Yaus Catering Services Ltd (Ireland) v Secretary of State for Home Department

A third-country national cannot create an Article 43 right of establishment merely by incorporating or acquiring a shell company in an EU or EEA state. Where the individual director has no entitlement to live and work in the state of establishment, refusal of immigration permission in another Member State does not hinder the company’s freedom of establishment. The domestic immigration restriction creates no new obstacle because the same impediment already exists in the state of establishment. Article 46 justification therefore does not arise unless an underlying Treaty right is engaged.

The claimant companies were incorporated in Ireland or Cyprus and were owned and controlled by third-country nationals who had no entitlement to enter, reside or work in those states. The companies had no established business there. The claimants argued that refusal of UK residence cards or other leave restricted the companies’ rights of establishment under Articles 43 and 48 of the EC Treaty, and gave the individuals derivative rights.

The claim was heard after permission had been granted and after earlier decisions had rejected materially similar arguments in Gransian v Secretary of State for the Home Department [2008] EWHC 3431 (Admin) and Lee Ling Low v Secretary of State for the Home Department [2009] EWHC 35 (Admin). The central issue was whether Article 43 was engaged at all.

1. The claim was dismissed. The refusal of residence cards or leave to remain did not engage Article 43 because the individual directors had no prior right to reside or work in Ireland or Cyprus, where the companies were said to be established.
2. Freedom of establishment protects genuine participation in the economic life of another Member State. It does not enable a third-country national to create immigration rights by setting up or acquiring a shell company in a state where that person has no right to enter, reside or work. The company’s incorporation and the director’s instructions to it could not generate such rights.
3. The relevant question was whether the individual had an entitlement to work and reside in the state of establishment before the alleged restriction in the second Member State. A refusal of UK immigration permission did not impose an additional hindrance where an equivalent impediment already prevented the individual from operating in the state of establishment.
4. The court accepted that a non-discriminatory measure could in principle hinder Article 43. However, the principle in Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-465 did not assist because the present case involved no engaged right of establishment. Article 46 could not be used as a justification mechanism before such a right existed.
5. The reasoning in Gransian and Lee Ling Low was adopted as applicable to the same essential corporate structure. Loutchansky was distinguished because its analysis assumed lawful residence and work in Austria. The authorities concerning workers and service providers likewise proceeded on lawful residence and employment in the state of establishment.
6. The abuse-of-rights issue did not arise because no EU right existed. Costs of £8,101 were ordered jointly and severally against the claimants. No wasted-costs order was made, and permission to appeal was refused.

First-instance judicial review claim. Permission had been granted by Plender J. The court dismissed the claim and refused permission to appeal.