FREEDOM OF ESTABLISHMENT

Definition: According to the Treaty, the Principle of Establishment can be defined as:

- the right
- of European companies and Nationals
- to move within the EU borders
- without limitations in order to establish business activities
- from a MS to another

Right of Establishment is the fundamental freedom:

- too carry on an economic activity

- in a stable and continuous way
- in another MS

The Primary Freedom of Establishment is the right :

- to form a company in accordance with the law of another MS;

- or to transfer the entire company in another MS incorporating the company under the law of
the receiving State .

It is granted to apply only the law of the MS where it decides:

-to set up new company under law of a MS different from that Origin;

- to transfer the company ceasing t exist in the previous MS.

Consequence: Companies do not exist as entity for the MS of Origin.

Secondary Right of Establishment:

Companies already formed in accordance with the law of a MS may set up:

-agencies

-branches

-subsidiaries

in another MS but they will remain existing companies incorporated under the law of the MS of
Origin.

The Secondary Right is the right to keep companies in the Original MS and to enter another MS’s
market by setting up agencies, branches or subsidiaries.

According to art. 49 and 54 of Treaty, , the Freedom of Establishment can be defined as:

- the right
- both for nationals of a MS
- and for companies or firms
 formed in accordance with the law of a MS
 and having within the Community
 their registered office
 or central administration
 or principal place of business
- to establish or carry on
- permanently
- an economic
- independent
- activity of entrepreneurial
- in a MS different form the one of the Origin
- under the same conditions in the MS of Origin and in the country where such establishment is
effected

Exception of Freedom of Establishment can be granted

The reason of this exception must concern:

Public Policy- the body of all legal rules that are necessary for a functioning of a democratic society
and a state of law.

Public Security- to cover both internal and external security along the line of preserving the integrity
of territory of a MS

Public Health

Limitation must comply with 4 requirements at the same time: Restrictions must be:

1. Non-discriminatory (applied for both nationals and foreigners)

2. Justified by an overriding reason
3. Suitable for achieving the objectives (goals)
4. Proportionate to what is necessary to achieve the scope.