Freedom of establishment
Every EU citizen may set up a business in any EU country in the same way and on the same legal basis as nationals of that country. This is part of the free movement of persons.
The intention of the Services Directive is to permit establishment without fulfilling all aspects of the host country's legislation. This is the so-called country of origin principle.
This principle was included in the Commission's original proposal for a Services Directive but was deleted by the European Parliament - without being replaced by the host country principle.
The exact interpretation of this question will to a very large extent have to be resolved by the Court of Justice.
Links
See Four Freedoms.