It is as per the basic principle of freedom of establishment and the same also has a basis in Articles 49-55 of the TFEU. For a clearer understanding of the concepts of freedom of establishment for nationals of particular state trying to setup up business in another member’s state, relevant facts of Article 49 and Article 54 should be looked at. To better understand the freedom of establishment, Article 49 and Article 54 tend to be read together. As per Article 49 restricting the freedom of establishment to nationals of a Member State in the region of another Member State is prohibited. Freedom of establishment includes the right to pursue and take up activities on a self employed basis and also to manage and create undertakings, especially firms or companies within the meaning of the second paragraph of Article 54. The second paragraph defines 'firms or companies' as ‘firms or companies constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making.’ The right of establishment, therefore, is granted both to natural and legal persons; this is clearly illustrated in Sodemare v Regione Lombardia.1 Sodemare was a company based in Luxembourg and it mainly provided sheltered accommodation for elderly residents. This company was refused approval to enter into contracts with public authorities in the place called Lombardy in Italy; the contracts would have enabled Sodemare to carry on its business and get paid or reimbursed for some of the health care services it provided. The reason for refusal was that as per Lombard law such contracts could only be entered and were available to non profit making bodies. This was challenged by Sodemare who claimed that it violated Article 49 because it affected its ability to run business in Italy.2 The ruling was in favour of Sodemare and this judgement 3 was very important from the point of view of freedom of establishment.
As regards to Article 52 of the Treaty, which is to be referred together with Article 58 thereof, it must be noted that the right of establishment with which these provisions are concerned is granted both to natural persons who are nationals of a Member State of the Community and to legal persons within the meaning of Article 58. Subject to the exceptions and conditions laid down, it allows all types of self-employed activity to be taken up and pursued on the territory of any other Member State, undertakings to be formed and operated and agencies, branches or subsidiaries to be set up.
The teeth of this principle is that natural persons, who are nationals of a Member State, and Community companies may take up economic activity in any Member State in a stable and continuous way and cannot be discriminated against based on nationality (Article 49 TFEU) or the mode of incorporation (Article 49 and Article 54 TFEU).
Freedom to Provide Services
The ECJ noted in that respect that the "it is therefore not necessary to consider whether the foundation acts as a service provider". Despite the supplementing character, the freedom to provide services is required as another distinct freedom because the cross border provision of services may be effected without any actual goods being physically moved, without (secondary) establishment and without relocation of any capital across the border. Although Article 50(1) EC defines 'services' as services not being governed by the provisions relating to freedom of movement of capital, goods and persons, it does not establish any particular order of priority between the freedom to provide services and the other fundamental freedoms. The provision of services applies in the case of a "temporary pursue of the activity". The temporary nature of the provision of services does, however, not exclude the service provider to "equip himself with some form of infrastructure in the host Member State…