Action brought on 23 March 2007 — Commission of the European Communities v Republic of Austria

(Case C-161/07)

(2007/C 140/16)

Language of the case: German

Parties

Applicant: Commission of the European Communities (represented by E. Traversa and G. Braun, acting as Agents)

Defendant: Republic of Austria

Form of order sought

Pleas in law and main arguments

The first paragraph of Article 43 guarantees all nationals of a Member State the right of establishment in another Member State in order to take up and pursue activities there as self-employed persons, and to set up companies and manage undertakings in another Member State. As an expression of the general prohibition of discrimination in Article 12 EC, Article 43 EC prohibits discrimination on grounds of nationality in the field of self-employed persons. The requirement of equal treatment with the nationals of the host State is expressed in the second paragraph of Article 43. Under that provision, freedom of establishment covers the right to take up and pursue activities of any kind as self-employed persons and to set up and manage undertakings, particularly companies, in the territory of any other Member State in accordance with the provisions laid down by the host State for its own nationals.

For the registration of a company established under Austrian law on application by a citizen of one of the Member States of the European Union which acceded on 1 May 2004 — with the exception of Malta and Cyprus — the courts keeping the registers of companies in Austria require a determination of his self-employed status. The distinction between self-employed and non-self-employed workers depends on the ‘true economic content of the activity’. Under the Austrian legislation, in particular, members of a partnership and members of a limited liability company with a share of less than 25 % of the business who perform work which is typically performed in an employment relationship are regarded as non-self-employed workers. That presumption applies until the regional office of the employment market service determines, on application by the member, that he exercises a significant influence on the management of the business. Proof of self-employed status is to be provided by the applicant. Until the determination of self-employed status by decision, but for a maximum of three months, the persons concerned cannot take up their activities.

This rule is not compatible with freedom of establishment under Article 43 EC. It impedes self-employed persons from eight new Member States in their freedom to become established in Austria, by making it considerably difficult for them to set up a company, without there being any justification for that. Even if it is the case that the provision in question is only of limited application, the rule does not thereby lose its discriminatory character. Even though nationals of the eight Member States concerned do not always without exception have to make an application, the decisive point is that Austrian citizens and nationals of the other Member States never have to make such an application. Moreover, the transitional provisions in the accession treaties provide for restrictions exclusively in respect of the freedom of movement of workers. For freedom of establishment there are no such possible restrictions. That the ratio legis of the relevant provision is to prevent the transitional provisions for the freedom of movement of workers from being circumvented, rather than to restrict freedom of establishment, does not alter the fact that it amounts to a restriction of freedom of establishment.

Restrictions of freedom of establishment can, under Article 46 EC, be justified only on grounds of public policy, public security or public health or, in the case of measures that are not overtly discriminatory, on other mandatory grounds in the public interest. As restrictions of a fundamental freedom, such measures must in any event be suitable for achieving the aim pursued and not go beyond what is necessary for that purpose. The Austrian rule in question does not satisfy those requirements for justification.

There is nothing to indicate that the evasion of the transitional provisions by nationals of the eight Member States concerned feared by the Austrian Government may reach such proportions that the functioning of the Austrian labour market will in fact be fundamentally threatened. In addition, the two criteria of assessment of the type of employment — the kind of work done and influence on the management of the company — are not appropriate for distinguishing between employment and self-employed activities. As regards the need for the restriction, it is not apparent from the Austrian Government's explanation why a subsequent check after registration of the company could not, as a less severe means, also achieve the intended purpose.