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IP/11/183

Brussels, 16 February 2011

Internal Market: Commission requests Sweden to ensure EU businesses can set up operations and supply services

The European Commission has today requested Sweden to change its legislation so as to comply with its obligations under EU law to allow businesses from other Member States to provide cross-border services in Sweden and establish themselves in Sweden. In the Commission's view, Sweden is in breach of rules laid down by the Treaty and by the Services Directive (2006/123/EC) to ensure the freedom of establishment and the freedom to provide services. The current Swedish legislation seriously hampers access to the Swedish market for businesses from other Member States. The Commission's request to Sweden takes the form of a "reasoned opinion". If the Swedish authorities fail to take satisfactory measures to remedy the infringement of EU law within two months, the Commission may decide to refer the case to the EU Court of Justice.

What is the aim of the EU rules in question?

Businesses that are effectively established in a Member State have the right, under Article 56 of the Treaty on the Functioning of the European Union (TFEU), to provide cross-border services in other Member States without having to establish there, in particular, without having to set up a branch. Businesses also have the right, under Article 49 of the TFEU, to establish in other Member States without being restricted to choose between establishment in the form of a branch, an agency or a subsidiary. Businesses have the right, under the Services Directive, to have their applications for setting up a branch processed as quickly as possible and without having to undergo unjustified or disproportionate formalities, such as producing certified copies or certified translations of certain documents. These rules are at the heart of the EU's Single Market and ensure that customers can enjoy access to a wide range of competitive goods and services and that businesses can enjoy access to the pan-European market.

How is Sweden not respecting these rules?

Swedish legislation on Foreign Branches, amended as recently as 2009 and 2010, contains several provisions which conflict with the Treaty rules on the freedom of establishment and the freedom to provide services, as well as with the Services Directive, in particular:

  • The requirement for businesses to set up a branch in Sweden before they can start supplying their services in Sweden. This requirement also restricts businesses' freedom of choice between establishments in the form of a branch, an agency or a subsidiary, which is guaranteed by the Treaty rules on the freedom of establishment.

  • The obligation for a business to use the commercial name used in its country of establishment when registering a branch, combined with the obligation to use a name that may not be confused with that of existing businesses in Sweden, makes it virtually impossible for those businesses, whose name risks being confused with that of Swedish businesses, to operate in Sweden.

  • The obligation on any business wishing to supply services in Sweden and whose manager resides outside Sweden to designate and register a person domiciled in Sweden responsible for the service of documents must be regarded as an unjustified restriction on the freedom to provide services.

  • The long deadline for processing an application for registering a branch in Sweden, and the obligation for the applicants to systematically provide certified copies and certified translations of a number of documents are contrary to the Services Directive.

How are EU citizens and/or businesses suffering as a result?

The Swedish legislation on Foreign Branches is of general scope and may affect thousands of businesses throughout the European Union.

Any service provider, such as IT experts or consultants or any self‑employed craftspeople who want to set up a business in Sweden are subject to the requirement to set up a branch. This limits their freedom to choose between different types of establishments. In addition, the formalities attached to the setting up a branch may be very burdensome for service providers. All this may dissuade them from setting up a business in Sweden.

Any business wanting to supply cross border services (i.e. services on a temporary basis without having to establish in Sweden) are subject to the requirements to set up a branch and to register a person domiciled in Sweden responsible for the service of documents. Businesses that fall within the scope of the Services Directive are exempt from such requirements. The requirements apply to service providers in the field of transport (e.g. taxis), audiovisual and radio broadcasting services and private security services which have been excluded from the Services directive. Health professionals are also subject in principal to this legislation.

This legislation may also discourage Swedish operators from calling on service providers from other Member States, and prevent consumers from gaining access to a greater variety of services from providers established in other Member States

More information

(Policy area):

http://ec.europa.eu/internal_market/services/services-dir/index_en.htm

Latest information on infringement proceedings concerning all Member States:

http://ec.europa.eu/community_law/index_en.htm

For more information on infringement procedures, see MEMO/11/86


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