European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

In application of the principle of mutual recognition, the Member States must allow the pursuit on their territory, either by the establishment of a branch  or by way of the provision of service by an authorized financial institution from another Member State, of the activities listed in Annex 1 provided that such activities are covered by the authorization (Article 33 of Directive No 2013/36). Fr …

Freedom of establishment and freedom to provide services

In application of the principle of mutual recognition, the Member States must allow the pursuit on their territory, either by the establishment of a branch  or by way of the provision of service by an authorized financial institution from another Member State, of the activities listed in Annex 1 provided that such activities are covered by the authorization (Article 33 of Directive No 2013/36). Freedom of establishment or freedom to provide services also apply to the financial institutions from another Member State, whether a subsidiary of a credit institution or the jointly-owned subsidiary of several credit institutions (Art. 34) .

A credit institution wishing to establish a branch within the territory of another Member State must notify the competent authorities of its home Member State and is obligated to include certain obligatory with such notification (Art. 35) . The competent authorities of the home Member State must communicate that information to the competent authorities of the host Member State . The principle of mutual recognition does not, however, divest the host Member State of all its powers in respect of credit institutions setting up branches on its territory. Thus, before the branch of a credit institution commences its activities and within two months of receiving the information provided with the notification of establishment, the competent authorities of the host Member State put in place measures of complementary supervision of the credit institution  and set forth, where appropriate, requirements relative to the pursuit of certain activities they have adopted in the interests of the general good . Establishment may be effective and the branch may commence its activities on receipt of a communication from the supervisory authorities of the host Member State or, in the absence of such communication, on expiry of the two-month period.

The exercise of the freedom to provide services by a credit institution on the territory of another Member State is subject to a reduced formality procedure; the credit institution merely has to notify the competent authorities of the home Member State of the activities it intends to carry on. That notification is sent to the competent authorities of the host Member State within one month of its receipt (Art. 39). Before the principle of mutual recognition was established by the second Directive, the Court of Justice had set out the conditions for the exercise of the freedom to provide services . Thus, where the rules of a Member State require a credit institution already authorized in another Member State to obtain an authorization in order to be able to grant a mortgage loan to a person resident within its territory, this constitutes a restriction to the freedom to provide services, unless that authorization is required of every person or company pursuing such an activity within the territory of that Member State, or is justified on grounds of public interest, such as consumer protection and is objectively necessary to protect the interests which those rules are intended to safeguard . Acknowledging the European court's position, the French courts overturned the case law and found that credit institutions located in other Member States wishing to pursue their mortgage loan activity on their territory according to the rules on provision of services required authorization, if authorization is required for all persons carrying out that activity in the territory in question. Enshrining the principle of the freedom to provide services, the French Court of Cassation in plenary session, adopted the reasoning of the Court of Justice in its judgment of 9 July 2007 and confirmed that the requirement of authorization means that an undertaking which is merely a service provider must be established on the territory of the Member State on which the service is provided and thus constitutes a violation of the freedom to provides services. Such a restriction goes beyond what is objectively necessary to achieve the aim pursued, when in its Member State of origin, the credit institution service provider is subject to prudential rules and to control by a supervisory authority, which itself is bound by a duty to cooperate with those of other Member States .

Freedom of establishment only concerns branches and does not extend to subsidiaries, which, because they have a legal personality, must be authorized in the Member State where their head office is established.

Article 3(I)(22) refers to Article 4(1)(26) of Regulation No 575/2013, in defining “financial institution” as an undertaking other than an institution, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive No 2013/36, including a financial holding company, a mixed financial holding company, a payment institution within the meaning of Directive No 2007/64 and an asset management company, but excluding insurance holding  companies and mixed-activity insurance holding companies as defined in point (g) of Article 212(1) of Directive No 2009/138. This concept does not include undertakings whose activity consists in acquiring shareholdings in companies which do not operate in the financial sector:  Case C-207/22 Concessões de Transportes SGPS SA, Judgment of 26 October 2023, LawLex202400004490JBJ.

Information which must be provided with the notification is: the Member State within the territory of which it plans to establish a branch, a programme of operations setting out, inter alia, the types of business envisaged and the structural organization of the branch, the address in the host Member State from which documents may be obtained and the names of those to be responsible for the management of the branch.

Reasons must be given for refusal by the competent authorities of the home Member State of origin to communicate such information to the competent authorities of the host Member State and that refusal is subject to a right to apply for judicial remedy.

Article 40 et seq. of the directive set out the powers of the host Member State: requirement of provision of periodic reports or the same information as those required of national credit institutions (Art. 40), competent authorities of the home Member State to take all appropriate measures to ensure that the credit institution concerned remedies its non-compliance or takes measures to avert the risk of non-compliance  with the directive (Art. 41), possibility of taking precuationary measures (Art. 43), possibility of preventing offending credit institutions from initiating further transactions within their territories (Art. 44). 

See Case C-442/02 CaixaBank France [2004] ECR I-8961, LawLex200900000834JBJ: finding that the public interest justification based on the protection of consumers against the increase in the cost of basic banking services could not justify the rule by a Member State prohibiting credit institutions which are subsidiaries of foreign companies from remunerating sight accounts in euros, where there is an option for consumers to choose between an unremunerated account and a remunerated account with higher charges according to the cost of services; See also for the consequences of that judgment, Cons. d'Ét., 23 February 2005, Caixa Bank France.

Case C-222/95 SCI Parodi v Banque de Bary [1997] ECR I-3899, LawLex200900001290JBJ.

Court of Cassation, 4 March 2005, JCP E, 2005, 690, D., 2005, AJ 836; See also Court of Cassation, 22 November 2005; CA Paris, 14 June 2000; 26 April 2007.

European Business Law

118. Freedom of establishment and freedom to provide services

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

118. Freedom of establishment and freedom to provide services

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise