Which fundamental freedom prevails?

1 Introduction
In connection with the first series of third-country cases, the relationship of the
fundamental freedoms has been extensively discussed. The obvious reason was
mainly the fact that only the free movement of capital applies to third-country
situations. This essay aims at analysing how the ECJ deals with the question of the
prevailing freedom. In this respect it shall be examined whether the Court curbs any
third-country rights granted by the free movement of capital or just applies the same
concept as in its intra-Community case-law.

2 Internal Market and the fundamental freedoms

2.1

Internal Market

The goal of the European Community is to achieve an Internal Market, which is

characterized as "an area without internal frontiers in which the free movement of
goods, persons, services and capital is ensured".1 Unlike for indirect taxes, the EC
Treaty does not contain provisions harmonizing direct tax laws of the Member States.
With the establishment of the Internal Market, which bases on the fundamental
freedoms, the Member States gave up certain rights. The new legal framework also
described by the Triangular Model has limiting effects on the national tax laws of the
Member States as they must exercise their powers retained consistently with
Community law.2
The basis of the Internal Market are the four fundamental freedoms: the free
movement of goods (Article 23 31 EC), the free movement rights of persons (free
movement of workers (Articles 39 42 EC) and the freedom to provide services
(Articles 43 48 EC)), the free movement of services (freedom to provide services
(Article 49 55 EC) and the free movement of capital (free movement of capital and
payments (Article 56 60 EC)). Since its entry into force, the Treaty of Amsterdam
additionally comprises the freedom of citizenship, which is sometimes referred as fifth
freedom (Article 18 EC).

1
2

Article 14(2) EC.

The Triangular Model was developed and introduced by O'SHEA (O'Shea, 'EU Tax Law and
Double Tax Conventions', Avoir Fiscal 2008); Case C-279/93 Finanzamt Kln-Altstadt v Roland
Schumacker ('Schumacker'), [1995] ECR I-225, para. 21.

2.2

Free movement of goods

For direct tax purposes, the free movement of goods does not play a significant role.
Although this fundamental freedom is supposed to be the most important fundamental
freedom, it is rather negligible in the direct tax area.3 Besides the non-discrimination
principle, the free movement of goods prohibits customs duties on imports and
exports between Member States as well as all charges having equivalent effect.4
Important elements of this freedom are Articles 90 and 91 EC, which ensure with
respect to the VAT that, neither directly nor indirectly, a less favourable taxation is
applied on im- or exported products. Furthermore, Article 93 EC mandates the Council
with the harmonization of the indirect taxes.

2.3

Free movement of workers

The free movement of workers ensures the "abolition of any discrimination based on
nationality

between

workers

of

the

Member

States

as

regards

employment,

remuneration and other conditions of work and employment". The freedom entails
the right of free choice of vocation, free professionalism and residence in the Member
States subject to the special provisions laid down in the secondary legislation.
With respect to direct taxation, the free movement of workers provides for the
abolition of all discrimination based on nationality between workers of the Member
States, particularly concerning remuneration. In this respect the Court held that the
principle of equal treatment "would be rendered ineffective if it could be undermined
by discriminatory national provisions on income taxes".6 Under comparable situations,
residents and non-residents must - unless giving raise to discrimination provide for a
non-less favourable treatment (national treatment). Such national treatment not only
forbids "overt discrimination by reason of nationality but also all covert forms of
discrimination which, by the application of other criteria such differentiation, lead in
fact to the same result".7 Moreover, domestic tax laws of the Member States typically
distinct on the basis of residence as opposed to non-residents.8
This fact leads to the following conclusions: Firstly, "the situation of residents and
non-residents are, as a rule not comparable"9 unless "the non-resident receives no
significant income in the State of his residence and obtains the major part of his
taxable income from an activity performed in the State of employment, with the result

3
4
5
6
7
8
9

TERRA/WATTEL, European Tax Law, 5th Ed., 2008, p. 52.

Articles 23 EC.
Article 39(2) EC.
Case C-175/88 Klaus Biehl v Administration des Contributions du Grand-Duch de Luxembourg
('Biehl'), [1990] ECR I-01779, para. 12; Schumacker, supra. fn. 2, para. 22.
Case C-152/73 Giovanni Maria Sotgiu v Deutsche Bundespost ('Sotgu'), [1974] ECR I-00153,
para. 11; Schumacker, supra. fn. 2, para. 26.
TERRA/WATTEL, supra. fn. 3, p. 716; Schumacker, supra. fn. 2, para. 28.
Schumacker, supra. fn. 2, para. 31.

3
that the State of his residence is not in a position to grant him the benefits resulting
from the tacking into account of his personal and family circumstances"10. The same
applies with respect to the taxpayer's ability to pay.11 Secondly and contrary to the
general non-comparability of residents and non-residents, it must be noted that the
tax base of non-residents must correspond to the one of residents.12

2.4

Freedom of establishment

The freedom of establishment ensures the right to do business by "setting-up of

agencies, branches or subsidiaries by nationals of any Member State established in the
territory of any Member State".13 It therefore "includes the right to take up and pursue
activities as self-employed persons and to set up and manage undertakings, under the
conditions laid down for its own nationals by the law of the Member State where such
establishment is effected, entails () for companies () the right to exercise their
activity in the Member State through a subsidiary, a branch or an agency."14
The freedom of establishment is generally characterized by the "actual pursuit of an
economic activity through a fixed establishment in another Member State for an
indefinite period"15 respectively as the pursuit of an economic activity "on a stable and
continuous basis, in the economic life of a Member State other than his State of origin
and to profit therefrom"16. Settled case-law determines "indefinite period" by factors
like duration, regularity, periodicity or continuity17 and the fact that pursuit of the
economic activity has to be "on a stable and continuous basis".18
For companies or a group of companies, a less favourable treatment of secondary
establishment set-ups may refrain non-resident companies from "acquiring, creating

10
11
12
13
14

15
16
17
18

Schumacker, supra. fn. 2, para. 36.

