International Business Law

The EU is a common market not only for goods but also for services and (as discussed later in the chapter) labor. In comparison with GATS, the Treaty Establishing the European Community (EC Treaty), and the Lisbon Treaty of 2010 are the principal source of law in the EU, and create a much more open and liberal market for services (and business in general) between and among its member states. The EC Treaty provides that, within the EU, “restrictions on the freedom to provide services”56 and “restrictions on the freedom of establishment”57 are to be progressively abolished. In essence, service suppliers and entrepreneurs have consistently acquired (as the EU integrates and EU law evolves) greater rights to do business in all EU member states.

The EU freedom to provide services relates to economic activities carried out on a temporary or nonpermanent basis. It applies, for example, when a Danish firm of consultants advises businesses in Greece or an Italian construction company erects a building in Spain.

The EU right of establishment authorizes a natural person or a company to settle permanently in a member state and carry on a business.58 It includes the right to set up and carry on a business both as an individual and as an employer.59

Concern has been expressed that some cases fall between the scope of both of these guarantees.60 An example would be a British camera crew filming scenes in France and Germany. Because the crew is neither establishing itself nor providing or receiving services, neither of the two guarantees fits exactly. However, in several cases, the European Court of Justice has read the two provisions together and hinted that it regards them as part of a general right of a self-employed person to pursue activities throughout the EU regardless of the location of his principal office or the kind of economic endeavor in which he is involved.61

To ensure that the right of establishment and the freedom to provide services are meaningful guarantees, the EC Treaty declares that the self-employed and the employees of service suppliers are entitled to travel freely within the member states of the EU and to carry on their activities free from discrimination.62 In order to “create a real internal services market by 2010” the EU enacted the so-called Services Directive in 2006 (Directive 2006/123/EC). This legislation aims to “facilitate freedom of establishment for providers in other Member States and the freedom of provision of services between Member States.” The directive (which was required to be implemented by all members by December 29, 2009) was intended to “increase the choice offered to recipients and improve the quality of services both for consumers and businesses using these services.”

As often happens, all EU nations did not meet the deadline for enacting legislation implementing the directive. In June 2010, the EU Commission sent a message to all the EU nations that had not at that time passed appropriate legislation, warning them of further action if the law was not enacted soon.63 Since that time several nations have enacted such legislation. However, in late October 2011, the EU Commission initiated legal proceedings in the EU Court of Justice against Germany, Austria, and Greece and asked the Court to impose significant monetary penalties on these Member States, on the ground that they have so far only partially “transposed” (implemented) the Services Directive (2006/123/EC). This is the first time that the EU has used the new powers created by the Lisbon Treaty to request the Court, as soon as a case is referred, to impose daily penalty payments on Member States that have not fully transposed the Directive within the appropriate time. The penalty payments requested of the Court are €44,876.16 for Austria, €141,362.55 for Germany, and €51,200.10 for Greece. These penalties have been set taking into account the different situations in the Member States and accordingly the seriousness of the infringements.64

The EU Commission stated that services constitute 70% of the European economy. But unjustified or disproportionate administrative requirements are still putting a major brake on the development of service activities. The 2006 Services Directive, which covers a large variety of economic activities—such as retail, construction services, tourism services, and the services of many regulated professions—applies to most, but not all, services provided for economic return,65 and requires EU members to examine and simplify the procedures required to access and exercise a service activity and to provide a single point of contact where a provider can complete all necessary formalities, perhaps using online methods. The directive also requires members to remove legal and administrative barriers to the development of service activities to ensure nondiscrimination.

Each nation still maintains a large body of its own labor and employments laws and regulations, which are legal and enforceable as long as they do not discriminate against foreign workers. An example of certain French laws applying to employment is given below