Court of Justice of the European Communities (including Court of First Instance Decisions)

The Association Agreement

Subject to the conditions and modalities applicable in each Member State:

- the treatment accorded to workers of Bulgarian nationality legally employed in the territory of a Member State shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared to its own nationals,

- the legally resident spouse and children of a worker legally employed in the territory of a Member State, with the exception of seasonal workers and of workers coming under bilateral Agreements in the sense of Article 42, unless otherwise provided by such Agreements, shall have access to the labour market of that Member State, during the period of that worker's authorised stay of employment.

1. Each Member State shall grant, from entry into force of the Agreement, for the establishment of Bulgarian companies and nationals and for the operation of Bulgarian companies and nationals established in its territory, a treatment no less favourable than that accorded to its own companies and nationals, save for matters referred to in Annex XVa.

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5. For the purposes of this Agreement

(a) establishment shall mean

(i) as regards nationals, the right to take up and pursue economic activities as self-employed persons and to set up and manage undertakings, in particular companies, which they effectively control. Self-employment and business undertakings by nationals shall not extend to seeking or taking employment in the labour market or confer a right of access to the labour market of the other Party. The provisions of this chapter do not apply to those who are not exclusively self-employed;

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(c) economic activities shall in particular include activities of an industrial character, activities of a commercial character, activities of craftsmen and activities of the professions.

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For the purpose of Title IV, nothing in the Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement. ...

The national legislation

217. The requirements for an extension of stay in order to remain in business in the United Kingdom are that the applicant can show that:

(i) he has established himself in business in the United Kingdom; and

(ii) his share of the profits of the business is sufficient to maintain and accommodate himself and any dependants without recourse to employment (other than his work for the business) or to public funds; and

(iii) he does not and will not supplement his business activities by taking or seeking employment in the United Kingdom other than his work for the business; and

(iv) in addition he satisfies the requirements of ... paragraph 219.

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219. Where a person has established himself as a sole trader or in partnership in the United Kingdom he will need, in addition to meeting the requirements at paragraph 217 above, to show:

(i) that he is a national of ... Bulgaria; and

(ii) that he is actively involved in trading or providing services on his own account or in partnership in the United Kingdom; and

(iii) that he, or he together with his partners, is the owner of the assets of the business; and

(iv) in the case of a partnership, that his part in the business does not amount to disguised employment; and

(v) the current financial position in the form of audited accounts for the business.

... the following provisions apply in relation to the refusal of an application for variation of leave to enter or remain or, where appropriate, the curtailment of leave:

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Grounds on which an application to vary leave to enter or remain in the United Kingdom should normally be refused

(2) the making of false representations or the failure to disclose any material fact for the purpose of obtaining leave to enter or a previous variation of leave;

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The main proceedings

The questions submitted for a preliminary ruling

1. Does Article 45 of the Association Agreement between the EEC and the Republic of Bulgaria ... confer rights of establishment upon a Bulgarian national who, under national immigration law, is treated as having entered the territory of that Member State illegally?

2. If the answer to the first question is yes, does Article 45 of the Agreement have direct effect within the national legal systems of Member States, notwithstanding the provisions of Article 59 of the Agreement?

3. If the answer to the second question is yes,

(i) to what extent may a Member State apply its laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons, and supply of services, to persons invoking Article 45 of the Agreement, without violating the proviso contained in the penultimate sentence of Article 59(1) of the Agreement and, inter alia, the principle of proportionality?

(ii) does Article 59, in any and if so what circumstances, permit the refusal of an application under Article 45 of the Agreement made by someone whose initial entry into that Member State was otherwise unlawful?

4. If the answer to the second question is yes, does Article 45 and/or Article 59 of the Agreement permit the application of a provision of national law under which the competent national authorities may require a Bulgarian national seeking to exercise rights as a self-employed person to demonstrate -

(a) that his share of the profits of the business (disregarding any alternative source of support) will be sufficient to maintain and accommodate himself and any dependants without recourse to employment (as opposed to self-employment) or to public funds, and

(b) that until his business provides him with such an income (disregarding any alternative source of support) he will have sufficient additional funds to maintain and accommodate himself and any dependants without recourse to employment (as opposed to self-employment) or to public funds?

5. If the answer to the preceding questions is that a Bulgarian national who is an illegal entrant may rely upon directly effective rights of establishment under the Agreement, then

(a) what factors, under such an Agreement, should the national court take into account in determining whether any breach by the competent authorities of that person's directly effective rights was sufficiently serious to give rise to a right to reparation in damages against the Member State concerned; and, in particular,

(b) in the state of Community law at the relevant time (i.e., when the decisions of August/September 1996 to refuse the Applicant's application for leave to remain as a self-employed person, and/or the decision to detain the Applicant, were taken), did the approach adopted by the competent national authorities constitute a grave and manifest disregard of a superior rule of law?

The second question

The first, third and fourth questions

The scope of Article 45(1) of the Association Agreement and the possible extension to that provision of the interpretation of Article 52 of the EC Treaty (now, after amendment, Article 43 EC)

Whether the restrictions imposed on the right of establishment by the host Member State's immigration legislation are compatible with the condition set out in Article 59(1) of the Association Agreement

The power of the competent authorities of the host Member State to refuse leave to remain, sought by a Bulgarian national invoking Article 45(1) of the Association Agreement, on the sole ground that her presence within the territory of that State was illegal

Whether the requirement for a new application for establishment to be submitted in due and proper form is compatible with the rule of equal treatment laid down in Article 45(1) of the Association Agreement and with the condition mentioned in Article 59(1) thereof

- The right of establishment, as defined by Article 45(1) of the Association Agreement, means that rights of entry and residence, as corollaries of the right of establishment, are conferred on Bulgarian nationals wishing to pursue activities of an industrial or commercial character, activities of craftsmen, or activities of the professions in a Member State. However, it follows from Article 59(1) of that Agreement that those rights of entry and residence are not absolute privileges, inasmuch as their exercise may, in some circumstances, be limited by the rules of the host Member State governing the entry, stay and establishment of Bulgarian nationals.

- Articles 45(1) and 59(1) of the Association Agreement, read together, do not in principle preclude a system of prior control which makes the issue by the competent immigration authorities of leave to enter and remain subject to the condition that the applicant must show that he genuinely intends to take up an activity as a self-employed person without at the same time entering into employment or having recourse to public funds, and that he possesses, from the outset, sufficient financial resources and has reasonable chances of success. Substantive requirements such as those set out in paragraphs 217 and 219 of the Immigration Rules have as their very purpose to enable the competent authorities to carry out such checks and are appropriate for achieving such a purpose.

- Article 59(1) of the Association Agreement must be construed as meaning that the competent authorities of the host Member State may reject an application made pursuant to Article 45(1) of that Agreement on the sole ground that, when that application was submitted, the Bulgarian national was residing illegally within the territory of that State because of false representations made to those authorities or non-disclosure of material facts for the purpose of obtaining initial leave to enter that Member State on a different basis. Consequently, those authorities may require that national to submit, in due and proper form, a new application for establishment on the basis of that Agreement by applying for an entry visa to the competent authorities in his State of origin or, as the case may be, in another country, provided that such measures do not have the effect of preventing such a national from having his situation reviewed at a later date when he submits that new application.

The fifth question

Costs