C-107/94 P.H. Asscher v Staatssecretaris van Financin ('Asscher'), [1996] ECR I-03089, para.
41.
C-385/00, F.W.L. de Groot v Staatssecretaris van Financin ('De Groot'), [2002] ECR I-11819,
para. 115.
Article 43(2) EC.
C-196/04 Cadbury Schweppes plc, Cadbury Schweppes Oversseas Ltd v Commissioners of
Inland Revenue ('Cadbury-Schweppes'), para. 41; C-307/97 Companie de Saint-Gobain,
Zweigniederlassung Deutschland v Finanzamt Aachen Innenstadt ('Saint-Gobain'), [1999] ECR
I-6161, para. 35; C-446/03 Marks & Spencer plc v David Halsey (Her Majesty's Inspector of
Taxes) ('Marks&Spencer'), [2005] ECR I-10837, para. 30; C-471/04 Finanzamt Offenbach am
Main-Land v Keller-Holding GmbH ('Keller-Holding'), [2006] ECR I-2107, para. 29.
C-221/89, The Queen v Secretary of State for Transport, ex parte Factortame Ltd and others
('Factorame'), [1991] ECR I-03905, para. 20.
C-55/94 Reinhard Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano
('Gebhard'), [1995] ECR I-04165, para. 25.
Gebhard, supra. fn. 16, para. 27.
Gebhard, supra. fn. 16, para. 25; C-70/95, Sodemare and Regione Lombardia ('Sodemare'),
[1997] ECR I-3395, 24. Interestingly to note that the same term "on a stable and continous
basis" is differently translated in the two cases. While it is translated as "stetig und dauerhaft"
in Sodemare, the German version of the Gebhard ruling speaks about "stabil und
kontinuierlich".

4
or maintaining a subsidiary in the State which adopts"19 such measures by its national
tax laws. Many decisions deal with group of companies and mainly regard issues in
connection with CFC-legislation, thin-capitalization rules as well as tax avoidance. The
significance of such provisions mainly affecting group of companies on the applicable
fundamental freedom will be dealt with later.

2.5

Freedom to provide services

The freedom to provide services in a Member State by nationals of another Member

State, without establishing domicile there, is guaranteed by Article 48(1) EC. The
freedom to provide services precludes, according to settled case-law, "the application
of any national rules which have the effect of making the provision of services
between Member States more difficult than the provision of services purely within one
member State".20 It is established that the freedom to provide services also "includes
the freedom of the persons for whom the services are intended to go to another
member State, where the provider is, in order to enjoy the services there".21
Additionally, the freedom applies to situations in which the service provider offers its
services in a Member State other than the one in which he is established, irrespective
of the place where the recipient is established.22 Finally, the freedom to provide
services applies to situations where only the service itself crosses the border.
TERRA/WATTEL point out that, according to Article 50 EC, the freedom to provide
services is supplementing the free movement of goods, persons and capital and is
thus for situations where none of the latter freedoms apply.23 The interpretation and
application of the freedom to provide services "corresponds to the objective of
covering any activity performed for remuneration which does not fall within the scope
of free movement of goods and capital or freedom of movement for persons".24 AG
Stix-Hackl argued in her opinion in Stauffer concerning an Italy based foundation that
held some real estate in Germany, that the freedom to provide services is subsidiary
to the also invoked freedom of establishment and free movement of capital and

19
20

21

22
23
24

C-324/00, Lankhorst-Hohorst v Finanzamt Steinfurt ('Lankhorst-Hohorst'), [2002] ECR I-11779,

para. 32.
C-281/06, Hans-Dieter and Hedwig Jundt v Finanzamt Offenburg ('Jundt'), [2007] ECR I-0000,
para. 52; C-136/00, Rolf Dieter Danner ('Danner'), [2002] ECR I-8147, para. 29; C-118/96,
Jessica Safir v Skattemyndigheten / Dalarnas Ln, formerly Skattemyndigheten / Kopparbergs
Ln ('Safir'), [1998] ECR I-1897, para. 23; C-290/04, FKP Scorpio Konzertproduktionen GmbH v
Finanzamt Bergisch ('Scorpio'), [2006] ECR I-09461, para. 31.
C-76/05, Herbert Schwarz und Marga Gootjes-Schwarz v Finanzamt Bergisch ('Schwarz'),
[2007] ECR I-06849, para. 36; Scorpio, supra. fn. 20, para. 32; C-294/97, Eurowings
Luftverkehrs AG v Finanzamt Dortmund-Unna ('Eurowings'), [1999] ECR I-07447, para. 34; C55/98, Skatteministeriert v Bent Vestergard ('Vestergaard'), [1998] ECR I-07641, para. 20.
Vestergaard, supra. fn. 21, para. 19.
TERRA/WATTEL, supra. fn. 3, p. 53.
Gebhard, supra. 16, para. 22; also see C-155/73, Giuseppe Sacchi ('Sacchi'), [1974] ECR I00409, para. 26 and C-452/04, Fidium Finanz AG v Bundesanstalt fr Finanzdienstleistungs
aufsicht ('Fidium Finanz'), [2006] ECR I-9521, para. 32.

5
therefore it is to be examined only if neither of the other freedoms is applicable in the
present case.25 The ECJ noted in that respect that the free movement of capital
applies in the present case and that "it is therefore not necessary to consider whether
the foundation acts as a service provider".26 Despite the supplementing character, the
freedom to provide services is needed as a separate freedom because the crossborder provision of services may be effected without any goods being moved, without
relocation of capital and without (secondary) establishment across the border.27
Fidium Finanz clarifies however that, although Article 50(1) EC defines 'services' as
services not being governed by the provisions relating to freedom of movement of
goods, capital and persons, it does not establish any order of priority between the
freedom to provide services and the other fundamental freedoms.28
The provision of services applies in the case of a "temporary pursue of the activity".29
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 (including an office, chambers or consulting rooms) in so far as such
infrastructure is necessary for the purposes of performing the services in question".30
Furthermore, the mere fact of having some kind of infrastructure in the Host State
does not per se preclude the application of the freedom to provide services.31
The freedom to provide services is distinguished from the free movement of goods by
the fact that services are intangible.32 The provision of services can however require
importing respective auxiliary materials.

2.6

Free movement of capital

Article 56(1) EC provides that all restrictions on the free movement of capital between
member States and between Member States and third countries are prohibited. In
contrast to the other fundamental freedom, the free movement of capital gives effect
not only to the free movement of capital between Member States but also between
Member States and third countries.33
The Treaty itself does not contain a definition on capital movement. According to
settled case-law, the ECJ has "recognized the nomenclature which constitutes Annex I

25
26
27
28
29
30
31
32
33

Opinion of AG Stix-Hackl in C-386/04, Centro de Musicologia Walter Stauffer v Finanzamt

Mnchen fr Krperschaften ('Stauffer'), [2006] ECR I-8203, para. 32.
Stauffer, supra. fn. 25, para. 24.
TERRA/WATTEL, supra. fn. 3, p. 53.
Fidium Finanz, supra. fn. 24, para. 32.
Art. 50(3) EC; Gebhard, supra. fn. 16, para. 26 and 39; C-234/01, Arnoud Gerritse v Finanzamt
Neukln-Nord ('Gerritse'), [2003] ECR I-5933, para. 23 and 24.
Gebhard, supra. fn. 16, para. 27.
See above section 2.4.
TERRA/WATTEL, supra. fn. 3, p. 53.
C-98/01, Commission v United Kingdom ('Golden Share UK'), [2003] ECR I-4641, para. 38.

