EU Internal Market Law PDF

ECL3004 EU INTERNAL MARKET LAW ABOUT ELSA ELSA Malta is a distinguished member of the ELSA International network, comprising over 50,000 students from more than 350 law faculties across Europe. The organization is deeply committed to upholding the values enshrined in its motto - "A just world in wh...

ECL3004 EU INTERNAL MARKET LAW ABOUT ELSA ELSA Malta is a distinguished member of the ELSA International network, comprising over 50,000 students from more than 350 law faculties across Europe. The organization is deeply committed to upholding the values enshrined in its motto - "A just world in which there is respect for human dignity and cultural diversity" - and strives to achieve this mission in all its activities. Founded in 1986, ELSA Malta is recognized as a prestigious student organization by the Senate of the University of Malta. Its primary aim is to represent all law students in the University and provide them with a diverse range of opportunities. ELSA Malta offers various events throughout the academic year that cater to the needs of law students of all ages, providing them with an excellent opportunity to expand their legal knowledge across various topics in the Law Course. Additionally, these events can prove to be of great value to students from other faculties as well. Furthermore, ELSA Malta also strives to promote international understanding and cooperation by fostering cultural exchange and encouraging students to participate in international projects, conferences, and competitions. By engaging in such activities, ELSA Malta seeks to equip its members with valuable skills and experiences that will help them become responsible and active citizens of the global community. DISCLAIMER Please note that the student notes provided by ELSA Malta are intended to supplement your own notes and independent study. These notes may contain errors or omissions, and we cannot guarantee their accuracy or completeness. While these notes may act as a tool to enhance your understanding of the material covered in class, we advise against relying solely on them in preparation for examinations or assignments. It is crucial to attend all classes, review the assigned readings, and take your own notes. ELSA Malta cannot be held responsible for any consequences that may arise from the use of these notes, including poor academic performance or misunderstandings of course content. By accessing and using these notes, you acknowledge and agree to these terms and conditions. ACKNOWLEDGMENTS ELSA Malta President: Jack Vassallo Cesareo ELSA Malta Secretary General: Beppe Micallef Moreno Writer: Rachel Lowell  EU Internal Market Notes The Single Market The Central Issues The single market is central to the EU and is still its principal economic rationale. The realisation of a single market in economic terms necessarily raises issues about the inter-relationships of the economic and social dimensions of EU policy. Economic Integration: Forms & Techniques Forms of Economic Integration It is of utmost importance to understand the nature of a common market and how it differs from other forms of economic integration. As held by D Swann in his book ‘The Economics of the Common Market’: “economic integration can take various forms and these can be ranged in a spectrum in which the degree of involvement of participating economies, one with another, becomes greater and greater”. Part Three of the TFEU contains the fundamental principles for the establishment of a customs union and a common market. It goes on to set out the four freedoms: 1. Freedom of Goods - ensure that goods move freely, and those most favoured by the consumers will be most successful, irrelevant to the area of origin. 2. Freedom of Workers - labour in some areas may be valued more highly than in others. The value of labours can only be maximised within the EU if workers can move to the areas in which they are most valued. 3. Freedom of Services 4. Freedom of Capital The basic economic aim is the optimal allocation of resources for the EU, which is facilitated by allowing factors of production to move to the area where they are mostly valued. Techniques of Economic Integration There are two principal techniques: 1. EU Law can prohibit national rules that hinder cross-border trade, because they discriminate against goods or labour, etc, from other MS, or because they render market access more dif cult. 2. The creation of a single market also requires positive integration. Barriers of integration may ow from diversity in national rules on different matters i.e. health. These may only be overcome through harmonisation through an EU directive. This is attained through Articles 114 and 115 of the TFEU, and other sector-speci c Treaty Articles. Pre-1986: Limits The most important legislative contribution was the harmonisation of laws. Article 115 TFEU now holds that: without prejudice to Article 114, the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the EP and the Economic and Social Committee, issue directives for the approximation of such laws, regulations, or administrative provisions of the MS as directly affect the establishment or functioning of the Internal Market”. The problem here is with the unanimity requirement. Technical developments used to mean the the Commission was ghting a lost battle. Rachel Lowell 1 fl fi fi fi The judicial contribution can be seen through the ECJ, with speci c reference to Article 258 TFEU and direct effect, in the way it interpreted the Treaty to promote the Single Market. One of the landmark judgements is that of Cassis de Dijon. Even though, there was still much to be done by the early 1980s and the Single Market integration appeared