The Freedom to Provide Services or sometimes referred to as free movement of services along with the Freedom of Establishment form the core of the European Union's functioning. With the free movement of workers, citizens, goods and capital, they constitute fundamental rights that give companies and citizens the right to provide services without restrictions in any member country of the EU regardless of nationality and jurisdiction.
After the Second World War, the creation of the European project led to the opening of borders, especially for citizens, since these controls had been almost absent before 1914. The Treaties of Rome laid down the foundations of the four freedoms of the European Union. Initially these freedoms applied to workers, the free provision of services, and the free movement of goods; later on free movement of capital was added.
The right to provide services has proved to be increasingly important as the European economy shifts towards a more service-based economy. Today, it is estimated that the services sector represents about two-thirds of the European economy and it is responsible for 90% of the overall creation of jobs in the EU. Adding to that, the shift to a digital economy means that many things that used to be goods now become services. The Commission is well aware of that and in 2015 launched a proposal for a so-called "Digital Single Market" with the aim of bringing down barriers to unlock digital opportunities.
Legal basis
The freedom to provide services involves the elimination of discrimination on the grounds of nationality and the adoption of measures to make it easier its exercise including the harmonisation of national access rules or mutual recognition. The exercise of both freedoms applies, according to Article 54 of the TFEU, to Self-employed persons and professionals or legal who are legally operating in one Member State. It consists in the right:
carry out an economic activity in a stable and continuous basis in another EU Member State (freedom of establishment based on Article 49 TFEU); offer and provide services in other Member States on a temporary basis while remaining in their country of origin (freedom to provide services: Article 56 TFEU).
Services, nonetheless, according to settled case law, need to have an economic base, that it, a reward for what is being offered by the recipient. This concept is introduced in Grogan (C-159/90) where the court rules on the "economic nature" of the provision of services. The case concerns a company that provides free information for women in Ireland wanting to have an abortion in the UK. The court finds out that the company has no right to claim its freedom to provide services as in this case, as the case would concern "freedom to provide information". This is intrinsically linked to the lack of payment and therefore of an economic link.
Services provided by governments or public entities are called "Services of General Interest". In practice, this means services that are considered to be "essential" and therefore subject to specific public services obligations. This type of services can be divided into three categories:
Services of general economic interest: basic services that are carried out in return for payment. These services fall within the scope of application of EU law and therefore must consider Internal market and competition rules (e.g. postal services). There may be derogation to these rules if necessary to protect citizens' access to basic services. Non-economic services: services whereby recipients do not pay directly to service provider. They are not subject to European law (e.g. police, judicial authorities, army). Social services of general interest: services that accommodate the needs of vulnerable citizens being both of an economic or non-economic nature (e.g. social security schemes, employment services and social housing). In the treaties, more specifically the Treaty on the Functioning of the European Union (TFEU), the freedom to provide services is based on Articles 49–66. The main articles related to both, the right of legal and natural persons to establish themselves in another EU country and there provide services (freedom of establishment), and the right to provide cross-border services without having the need of establishing an office (freedom to provide services) can be found at:
Right of Establishment Right to Provide Services
Case-Law
Services The "freedom to provide services" under TFEU article 56 applies to people who give services "for remuneration", especially commercial or professional activity.TFEU arts 56 and 57 For example, in Van Binsbergen v Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid a Dutch lawyer moved to Belgium while advising a client in a social security case, and was told he could not continue because Dutch law said only people established in the Netherlands could give legal advice.(1974) Case 33/74 The Court of Justice held that the freedom to provide services applied, it was directly effective, and the rule was probably unjustified: having an address in the member state would be enough to pursue the legitimate aim of good administration of justice.cf Debauve (1980) Case 52/79, art 56 does not apply to 'wholly internal situations' where an activity are all in one member state. The Court of Justice has held that secondary education falls outside the scope of article 56 because usually the state funds it,Belgium v Humbel (1988) Case 263/86, but contrast Schwarz and Gootjes-Schwarz v Finanzamt Bergisch Gladbach (2007) C-76/05 but higher education does not.Wirth v Landeshauptstadt Hannover (1993) C-109/92 Health care generally counts as a service. In Geraets-Smits v Stichting Ziekenfonds Mrs Geraets-Smits claimed she should be reimbursed by Dutch social insurance for costs of receiving treatment in Germany.(2001) C-157/99, ECR I-5473 The Dutch health authorities regarded the treatment unnecessary, so she argued this restricted the freedom (of the German health clinic) to provide services. Several governments submitted that hospital services should not be regarded as economic, and should not fall within article 56. But the Court of Justice held health was a "service" even though the government (rather than the service recipient) paid for the service.(2001) C-157/99, - National authorities could be justified in refusing to reimburse patients for medical services abroad if the health care received at home was without undue delay, and it followed "international medical science" on which treatments counted as normal and necessary.(2001) C-157/99, and - The Court requires that the individual circumstances of a patient justify waiting lists, and this is also true in the context of the UK's National Health Service.See Watts v Bedford Primary Care Trust (2006) C-372/04 and Commission v Spain (2010) C-211/08 Aside from public services, another sensitive field of services are those classified as illegal. Josemans v Burgemeester van Maastricht held that the Netherlands' regulation of cannabis consumption, including the prohibitions by some municipalities on tourists (but not Dutch nationals) going to coffee shops,(2010) C‑137/09, I-13019 fell outside article 56 altogether. The Court of Justice reasoned that narcotic drugs were controlled in all member states, and so this differed from other cases where prostitution or other quasi-legal activity was subject to restriction.