6
to Directive 88/361 as having indicative value, even if the latter was adopted on the
basis of Articles 69 and 70(1) of the EEC Treaty (), it being understood that,
according to the third paragraph of the introduction to that annex, the nomenclature it
contains is not exhaustive as regards the term 'movement of capital'".34 The
nomenclature contains a list of all kinds of transactions that are to be considered as
capital movements whereby its non-exhaustive character shown by the title of the last
section 'Other capital movements Miscellaneous'. Generally, a capital movement
"may be understood as unilateral and one-sided, that is to say a transfer of capital
that is not conditional upon a transaction falling under the free movement of goods or
services, a cross-border flow of value in form of monetary capital or other material or
immaterial assets from one Member State to another".35 One-sidedness means
transactions on pure financial investment grounds and has to be denied in cases
"where the transfer in question corresponds to an obligation to pay arising from a
transaction involving" another fundamental freedom.36
With respect to the case-law discussed below and also in order to demonstrate the
relation of the free movement of capital to the other fundamental freedoms,
acquisitions of shares in companies are especially relevant. Any other forms of capital
movements are therefore not discussed in detail. Points I and III in the nomenclature
and the explanatory notes "indicate that direct investment in the form of participation
in an undertaking by means of a shareholding or the acquisition of securities on the
capital market constitute capital movement for the purposes of Article 56(1) EC".37
The heading 'Acquisition () of domestic securities ()' includes, inter alia, the
transaction 'acquisition by non-residents' of shares and bonds in domestic companies
on pure financial grounds, i.e. without the aim of exercising any definite influence on
the company's decisions.38 This type of participation is usually known as 'portfolio
investment'. In contrast, the heading 'Direct investments' comprises "investments of
all kinds () which serve to establish or to maintain lasting and direct links between
the person providing the capital and the () undertaking to which the capital is made
available in order to carry on an economic activity". As defined by the explanatory
notes, "there is participation in the nature of direct investment where the block of
shares held by a person () enables the shareholder () to participate effectively in

34

35

36
37
38

C-67/08, Margarethe Block v Finanzamt Kaufbeuren ('Block'), ECR pending, para. 19 with
further case-law reference; C-222/97, Manfred Trummer and Peter Mayer ('Trummer and
Meyer'), [1999] ECR I-1661, para. 20 and 21; Golden Share UK, supra. fn. 33, para. 39.
C-26/83, Luisi and Carbone v Ministero del Tesoro ('Luisi & Carbone'), [1984] ECR 377, para.
21; SEDLACZEK, 'Capital and Payments: The Prohibition of Discrimination and Restrictions", ET
2000, p. 16.
Luisi & Carbone, supra. fn. 35, para. 22.
Golden Share UK, supra. fn. 33, para. 40.
Communication of the Commission on certain legal aspects concerning intra-EU investment, OJ
C 220, 19. July 1997, p. 0015 0018., para. 3.

7
the management of the company or in its control". The Commission mentions that
"the acquisition of controlling stakes, as well as the full exercise of the accompanying
voting rights, in domestic companies by other EU investors is also considered to be a
form

of capital movement".39 Furthermore, the Commission outlines that an

acquisition of a controlling stake is also covered by the provisions of the freedom of

establishment at the same time. The rights granted under the freedom

of

establishment enable nationals of other EU Member States to freely acquire controlling

stakes, exercise voting rights and manage domestic companies under the same
conditions applicable in a given Member State to its own nationals".40

2.7

Right of residence of EU citizens

With the Maastricht Treaty, the Community citizenship right was adopted.41 The right
of residence grants EU citizens "the right to move and reside freely within the territory
of the Member States ()".42 The Community citizenship right ensures that nationals
are not less favourably treated even though they have not availed themselves of the
opportunities offered by the EC Treaty in relation to freedom of movement.43 The
application of this freedom appears in cases of pensioners like Ms. Turpeinen who
decided to relocate after her retirement first to Belgium and subsequently to Spain.
Based on this freedom she was granted equal treatment44 with respect to the imposed
flat Finish withholding tax of 35% on her pension payments and could claim the
normal progressive tax rates with basic allowance, which resulted in her personal
situation to a final tax burden of approximately 28.5%.45 Werner, a case decided
before the adoption of the Community citizenship right, demonstrates the need of the
Community citizenship right for achieving an undistorted internal market. This case
concerned a German national who lived in the Netherlands and first practised as an
employed dentist in Germany, and thereafter opened his own practice there. Since he
had always worked in Germany and thus had not exercised his free movement rights,
he was prevented from benefitting equal treatment and was thus due to the lack of
the Community citizenship right at that moment subject to the less favourable
limited taxation regime.46

39
40
41
42
43
44
45
46

COMMISSION, supra. fn. 38, para. 3.

COMMISSION, supra. fn. 38, para. 4.
O'SHEA, 'EU Tax Law and Double Tax Conventions', Avoir Fiscal 2008, p. 48.
Article 18 EC; Schwarz, supra. 21, para. 86 with further references to case-law.
C-224/02, Heikki Antero Pusa and Osuuspankkien Keskininen Vakuutusyhti ('Pusa'), [2004]
ECR I-5763, para. 18; Schwarz, supra. fn. 21, para. 88.
O'SHEA, supra. 41, p. 47.
C-520/04, Pirkko Marjatta Turpeinen ('Turpeinen'), [2006] ECR I-10685, para. 6; TERRA/WATTEL,
supra. 3, sec. 17.5.1, p. 790.
C-112/91, Hans Werner v Finanzamt Aachen Innenstadt ('Werner'), [1993] I-00429, para. 4 -6
and 16.

