated in 45TFEU- not exhaustive The ECJ interprets and adopts the scope of 45 TFEU in accordance with the EU s changing social, economic and political climate ECJ ruled that Mr. Ioannidis (Case C-285/04 ) was entitled to tideover allowance in Belgium for transition from education to the employment market 11/12/2014 Market Freedoms, Smaragda Rigakou 14
Free Movement of Workers Discrimination: - Direct - Indirect: Conditions of eligibility --> if more easily satisfied by nationals, when intrinsically liable to affect migrant workers e.g. military time in the MS linguistic knowledge double-burden regulatory requirements (certifications) Access to employment market - by state of origin - state of destination 11/12/2014 Market Freedoms, Smaragda Rigakou 15
Free Movement of Workers Wholly internal situations/reverse discrimination No connecting factor to the EU law National workers cannot claim rights in their MS EU protection when employed and resided in another MS and under discrimination when returning to home MS Art. 21 TFEU freedom of movement conferred to all European citizens! 11/12/2014 Market Freedoms, Smaragda Rigakou 16
Free Movement of Workers Defenses-Exemptions NO acceptance of justifications based purely on economic grounds, e.g. technical difficulties for tax collection Limitations on grounds of public policy, public security or public health Public service exception: Derogation confined to restricting admission to non-nationals into the public service does not permit discrimination in conditions/measures once they are admitted Armed forces, police, judiciary/tax authorities: Exercise power conferred by public law and safeguard the general interest of the MS functional approach/purposive interpretation not nurses, teachers etc 11/12/2014 Market Freedoms, Smaragda Rigakou 17
Free Movement of Workers Directive 2004/38 Directive 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States Right of entry; residence up to 3 months (unconditional); residence for workers and their families; the right of permanent residence to EU citizens and their families who have resided lawfully for a continuous period of 5 years in the host MS; condition of exercise: equal treatment; family members, registered relationships, durable relationships. Regulation 1612/68: free movement of workers substantive & social rights Political discomfort in the sensitive area of migration Tensions with MS Case C-127/08, Metock: Abolition of obstacles to the free movement of persons 11/12/2014 Market Freedoms, Smaragda Rigakou 18
Freedom of Establishment & Freedom to Provide Services Two freedoms on self employed persons (legal/physical) who move on a permanent [establishment] or temporary basis [services] between MS Treaty: a.49-54 TFEU & 56-62 TFEU Case law Secondary legislation: Insurance, Financial services, Electronic Commerce, Telecommunications, Broadcasting, GEI services (sector specific legislation for both freedoms) Recognition of professional qualifications (means for the enjoyment of the rights) Services directive 11/12/2014 Market Freedoms, Smaragda Rigakou 23
Freedom of Establishment & Freedom to Provide Services a.49-54 TFEU: Establishment => Actual pursuit of an economic activity through a fix establishment in another MS for an indefinite period. a.56-62 TFEU: Services => Cross-border element -Provider is not in the MS where the service is provided, or - recipient has traveled to receive services in another MS, or - none moving, but service by telecommunication/electronically 11/12/2014 Market Freedoms, Smaragda Rigakou 24
Freedom of Establishment & Freedom to Provide Services The Treaty provisions governing free movement of services are residual, in that they apply only insofar as the provisions concerning capital, persons or goods do not apply. When issues concern goods and when services? Cases: 155/73 Sacchi, C-390/99 Canal Satélite C-405/98 Gourmet, C-97/98 Jägerkiöld Several freedoms often affected by a single national measure Cases: C-150/04 Commision v Denmark C-522/04 Commision v Belgium 11/12/2014 Market Freedoms, Smaragda Rigakou 25
Freedom of Establishment & Freedom to Provide Services Like the other freedoms non-discriminatory measures are also caught public policy, security, health, range of public-interest justifications Principle of equal treatment - in employed capacity (workers) - in an self-employed capacity (services/ establishment) Workers v. temporary service providers, Case C-49/98 Establishment v. services, Case C-55/94, Gebhard 11/12/2014 Market Freedoms, Smaragda Rigakou 26
Freedom of Establishment & Freedom to Provide Services Temporary provision of services v sufficiently connected with establishment Pursue activity on temporary basis Activity carried-on on stable & continuous basis Periodicity, continuity, regularity => duration Irrespective of equipment, sort of infrastructure, office, chambers, consulting room. 11/12/2014 Market Freedoms, Smaragda Rigakou 23
Freedom of Establishment & Freedom to Provide Services Application of the relevant articles to private parties / trade unions not only for state measures Collective nature of private power Viking and Laval 51TFEU: Official authority exemption narrowly interpreted power of coercion over citizens public service derogation for workers 52&62TFEU: Public policy / public security /public health exemptions Services Directive for companies Directive 2004/32 for natural persons 11/12/2014 Market Freedoms, Smaragda Rigakou 28
Right of Establishment 49 TFEU: Restrictions on the freedom of establishment shall be prohibited Establishment : agencies, branches, subsidiaries, self-employed persons & understandings Treaty under the same conditions laid down for nationals prohibition of discrimination ECJ wider application any unjustified obstacles even non discriminatory could hinder the freedom of establishment 11/12/2014 Market Freedoms, Smaragda Rigakou 25
Right of Establishment SCOPE of 49 TFEU: Non-discriminatory restrictions equal treatment & access to market Same Principles that underpin all Treaty Provisions e.g. certain indistinctly applicable national rules on socialsecurity exemptions for the self-employed Opening of professions (esp. legal profession) Equivalence to the corresponding national qualifications* * Case 340/89, Vlassopoulou: a.49 TFEU imposes a precise obligation on national authorities to examine qualifications, compare to knowledge and skills 11/12/2014 Market Freedoms, Smaragda Rigakou 26
