Freedom of establishment (LE)
A European principle letting an intermediary or institution headquartered in France open branches in other European Economic Area states without a new local authorization. It frames durable cross-border activity, as opposed to the more occasional freedom to provide services.
Key points
Frequently asked questions
How does freedom of establishment work in practice for a French broker?
A broker licensed in France by the ACPR may notify its intention to open a branch in another EEA state; the ACPR then forwards the information to the host-country authority. The branch may then operate under the French regulatory regime, without going through an additional local licensing process. The host-country license is not required, but compliance with certain local rules of general application (consumer law, contract language) remains mandatory.
What is the difference between freedom of establishment and freedom to provide services?
Freedom of establishment involves a permanent physical presence (branch, office) in the host country, suited to regular commercial activity. Freedom to provide services, conversely, allows occasional intervention from the home country without creating a local presence. A broker regularly serving clients in Spain should opt for freedom of establishment, whereas an isolated cross-border file would fall under LPS.
What risks arise from ignoring the notification procedure?
Operating without prior notification exposes the broker to sanctions from the host-country authority and may lead to the annulment of contracts concluded with local clients. Moreover, an undeclared branch does not benefit from the European passport protection and may be deemed to be operating illegally.
In practice
A French brokerage network wishing to recruit commercial agents in Portugal to develop a portfolio of expat clients chooses freedom of establishment: it opens a branch in Lisbon after notifying the ACPR and the Bank of Portugal, without needing to obtain a separate Portuguese license.
Official sources
- Freedom of establishment and to provide services (CMF) · Légifrance
- Article L519-1 of the Monetary and Financial Code · Légifrance
- Prudential supervision and resolution authority · ACPR (Banque de France)