8
According to settled case-law, the Community citizenship right is secondary to the
fundamental freedoms. This subordination can be seen in N with respect to the
freedom of establishment, in Turpeinen with respect to the free movement of workers
and in Schwarz with respect to the freedom to provide services.47 The Court generally
holds that if the case in the main proceeding falls under (another) fundamental
freedom, "it will not be necessary to () to rule on the interpretation of Article 18 EC"
and "it is therefore to rule on Article 18(1) EC only in so far as the case in the main
proceedings does not fall within the scope (of another fundamental freedom)".48

3 Concept of the prevailing freedom

3.1

General

According to the EC Treaty, none of the fundamental freedoms generally prevails. The
Community citizenship however, is as mentioned above of secondary nature and
only applies if the national provisions at issue do not fall under any particular
provisions of the other fundamental freedoms. Furthermore, it has to be recalled that
the freedom to provide services is supplementing the free movement of goods,
persons and capital.

3.2

Cadbury-Schweppes

In the context of direct taxation, the ECJ for the first time examined in CadburySchweppes the question of the prevailing fundamental freedom. The taxpayer invoked
freedom of establishment, freedom to provide services as well as free movement of
capital. The Court first held in accordance with settled case-law "that national
provisions which apply to holdings by nationals of the Member State concerned in the
capital of a company established in another Member State, giving them definite
influence on the company's decision and allowing them to determine its activities
come within the substantive scope of the provisions of the Treaty on freedom of
establishment."49 In contrast to Baars50 where this definition has been applied for the
first time, the Court explicitly ruled in Cadbury-Schweppes, that if the scrutinized
legislation has "restrictive effects on the free movement of services and the free
movement of capital, such effects are an unavoidable consequence of any restriction

47

48
49
50

C-470/04, N. v Inspecteur van de Belasingsdienst Oost/kantoor Almelo ('N'), [2006] ECR I7409, para. 22 23; Turpeinen, supra. fn. 45, para. 13; Schwarz, supra. fn. 21, para. fn. 34
35. See also C-318/05, Commission v Germany ('Commission v Germany (School fee)'), [2007]
ECR I-06957, para. 32 and 34.
Schwarz, supra. fn. 21, para. 34 35.
Cadbury-Schweppes, supra fn. 14, para. 31.
C-251/98, C. Baars v Inspecteuer der Belastingen Particulieren/ondernemingen Gornichen
('Baars'), [2000] ECR I-2787.

9
on freedom of establishment and do not justify, in any event, an independent
examination of that legislation in the light of Articles 49 EC and 56 EC."51
The fact that the Court determined the prevailing freedom became more important in
connection with its early third-country decisions. Since only the free movement of
capital provides for an erga-omnes effect and thus also applies in a third-country
context while the other freedoms only apply in a MS-MS context, the determination of
the prevailing freedom is decisive. After the Court's decisions in Fidium-Finanz52,
Lasertec53 and Holbck54 where in each case the freedom to provide services or the
freedom of establishment was found to be prevailing over the free movement of
capital, the discussion whether the Court is curbing third-country rights emerged.55
WEBER disagreed with the Court's approach and argued with respect to the FidiumFinanz decision that, since the freedom to provide services is not applicable in a MSTC context, the Court should have examined whether the restriction of the free
movement of capital is justified by imperative reasons in the public interest.56 In
addition, recent court decisions like Burda57 show that the Court, however follows the
concept of the prevailing freedom and therefore examined the facts under the free
movement of establishment which displaced the free movement of capital.
The discussion raises several questions, which will be addressed in this article, (i) why
is it necessary to determine the prevailing freedom even in a intra-community
context, (ii) when is the application of one fundamental freedom only the "unavoidable
consequence" of another freedom and (iii) whether this concept curbs any rights of
the taxpayers.

3.3

Relationship between the free movement of workers,

freedom of establishment and the freedom to provide
services

From the case-law in Gebhard it emerges that the free movement of workers, the
freedom of establishment and the freedom to provide services are "mutually
exclusive".58 In these situations, the Court has to define the scope of the invoked
freedoms. Gerritse may serve as an example where the Court concludes that not the
invoked freedom of establishment is at stake but, due to the temporary nature of the
51
52
53
54
55

56
57
58

Baars, supra. fn. 50, para. 33.

Fidium Finanz, supra. fn. 24.
C-492/04, Lasertec Gesellschaft fr Stanzformen GmbH v Finanzamt Emmendingen ('Lasertec'),
[2007] ECR I-3775.
C-157/05, Winfried L. Holbck v Finanzamt Salzburg-Land ('Holbck'), [2007] ECR I-4051.
See, e.g. WEBER, 'Fidium Finanz AG v Bundesantsalt fr Finanzdienstleistungsaufsicht: the ECJ
gives the wrong answer about the applicability of the free movement of capital between the EC
Member States and non-member countries', BTR (2007), pp. 670.
WEBER, supra. fn. 56, p. 671.
See Case C-284/06 Finanzamt Hamburg-Am Tierpark v Burda GmbH, formerly Burda
Verlagsbeteiligungen [2008] ECR I-00000, ('Burda').
Gebhard, supra. fn. 16, para. 20.

10
self-employed activity, the freedom to provide services.59 The cases of Gebhard or
Schnitzer60 are about the distinction between the material scope of the freedom to
provide services and the freedom of establishment. Mr Gebhard, a German national
and admitted to the Bar of Stuttgart (Germany), took up residency in Italy where he
pursued his professional activity first as an associate and later as a partner of a law
firm.61 Upon starting his own business, his application, which based on the Council
Directive 89/48/EEC62, to the Milan Bar Council to be entered on the role of members
of the bar, was denied.63 In connection with the subsequent disputes, the ECJ had
inter alia to decide which freedom applies. In its judgement the Court distinguished
the freedom to provide services from the freedom of establishment by noting that "the
temporary nature of the provision of services () has to be determined in the light of
its duration, regularity, periodicity and continuity".64 In contrast, the freedom of
establishment applies if a national of a Member States pursues his professional activity
"on a stable and continuous basis in another Member State where he holds himself out
from an established professional base to, amongst others, nationals of that State".65
The Court essentially determined, like in Schnitzer, the functional scope of the
mutually exclusive freedoms. Also in the judgements in Sacchi66 and Schindler67 the
Court is determining whether the present cases come under the free movement of
goods or freedom to provide services. Sacchi was about the qualification of tv-signals
while Schindler concerned the importation of lottery advertisements and tickets. In
both cases the Court decided that the freedom to provide services applies68.
In Omega, a case concerning the operation of a 'laserdome' which is normally used for
the practice of the 'laser sport', the Court argued that "where a national measure
affects both the freedom to provide services and the free movement of goods, [it] will,
in principle, examine it in relation to just one of those two fundamental freedoms if it
is clear that () only one of those freedoms is entirely secondary in relation to the
other".69 It must thus be noted that the referred case actually contains two questions.
One aspect concerns the fact that the required equipment is imported from UK to
Germany and the other that the claimant's 'laser sport' business whose restriction is

59
60
61
62
63
64
65
66
67
68
69

Gerritse, supra. fn. 29, para. 24.