Companies Right of Establishment Public or private law legal persons non-profit excluded (as non remunerated worker and non-remuneration of services) - Formed in accordance with MS laws - Registered office in MS established in MS - Principle place of business in EU * Right of (secondary) establishment ONLY IF Principal place of business + within EU Central / Registered office 11/12/2014 Market Freedoms, Smaragda Rigakou 27
Right of Establishment Restrictions Case C-55/94,Gebhard: National measures that hinder or make less attractive the exercise of the fundamental freedoms 4 conditions for the ECJ to accept such measures: Applied in a non-discriminatory manner Justified by imperative requirements of general interest Suitable for securing the attainment of the objective which they pursue Proportionate: not go beyond what is necessary in order to attain it 11/12/2014 Market Freedoms, Smaragda Rigakou 28
Right of Establishment Restrictions If sufficient hindrance mandatory impera ve requirements If discriminatory (directly or deliberately) only 52 TFEU as exception Taxation Rules (e.g. preventing tax avoidance/ double benefits) Corporate seat (just like residence) o connecting factor with certain legal systems o may justify differential tax treatment Reverse discrimination / wholly internal situations Na onals against own MS if they wish to leave or when acquiring qualifications having taken advantage of the right of movement But If they have never exercised EU freedom to move disadvantaged by comparison with other EU nationals 11/12/2014 Market Freedoms, Smaragda Rigakou 29
Right of Establishment Restrictions Case C-438/05, Viking: vessel under Finish flag Finnish union collec ve ac ons to refrain from entering in nego a ons ECJ: MS still free to lay down condition in areas which fall outside the scope of EU competence but when exercising that competence, the MS must nevertheless comply with EU law (maneuvre) Right to strike Fundamental right which forms integral part of the general principles of EU law > They may be subject to restric ons since they are protected in accordance with EU law > Such rights must be reconciled with the requirements relating to rights protected under the Treaty and in accordance with the principle of proportionality 11/12/2014 Market Freedoms, Smaragda Rigakou 30
Right of Establishment Although fundamental nature does not render inapplicable art. 49 TFEU and the freedom Right to strike Fundamental right which forms integral part of the general principles of EU law > They may be subject to restric ons since they are protected in accordance with EU law > Such rights must be reconciled with the requirements relating to rights protected under the Treaty and in accordance with the principle of proportionality Although of fundamental nature the social right does not render inapplicable art. 49 TFEU and the relevant freedom 11/12/2014 Market Freedoms, Smaragda Rigakou 31
Free Movement of Services If permanent establishment in the host MS not freedom of services > nature of economic ac vi es difficult to dis nguish e.g. construction services might take years Abuse / evasion theory Persons who direct most or all of their services at the territory of a particular MS, but maintain their place of establishment outside that MS in order to evade professional rules > may be treated as established in host MS not covered by 56TFEUbut by 49TFEU. * The person shall have an establishment (=a permanent economic base) within the EU! 11/12/2014 Market Freedoms, Smaragda Rigakou 32
Free Movement of Services Residual the Treaty Articles on free movement of services apply only insofar as the provisions concerning capital, persons or goods do not apply Banking & Insurance services connected with capital movement capital To be dealt in line with Treaty provisions on movement of 11/12/2014 Market Freedoms, Smaragda Rigakou 33
Free Movement of Services Scope 1. Inter-state element (provider / recipient / cross-border) 2. Freedom to receiveservices as well (tourists, medical treatment, education business) 3. Commercial nature of services =provided for remuneration (not necessarily from the recipient). Distinction between publicly v. privately remunerated services 4. Illegal activities (e.g. Abortion, gambling, prostitution, marketing of cannabis) > If the economic ac vity lawful in some/one MS remunerated ac vity it cons tutes a service within 56 TFEU However, the MS Free to regulate and restrict such services > propor onately and without discrimina on (to be treated as excep on) 11/12/2014 Market Freedoms, Smaragda Rigakou 34
Free Movement of Services Justifying Restrictions Goods mandatory requirements Services Impera ve requirements [generic item: objec ve jus fica ons] - legitimate public interest compatible with EU aims [not if purely economic aim] - applied without discrimination -proportionate: suitable/appropriate for achieving aims, least restrictive means - applied in a consistent manner (esp. in gambling cases ) Propor onality / necessity double burden 11/12/2014 Market Freedoms, Smaragda Rigakou 35
Free Movement of Services Justifying Restrictions Non-discriminatory restrictions Case C-384/93, Alpine Investments: affect access to the market Not only discrimina on/protec onism single EU market Impediment of inter-state market In principle caught by EU law Advocate General Jacobs > Services should be treated by analogy with goods > Mutual recogni on: if undertaking complies with MS legisla on may provide services in another MS unless jus fied restrictions 11/12/2014 Market Freedoms, Smaragda Rigakou 36
Case Study Mr. Gebhard is a German national and authorized to practise as Rechtsanwahlt, i.e. a German lawyer. He resides in Italy, income taxed in Italy and professional activity in Italy the last 10 years. The Milan Bar Council prohibited him to use the title avvocato. He applied to be a member of the Bar based on a Directive about the recognition of higher education diplomas and 10 years practice in Italy. The Milan Bar Council imposed the sanction of suspension from pursuing his professional activity. Mr Gebhard appealed against the decision. National Courts referred preliminary questions to the ECJ. Mr Gebhard argues that he is entitled to the freedom to provide services in Italy. The Milan Bar Council argues that he has office in Milan, which is a fix establishment, but cannot enjoy the right of establishment since he is not a member of the Bar. Such a situation of a EU national who moves to pursue activity is governed by the free movement of workers, the right of establishment or the freedom to provide services? What should ECJ s ruling be? 11/12/2014 Market Freedoms, Smaragda Rigakou 37