to be no closer. However, in a very important meeting, the seeds of the Single European Act (SEA) were sown. In 1985 the European Council called on the Commission to draw up a detailed programme with a speci c timetable for achieving a single market by 1992. The Commission, under the leadership of Jacques Delors, responded. Single European Act: The Economic and Politics of Integration The Economic Dimension: The Commission’s White Paper The White Paper set out to establish the essential and legal consequences of commitment to a single market. The Commission held that the Community had lost its momentum partly through recession, partly through lack of con dence and vision, but it said that the mood has now changed: time for talk has now paused. The time for action has come. That is what the White Paper is about. The Paper made reference to a chosen strategy, and it is evident that the Commission was going to take into account the underlying reasons for the existence of barriers to trade, and recognises the essential equivalence of MS’ legislative objectives in the protection of health and safety, and of the environment. Its harmonisation approach is based on different principles: One has to see what is essential to harmonise, and what may be left to the mute; recognition of national regulations and standards. Legislative harmonisation will in future be restricted to laying down essential health and safety requirements which will be obligatory in all MS. Conformity with this will entitle a product to free movement. Harmonisation of industrial standards by the elaboration of European standards will be promoted to the maximum extent, but the absence of European standards should not be allowed to be used as a barrier to free movement. The Political Dimension: The Politics of Integration Authors Sandholtz & Zysman rejected explanations based on neofunctionalist integration theories and on the domestic politics of the MS, although they admitted that elements of these theories were relevant even under the own explanations. They argued that the success of the 1992 initiative should instead be viewed in terms of elite bargain formulated in response to international structural change and the Commission’s policy entrepreneurship. There were three factors in this regard: i. The Domestic Political Context ii. The Commission’s initiative iii. The Role of the Business Elite However, Moravcsik held different views. He disagreed with the previous thesis, and agreed that he reform was due to inter-state bargains between Britain, France, and Germany. This was made possible by the convergence of European Economic Policy preferences in the early 1980s, combined with the bargaining leverage which France and Germany used against Britain by threatening a two-track Europe, with Britain in the slow lane. There is no need to speci cally decide between the two theories put forward, and one can easily argue that there were two connected conditions for the success of the SEA: 1. The legislative reform to facilitate the passage of measure designed to complete the internal market. Rachel Lowell 2 fi fi fi fi 2. The new approach to harmonisation which would expedite the process of breaking down the technical barriers to intra-community trade. The Internal Market: Legislative Reform and the SEA The SEA was signed in 1986 and entered into force in 1987. The Act contained procedures aimed at facilitating legislation to complete the IM. The SEA introduced two major legislative innovations for the Single Market Project. They are now found in Article 26 & Article 114 TFEU. Article 26: the Obligation Stated The content of the obligation is contained within Article 26(1) TFEU which holds: “the Union shall adopt measures with the aim of establishing or ensuring the functioning of the IM, in accordance with the provisions of the Treaty”. Article 26(2) de nes the Internal Market and states that: “the IM shall compromise an area without internal frontiers in which the free movement of goods, persons, services, and capital is ensured in accordance with the provisions of the Treaties”. Attainment of an area without internal frontiers can be judged by whether border controls exits on the free movement. However, such attainment of the internal market is not a once-and-for-all, static objective, since technological developments pose new challenges for the internal market ideal, as do external economic factors. One might argue that Article 26 may have legal effects against the EU itself, and this owing to the fact of its mandatory wording. The possibility of using Article 265 TFEU in the event of Commission/Council inaction would demand on whether the criteria for such actions were met. This would not be easy, because it would need to be shown that the measures that it is claimed should have been enacted were de ned with suf cient speci city for them to be identi ed individually, and adopted as per Article 266 TFEU. This will not be so where the relevant institutions possess discretionary power, with consequential policy options, the content of which cannot be identi ed with precision. Article 26 may possibly also have legal consequences for the MS. This could mean that an individual might argue that MS’ rules which constituted a barrier to teh completion of the IM should not be applied if incompatible with Article 26, given that this article ful lled the conditions for direct effect. Article 27: the Obligation Quali ed This Article quali es the former. It requires the Commission, when drawing proposals in pursuant to Article 26, to take into account the extent of the effort that certain economies showing different in development will have to sustain during the period of establishment of the