C-215/01, Bruno Schnitzer ('Schnitzer'), [2003] ECR I-14847.
Gebhard, supra. fn. 16, para. 3 5.
Council Directive 89/48/EEC of 21 December.
Gebhard, supra. fn. 16, para. 6 and 10.
Gebhard, supra. fn. 16, para. 39.
Gebhard, supra. fn. 16, para. 39.
Sacchi, supra fn. 24.
C-275/92, Her Madjesty's Customs and Excise v Gerhart Schindler and Jrg Schindler
('Schindler'), [1994] ECR I-01039.
Sacchi, supra. fn. 24, para. 6; Schindler, supra. fn. 67, para. 37.
C-36/02, Omega Spielhallen- und Automatenaufstellungs-GmbH v Oberbrgermeisterin der
Bundesstadt Bonn ('Omega'), [2004] ECR I-9609, para. 3 and 26 with further references.

11
backed by the public policy reasons since it comprises simulating acts of homicide.70
Any restriction in connection with the import of required equipment, which is
"specifically designed for the prohibited variant of the laser game" is therefore "an
unavoidable consequence of the restriction imposed with regard to supplies of
services".71

3.4

Relationship between freedom of establishment or freedom

to provide services and free movement of capital

Two types of case remain for the analysis of the concept of the prevailing freedom,
namely the relationship between the freedom of establishment and the free movement
of capital as well as the relationship between the freedom to provide services and the
free movement of capital. The question of the relationships has been extensively
discussed. The reasons for the extensive academic writing was mainly the fact that
non-resident taxpayers can, in a third-country context, only rely on the free
movement of capital and the fact that there has suddenly been quite a series of cases
referred to the ECJ. Except from the first decision in Sanz de Lera72 with respect to the
export

of

coins,

banknotes

or

bearer

cheques,

which

was

subject

to

prior

authorization, the third-state cases date between February 2006 and April 2008. The
first case was Fidium Finanz73, followed by the decisions in the FII Group Litigation74,
Thin Cap Group Litigation75, A and B76, Lasertec77, Holbck78, SEW79, A80 and CFC and
Dividend Group Litigation81. Besides these third-country cases, the ECJ also dealt with
quite a few Community internal cases like the Baars, Cadbury-Schweppes etc. and the
most recent decisions in Burda82, Truck Center83 and STEKO84. All of these cases help
to better understand the relationship between the two freedoms.

70
71
72
73
74
75
76
77
78
79
80
81
82
83
84

Omega, supra. fn. 69, para. 27 and 39 41.

Omega, supra. fn. 69, para. 27.
Joined cases C-163/94, C-165/94 and C-250/94, Criminal proceedings against Lucas Emilio
Sanz de Lera, Raimundo Daz Jimnez and Figen Kapanoglu ('Sanz de Lera'), [1995] I-04821.
Fidium Finanz, supra. fn. 24.
C-446/04, Test Claimants in the Franked Investment Income Group Litigation v Commissioners
of Inland Revenue ('Test Claimants in the FII Group Litigation'), [2006] ECR I-11753.
C-524/04, Test Claimants in the Thin Cap Group Litigation v Commissioners of Inland Revenue
('Thin Cap Group Litigation'), [2007] ECR I-0000.
C-102/05, Skatteverket v A and B ('A and B'), [2007] ECR I-3871.
Lasertec, supra. fn. 53.
Holbck, supra. fn. 54.
C-415/06, Stahlwerk Ergste Westing GmbH v Finanzamt Dsseldorf-Mettmann ('SEW'), [2007]
ECR I-00151.
C-101/05, A v Skatteverket ('A'), [2007] ECR I-11531.
C-201/05, The Test Claimants in the CFC and Dividend Group Litigation v Commissioners of
Inland Revenue ('CFC and Dividend Group Litigation'), not yet reported.
Burda, supra. fn. 57.
C-282/07, tat belge - SPF Finances v Truck Center SA ('Truck Center'), not yet reported.
C-377/07, Finanzamt Speyer-Germersheim v STEKO Industriemontage GmbH ('STEKO').

12
Prior to the mentioned third-country cases, AG Stix-Hackl delivered in her opinion in
Stauffer85 a summary on the case-law regarding the differentiation between the
freedom of establishment and free movement of capital. The differentiation of the two
freedoms is affected by the close connection between the provisions governing the
freedom of establishment and those governing the free movement of capital which can
also bee seen from the reciprocal reservations contained in Article 43(2) EC and 58(2)
EC.86 STAHL therefore concludes that it becomes evident from these provisions that the
drafters of the Treaty were aware that one and the same transaction could be covered
by both freedoms.87 Also the freedom to provide services and the free movement of
capital are closely linked but nevertheless are designed to regulate different situations
and have their own field of application.88 According to AG Stix-Hackl in Stauffer, the
ECJ took in its existing case-law the position that the freedom of establishment and
the free movement of capital apply in parallel. AG Alber concluded in his earlier
Opinion in Baars that the "reservations do not signify that conduct can be protected
only under one of these fundamental freedoms".89
Based on the broad material scope of Article 56(1) EC, the free movement of capital
seems to apply to all kinds of cross-border activities that are subject to the freedom of
establishment or freedom to provide services. This view was supported by the caselaw of the ECJ which did in contrast to some of its AGs refrain from determining
the prevailing freedom and kept concluding that there is no need for a separate
examination under a different freedom.90 For instance, AG Alber in Baars analysed in
detail the relationship between the freedom of establishment and the free movement
of capital and also provided an overview on the respective case-law while the Court
briefly concluded that in cases where a national of a Member State "has a holding in
the capital of a company established in another Member State which gives him definite
influence over the company's decisions and allows him to determine its activities is
exercising his right of establishment" and that "it is unnecessary to reply to the
second question" which regarded the applicability of the free movement of capital.91
Another example in the direct tax area is Safir. In his respective Opinion, AG Tesauro

85
86
87
88
89
90

91

Stauffer, supra. fn. 25.

