Luxembourg implemented the Posted Workers Directive 96/71/EC with a national law that stipulated that certain areas fell within mandatory areas of "public policy". It set certain requirements for when a non-Luxembourg employer had workers within the Duchy, such as the provision of certain extensive and detailed information to the Luxembourg authorities, and that an agent be in place within Luxembourg to ensure compliance.

The Commission argued that Luxembourg had failed to properly implement the Directive - it was imposing obligations on employers outside of Luxembourg which went beyond the Directive's requirements. Luxembourg claimed that this was for reasons of public policy.

The ECJ agreed with the Commission. Luxembourg had imposed an additional burden for undertakings established in another Member State. The latter were not on an equal footing, from the point of view of competition, with employers established in Luxembourg and they may have been dissuaded from providing services there.

The ECJ said that the laws of the Member States must be coordinated in order to lay down a nucleus of mandatory rules for minimum protection to be observed in the host country by employers who post workers there. "Public order" legislation applies to national provisions crucial to protect political, social or economic order in the State concerned, so as to require compliance by everyone present on that State's national territory. Therefore the public policy exception to the fundamental principle of freedom to provide services, must be interpreted strictly - its scope cannot be determined unilaterally by the Member States. Luxembourg's requirements were for ease of administration, no more, and this was not sufficient. It had failed to implement the Directive properly.