If an activity does fall within article 56, a restriction can be justified under article 52, or by overriding requirements developed by the Court of Justice. In Alpine Investments BV v Minister van Financiën(1995) C-384/93, ECR I-1141 a business that sold commodities futures (with Merrill Lynch and another banking firms) attempted to challenge a Dutch law that prohibiting cold calling customers. The Court of Justice held the Dutch prohibition pursued a legitimate aim to prevent "undesirable developments in securities trading" including protecting the consumer from aggressive sales tactics, thus maintaining confidence in the Dutch markets. In Omega Spielhallen GmbH v Bonn(2004) C-36/02, ECR I-9609 a "laserdrome" business was banned by the Bonn council. It bought fake laser gun services from a UK firm called Pulsar Ltd, but residents had protested against "playing at killing" entertainment. The Court of Justice held that the German constitutional value of human dignity, which underpinned the ban, did count as a justified restriction on freedom to provide services. In Liga Portuguesa de Futebol v Santa Casa da Misericórdia de Lisboa the Court of Justice also held that the state monopoly on gambling, and a penalty for a Gibraltar firm that had sold internet gambling services, was justified to prevent fraud and gambling where people's views were highly divergent.(2009) C‑42/07, ECR I-7633 The ban was proportionate as this was an appropriate and necessary way to tackle the serious problems of fraud that arise over the internet. In the Services Directive a group of justifications were codified in article 16, which the case law has developed.2006/123/EC
Other important cases related to specific issues are:
C-263/86 Humber ed Edel Secondary education – This case is particularly relevant as the court rules on the essential characteristic of remuneration. It considers that it lies in the fact that it constitutes consideration for the service in question. It is absent in the case of courses provided under the national education system because, first of all, the State, in establishing an maintaining such a system, is not seeking to engage in gainful activity but is fulfilling its duties towards its own population in the social, cultural and educational fields and. Secondly, the system in question is funded from the public purse and not by pupils or their parents. C-157/99 Smits and Peerborns Health Care - The Court said here that health care is a service. For the purposes of Article 57 the essential characteristic of remuneration lies in the fact that it constitutes consideration for the service in question. In the present cases, the payments made by the sickness insurance funds under the contractual arrangements, albeit set at a flat rate, are indeed the consideration for the hospital services and unquestionably represent remuneration for the hospital which receives them and which is engaged in an activity of an economic character. Van Binsberger 33/74 – In this case, Mr. Kortman is a Dutch national that provides representation services in court proceedings where the representation by a lawyer is not mandatory. Mr. Van Binsbergen hired Mr Kortmann and subsequently he moves to Belgium. The main point of tension in this case is that Dutch legislation imposes that representation services must be carried out by residents in the Netherlands, meaning that Mr. Kortmann is unable to exercise his profession. In this case, the Court finds that it is a discriminatory measure because it treats less favourably residents from other countries to the extent that it blocks their ability to provide services in the Netherlands. The normal outcome in such cases is that the Court rules for the "setting aside" of such measures as no acceptable justification is provided under those foreseen in the treaties after assessing the proportionality and the necessity os the justification.
Establishment