Opinion of AG Stix-Hackl in Stauffer, supra. 25 para. 35; Opinion of AG Alber in Baars, supra.
50, para. 13.
STAHL, Free movement of capital between Member States and third countries, EC Tax Review
2004/2, p. 48.
Fidium Finanz, supra. fn. 24, para. 28.
Opinion of AG Alber in Baars, supra. fn. 50, para. 13.
See e.g. Safir, supra. fn. 20, para. 35; C-200/98, X AB and Y AB v Riksskatteverket ('X AB and
Y AB'), [2002] ECR I-10829, para. 30; Baars, supra. fn. 50, para. 42; C-35/98, Staatssecretaris
van Financin v B.G.M. Verkooijen ('Verkooijen'), [2000] ECR I-4071, para. 63; C-265/04,
Margarethe Bouanich v Skatteverket ('Bouanich'), [2006] ECR I-00923, para. 57.
Opinion of AG Alber in Baars, supra. fn. 50, para. 22 and 42; see additionally para. 16 22
which provide an overview on the existing case-law until the delivery of Alber's opinion in
October 1999.

13
discussed the relationship between the freedom to provide services and the free
movement of capital based on the existing case-law and noted that in the present
case it has to by analyzed within the purview of Article 49 EC92. The Court however did
not address the relationship of the freedoms in its judgement and held that "it is not
necessary to determine whether such legislation is also incompatible with [the free
movement of capital]."93
The parallel application of the free movement of capital with the freedom of
establishment or the freedom to provide services would have significant impact on any
third country situations since it could as initially argued by WEBER94 - always be relied
on the free movement of capital and thus third country nationals would, at least to a
certain extent, indirectly get access to the community internal movement rights.
Arguing that the Court is actually restricting or curbing third-country rights granted
under Article 56 EC, may only be legitimate if it applies a different concept of
examination. As long as the Court follows the concept of the prevailing freedom in the
same manner as described in the above sections, the third country rights are fully
respected and the confusion appears to lie in understanding exactly the scope of thirdcountry rights.95
3.4.1 Relevant third-country case-law compared to intra-Community case-law
Fidium Finanz
Fidium Finanz, a company incorporated in Switzerland, grants on a commercial basis
small credits of EUR 2'500 EUR 3'500 to clients established abroad, most of which
are in Germany, by using an internet site.96 As the company does not have the
respective authorisation to carry on banking activities and to provide financial services
in Germany, the respective German supervisory authority prohibited Fidium Finanz
from carrying on lending activities on a commercial basis.97 The respective dispute
was finally referred to the ECJ as Fidium Finanz argued that this restricts its rights
granted under the free movement of capital. The Court held that "where a national
measure relates to the freedom to provide services and the free movement of capital
at the same time, it is necessary to consider to what extent the exercise of those
fundamental liberties is affected and whether, in the circumstances of the main
proceedings, one of those prevails over the other".98 Furthermore the Court continued
noting that it "will in principle examine the measure in dispute in relation to only one

92
93
94
95
96
97
98

Opinion of AG Tesauro in Safir, supra. fn. 20, para. 9 19.

Safir, supra. fn. 20, para. 35.
See above under section 3.4.
O'SHEA, 'Thin Cap GLO and Third-Country Rights: Which Freedom Applies?', Tax Notes Int'l, April
23, 2007, p. 372;
Fidium Finanz, supra. fn. 24, para. 14 - 16.
Fidium Finanz, supra. fn. 24, para. 17 19.
Fidium Finanz, supra. fn. 24, para. 34.

14
of those freedoms if it appears, in the circumstances of the case, that one of them is
entirely secondary in relation to the other and may be considered together with it".99
Thereby, the Court referred to its earlier case-law in, inter alia, Schindler and
Omega.100 In contrast to these judgements, it explicitly noted, that "the activity of
granting credit on a commercial basis concerns, in principle, both the freedom to
provide services within the meaning of Article 49 EC et seq. and the free movement of
capital within the meaning of Article 56 EC et seq."101 After having analyzed the
purpose of the German provisions, which concern regulatory aspects, it concluded,
"the predominant consideration is freedom to provide services rather than the free
movement of capital".102 Therefore, any restrictions on the free movement of capital
are "merely an unavoidable consequence of the restriction on the freedom to provide
services".103 The Court applies here the same reasoning by determining the prevailing
freedom as in Cadbury-Schweppes.104
Thin Cap Group Litigation
In Thin Cap Group Litigation, the freedom of establishment, the freedom to provide
services as well as the free movement of capital were invoked. The main proceedings
are part of a group litigation concerning the rules on UK thin capitalisation rules. Two
of the involved test cases have a third-country dimension.105 While determining the
applicable freedom, the Court followed its settled case-law by saying that "national
provisions which apply to holdings by nationals of the Member State concerned in the
capital of a company established definite influence on the company's decisions and
allowing them to determine its activities, come within the substantive scope of the
provisions of the EC Treaty on freedom of establishment".106 The national provisions,
which are directed against thin capitalisation, only concern situations in which the
parent companies exercise control over the other group companies. Consequently and
based on the facts that the subsidiaries are at least 75% owned by its parent
companies, the main proceedings have to be considered in the light of Article 43 EC.107
Any restrictive effects on the freedom to provide services and the free movement of
capital, () "must be seen as an unavoidable consequence of any restriction on free
freedom of establishment and do not justify an independent examination of that

99
100
101
102
103
104
105
106
107

Fidium Finanz, supra. fn. 24, para. 34.

See above sec. 3.3.
Fidium Finanz, supra. fn. 24, para. 43.
Fidium Finanz, supra. fn. 24, para. 45 46 and 49.
Fidium Finanz, supra. fn. 24, para. 48 49.
Cadbury-Schweppes, supra. fn. 14, para. 33.
Test Claimants in the Thin Cap Group Litigation, supra. fn. 75, para. 17 and 19.
Test Claimants in the Thin Cap Group Litigation, supra. fn. 75, para. 27 with reference to caselaw.
Test Claimants in the Thin Cap Group Litigation, supra. fn. 75, para. 32 and 33.

15
legislation in the light of Articles 49 EC and 56 EC".108 Thin capitalisation legislation is
typically targeted at group of companies and only applies to situation where the
parent company providing loans to its subsidiaries actually has definite influence over
it. Thus, the test cases come within the functional scope of the freedom of
establishment.

