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15th May 2008

NEWS IN BRIEF

Articles 43 and 49

The freedom of establishment, set out in Article 43 of the EC Treaty and the freedom to provide cross border services, set out in Article 49, are two of the “fundamental freedoms” (according to the European Commission) which are central to the effective functioning of the EU internal market.

The principle of freedom of establishment allows an economic operator (whether a person or a company) to carry on an economic activity in a stable and continuous way in one or more member states. The principle of the freedom to provide services enables an economic operator providing services in one member state to offer services on a temporary basis in another member state, without having to be “established”.

These provisions have direct effect, meaning that member states must modify national laws that restrict freedom of establishment, or the freedom to provide services, and are therefore incompatible with these principles. This includes not only discriminatory national rules, but also any national rules which are applicable to domestic and foreign operators but which hinder the exercise of these "fundamental freedoms", in particular if they result in delays or additional costs.

In these cases, member states are only allowed to maintain such restrictions in specific circumstances where these are justified by overriding reasons of general interest, for instance on grounds of public policy, public security or public health and where they are “proportionate”.