In

third-country

context the

application

of the

freedom

of

establishment means that the taxpayer cannot rely on this freedom since, contrary to
the free movement of capital, it does not have an erga-omnes effect. Nevertheless, it
must be recalled that any interaction between a number of fundamental freedoms,
irrespective whether in an intra-Community or third-country context, has been solved
by first determining the prevailing freedom.109
Lasertec
In Lasertec the Court had as already in Lankhorst-Hohorst110 to decide on the
compatibility of the German thin capitalization rules but this time in a third county
context as the parent company was domiciled Switzerland. The Court thereby stressed
in its order that the purpose of the concerned national rule has to be taken into
account. According to the order "it is apparent from settled case-law that in order to
ascertain whether national legislation falls within one or the other freedoms of
movement,

the

purpose

of

the

legislation

at

issue

must

be

taken

into

consideration".111 With respect to the settled-case law, the ECJ referred in the decision
primarily to its intra-Community decision in Cadbury-Schweppes but also to the recent
decisions in Test Claimants in ACT Group Litigation, Test Claimants in FII Group
Litigation and Test Claimants in Thin Cap Group Litigation.112 This makes generally
clear

that

the

Court

applies

in

intra-Community

situations

the

same

legal

differentiation. As the German provisions related only to substantial shareholdings

"giving the holder a definite influence on the decisions of the company concerned and
allowing him to determine its activities", the case "falls within the material scope
solely of the Treaty provisions relating to freedom of establishment".113 Any restrictive
effects on the free movement of capital "must be seen as an unavoidable consequence

108
109
110

111
112
113

Test Claimants in the Thin Cap Group Litigation, supra. fn. 75, para. 34.
O'SHEA, 'Thin Cap GLO and Third-Country Rights: Which Freedom applies', Tax Notes Int'l, 27
April 2007, p. 372.
Lankhorst-Hohorst, supra. fn. 19. Lankhorst-Hohorst concerned a German subsidiary of a Dutch
parent company. The loan granted to the German subsidiary which was intended to be a
substitute for capital was subject to the scrutinized thin capitalization rules applied by Germany.
Since these rules treated interest paid to non-resident parent companies less favourably than
interest paid in the national context, without being justified by a public interest like the
prevention of tax avoidance, the rules were precluded by the freedom of establishment.
Lasertec, supra. fn. 53, para. 19.
Lasertec, supra. fn. 53, para. 19.
Lasertec, supra. fn. 53, para. 20 and 24.

16
of the restriction on freedom of establishment".114 As the freedom of establishment
provisions do not apply with respect to third countries, the ECJ consequently held that
third-country nationals could not rely on Art. 43 EC.115
A and B
On the same day as Lasertec, the ECJ delivered also its reasoned order in A and B. A
and B concerned national provisions regarding closely held companies that, in
determining the applicable tax rate on any dividends received, denied to the detriment
of its shareholders to take into account any compensation paid to employees of its
permanent establishment located in a third country. The provisions prevent from
converting of any employment income subject to higher income into less heavily taxed
dividend income.116 Unlike in Lasertec, the Court did not argue that the shareholders
exercised definitive influence on the decisions of the company and thus determined its
activities but based its ruling on the fact that the freedom of establishment entails the
right to exercise the business activities through a subsidiary, branch or agency.117
Setting up of branches is an important right under the freedom of establishment.118
Any national rules that are discouraging the exercise of the rights granted under the
freedom of establishment, "solely come within the scope of the Treaty provisions
relating to that freedom".119 Therefore, "any restrictive effects on the free movement
of capital must bee seen as an unavoidable consequence of any restriction on the
freedom of establishment".120 Since the freedom of establishment does not apply with
respect to third country situations, the claimant could again not rely on Art. 43 EC.
Holbck
Mr Holbck, an Austrian resident individual, owned two-thirds of the share capital in a
Swiss company and received dividend income thereon. The facts of the case were
generally identical with Lenz where the Austrian half-rate regime was scrutinized but
this time in a third-country context. In contrast to the decisions in Lasertec and A and
B, the ECJ appears to have agreed with the taxpayer that the legislation at issue,
which equally applies to portfolio holdings as well as participation holdings, "may fall
within the scope of both Article 43 EC on freedom of establishment and Article 56 EC

114

115
116
117
118
119
120

Lasertec, supra. fn. 53, para. 25. The reference to Lankhorst-Hohorst, supra. fn. 19, is
interesting as in this case only the freedom of establishment was invoked and the Court did
therefore not have to determine the applicable Treaty freedom.
Lasertec, supra. fn. 53, para. 27; O'SHEA, 'Third Country Denied Freedom of Establishment
Rights in Lasertec', Tax Notes International, June 4, 2007, p. 993.
A and B, supra. fn. 76, para. 4 7.
A and B, supra. fn. 76, para. 23.
Article 43(1) EC; A and B, supra. fn. 76, para. 23 with further reference to case-law.
A and B, supra. fn. 76, para. 26.
A and B, supra. fn. 76, para. 27.

17
on free movement of capital."121 Already in Test Claimants in the ACT Group Litigation
and the Test Claimants in the FII Group Litigation, the ECJ examined national
provisions equally applying to all kind of holdings, may fall within the scope of both
freedoms.122 A portfolio interest which is made on pure financial investment grounds
without the aim of exerting any influence in the company's management would
consequently come within the free movement of capital. Also from Burda, which
mainly concerned the correct implementation of the Parent-Subsidiary Directive into
national legislation123, it becomes evident that in situations where the scrutinized
national provisions equally apply to portfolio as well as participation holdings ('direct
investments'), the freedom of establishment prevails if a controlling shareholding is
actually given. Following its reasoning in Test Claimants in the FII Group Litigation the
Court held that "it should () be pointed out that national legislation such as that at
issue in the main proceedings, the application of which does not depend on the extent
of the holding which the company receiving the dividend has in the company paying it,
may fall within the purview both of Article 43 EC on freedom of establishment and of
Article 56 EC on the free movement of capital."124 The Court further concluded that,
based on the fact that the parent company holds a 50% participation in its subsidiary,
the freedom of establishment applies in the present case.125 The recent decision in
STEKO clarifies that a holding of less than 10% comes within the functional scope of
the free movement of capital.126 Also the fact that STEKO holds its shares as fixed
assets ("hielt () in ihrem Anlagevermgen Aktien auslndischer Gesellschaften")
does not lead to a different result, i.e. the effective holding is decisive whether the
free movement of capital or freedom of establishment is applicable.127
In Holbck the Court did finally not determine the applicable freedom and just noted
that the provisions of the freedom of establishment cannot be invoked in a thirdcountry context and that the free movement of capital would neither apply as "that
legislation is caught by the exception laid down in Article 57(1) EC".128

121

122

123
124
125
126
127
128

Holbck, supra. fn. 54, para. 22 and 23; CODEWENER/KOFLER/SCHINDLER, 'Free Movement of
Capital and Third Countries: Exploring the Outer Boundaries with Lasertec, A and B and
Holbck', ET 2007, p. 372.
C-374/04, Test Claimants in Class IV of the ACT Group Litigation v Commissioners of Inland
Revenue ('Test Claimants in the ACT Group Litigation'), [2006] ECR I-11673; Test Claimants in
the FII Group Litigation.
Parent-Subsidiary Directive 90/435/EEC.
Burda, supra. fn. 57, para. 71.
Burda, supra. fn. 57, para. 70 73.
STEKO, supra. fn. 84, para. 13; Test Claimants in the FII Group Litigation, supra. fn. 74; Test
Claimants in the ACT Group Litigation, supra. fn. 122.
STEKO, supra. fn. 84, para. 13.
Holbck, supra. fn. 54, para. 30 and 31.

18
SEW
SEW concerned a German limited liability company that participated in two
partnerships established in the US, which constituted due to their transparency for tax
purposes as permanent establishments of the German entity. The German tax
authorities however denied a deduction for loss by arguing that the exemption
enacted by the German US double tax treaty did not allow including the losses of the
US permanent establishments.129 The case actually corresponds to the intraCommunity case of Lidl-Belgium.130 The ECJ argued in its reasoned order that in order
to determine the applicable freedom, the purpose of the national legislation must be
taken into consideration.131 It continued saying that in accordance with settled caselaw, holdings held by nationals of the Member State in the capital of a company
established in another Member State, which give them definite influence on the
company's

decision

come

within

the

substantive

scope

of

the

freedom

of

establishment provisions.132 The provisions of the German US double tax treaty apply
to permanent establishments and therefore only to situations where the company
exercises definite influence. Furthermore, SEW held 100 per cent interest in those
partnerships that qualify as a permanent establishment for tax purposes.133 The ECJ
concluded that the case falls solely within the material scope of the freedom of
establishment134, which is coherent with earlier case-law in connection with national
legislation that only targets at a group of companies.
In her opinion in Truck-Center, AG Kokott recalled that, "when examining which
fundamental freedom a rule of national law comes under, primarily the purpose of the
legislation concerned must be taken into consideration."135 Although the provisions of
the Belgian income tax code "admittedly do not apply only in cases in which the lender
has a holding of a certain size in the borrower", AG Kokott argued "those provisions,
however, cannot be viewed in isolation from the DTC, which is also part of the national
legal order of Belgium".136 She apparently also takes the DTC provisions as part of the
national legislation

into

consideration

while

determining

whether

the

national

provisions only apply with respect to holdings giving definite influence over the
company's

decisions

and

allowing

to

determine

the

company's

activities.

Consequently, she concludes that since "withholding tax is permitted only on interest
which a company resident in one Contracting State allocates to a company resident in

129
130
131
132
133
134
135
136

SEW, supra. fn. 79, para. 3 5.

C-414/06, Lidl Belgium GmbH & Co. KG v Finanzamt Heilbronn ('Lidl-Belgium'), not yet
reported.
SEW, supra. fn. 79, para. 13 with further references to case-law.
SEW, supra. fn. 79, para. 14.
SEW, supra. fn. 79, para. 15.
SEW, supra. fn. 79, para. 15 and 17.
Opinion of AG Kokott in Truck-Center, supra. fn. 83, para. 18.
Opinion of AG Kokott in Truck-Center, supra. fn. 83, para. 20 and 21.

19
the other Contracting State which holds, directly or indirectly 25% of the voting
shares in the former company" and given the fact that the parent "held 48% of the
capital of Truck Center", the case falls within the substantive scope of freedom of
establishment. Her conclusion follows the same arguments as delivered in SEW which
also took the DTC provisions into account.
3.4.2 Conclusions
From the analysed case-law, the following pattern emerges:
Cross-border acquisition of real estate
Provided that the real estate investment is not conducted through on agencies,
branches or subsidiaries, the free movement of capital covers ownership and
administration of such property.137 Only in cases where a national of a Member State
has "secured a permanent presence in the host Member State and, where immovable
property is purchased and held, that property [is] actively managed".138 Both
freedoms may be infringed at the same time and it must be recalled, that "the right to
acquire, use or dispose of immovable property on the territory of another Member
State, which is the corollary of freedom of establishment () generates capital
movements when it is exercised".139 The Court consequently examines in such
situations the applicability of both freedoms. In the light of the specific facts of ELISA
and Stauffer, the provisions governing the freedom of establishment however cannot
be applied. Under different circumstances, both freedoms may apply and the Court
would thus have to determine the prevailing freedom.
Participations
From the case-law it emerges that dividend payments may come under the functional
scope of both freedom of establishment as well as free movement of capital. Case-law
shows that the Court consequently applies its opinion of the "prevailing freedom" once
it is established that the provisions of both freedoms can be applied in the present
circumstances, irrespective whether there is a third-country element or not.140
According to settled case-law, any national rules which only concern groups of
companies primarily affect the freedom of establishment.141 National legislation which
applies "irrespective of the extent of the holding which the shareholder has in the

137
138
139

140
141

Stauffer, supra. fn. 25, para. 24.

Stauffer, supra. fn. 25, para. 19.
C-451/05, Europenne et Luxembourgeoise d'investissements SA v Directeur general des
Impt, Direction des services gnraux et de L'informatique and Ministre public ('ELISA'),
[2007] ECR I-8251, para. 59 with further references to case-law.
See also O'SHEA, supra. fn. (thin cap article), p. 372.
Burda, supra. fn. 57, para. 68; Test Claimants in the FII Group Litigation, supra. fn. 74, para.
118; Test Claimants in ACT Group Litigation, supra. fn. 122, para. 33; Lasertec, supra. fn. 53,
para. 19; Cadbury-Schweppes, supra. fn. 14, para. 31 and 32.

20
company making the distribution, may fall within the scope of both Article 43 EC on
freedom of establishment and Article 56 EC on free movement of capital".142 In
situations where the shareholder however exercises a definite influence on the
company's decision and determines in fact its activities, the freedom of establishment
prevails over the free movement of capital.143
(Financial) Services
In certain specific cases, a national provision may concern both the freedom to
provide services and the free movement of capital so that it is necessary to determine
the prevailing freedom.

142
143

Holbck, supra. fn. 54, para. 24; Test Claimants in ACT Group Litigation, supra. fn. 122, para.
37 and 38; Test Claimants in the Thin Cap Group Litigation, supra. fn. 75, para. 36, 80 and 142.
Burda, supra. fn. 57, para. 72 et seq.