IM, and it may propose appropriate provisions. If the provisions take the form of derogations, they must be temporary and cause the least possible disturbance to the functioning of the Common Market. Article 114(1): Facilitating the passage of harmonisation measures A major problem in enacting harmonisation measures was the unanimity requirement under what is now Article 155 TFEE, which gives general power to pass directives for the approximation of laws of the MS that affect age establishment of the IM. The SEA provided in what is now Article 114 TFEU a general legislative power, making to Article 115, without the unanimity requirement. So whereas Article 115 authorises only the passage of directives, Article 114 empowers enactment of measures, which includes directives but also covers regulations, which are made by the ordinary legislative procedure as seen in Germany v Council (C-359/92). Rachel Lowell 3 fi fi fi fi fi fi fi fi fi  Article 114: A Residual Provision The article only operates save where otherwise provided in this Treaty. This means that other, more speci c Treaty provisions, such as Articles 43, 50, and 53 TFEU, should be used for measures designed to attain the IM where they fall within the subject matter areas of those Articles. This can generate boundary-dispute problems about the correct legal basis for EU legislation. The general test propounded by the ECJ for the resolution of such boundary disputes was that regard should be had to the nature, aim, and content of the act in question as seen in a multiple of caselaw, one of which being EP v Council (C-271/74 1996). Where these factors indicated that the measure was concerned with more than one area of the Treaty, then it might be necessary to salsify the legal requirement if two Treaty Articles. Boundary disputes are less likely to occur now, since the ordinary legislative procedure, the successor to the co-decision procedure, is applicable to many Treaty Articles. Article 114: the Limits The ECJ, in the Tobacco Advertising Case, held that this Article has its limits. The ECJ struck down a directive to harmonise a law relating to advertising of tobacco products. It concluded that the measures must be intended to improve the conditions for the establishment and functioning of the IM. The ECJ is willing to accept Article 114 as the legal basis for the enacted measure, as seen in the aforementioned case and R v Secretary of State for Health (C-210/03) & ex p Swedish Match (2004). Reference can again be made to the Tobacco Case, where the ECJ upheld the validity of a revised Directive on tobacco advertising, which included prohibitions on advertising in the press and radio. The Court concluded that this measure could be validly adopted under Article 114, since there were disparities between the relevant national laws on advertising and sponsorship of tobacco products which could affect competition and inter-state trade. Article 114(2)-(10): Quali cations to Article 114(1) The remainder of the article quali es what is found in the rst subsection. Article 114(2) encapsulates an exception, by providing that the rst sub article shall not apply to scal provisions, to those relating to the free movement of persons, or to those relating to the rights and interested of employed persons because of their sensitive nature. Article 114(3) instructs the Commission, when proposing measures under the rst sub article re to health, safety, environmental protection, and consumer protection, to take as a base a high level of protection, taking into account any new development based on scienti c facts. Article 114(4)-(9) have received most critical attention and are very often described as being complex. Article 114(5), (7), and (8) were new provisions put forward by the Treaty of Amsterdam, whereas other paragraphs modi ed pre-existing provisions. Any assessment of Article 114(4)–(9) must take into account political and legal issues. In political terms many of the more dramatic fears about the impact of Article 114(4) have not been borne out. Concerns that Member States would routinely seek to invoke the Article to prevent the application of harmonisation measures have proven unfounded. In legal terms, the MS concerns which can trigger this same article are nite: the matters covered by Article 36 TFEU, plus the environment and working environment. This article was further limited through the Treaty of Amsterdam. Rachel Lowell 4 fi fi fi fi fi fi fi fi fi fi  Article 114(5) deals with the situation where the MS seeks to introduce a new national measure after the adoption of a harmonisation directive. The MS concerns which can tigger this article are more limited: there must be new scienti c evidence and there must be a problem speci c to that state as seen in Netherlands v Commission (Case T-234/04 2007). The two aforementioned subsections are exceptions that derogate from the principles of the Treaty and are therefore restrictedly construed by the Commission and ECJ. Additionally, the Commission’s power of scrutiny has been reinforced by Article 114(6). This article now speaks of the commission approving or rejecting national provisions, and not merely con rming them. The State is also obliged to explain the reasons for maintaining the national provisions. The process under Article 114 is not wholly adversarial. The seventh and eighth subsections are distend to facilitate a negotiated solution to the problem. Article 114(10) is the nal quali cation which provides that harmonisation measures may include safeguard clauses authorising MS to take provisional measure subject to Union control procedures. Recourse to Article 36 is normally precluded when EU harmonisation measures have been enacted. The IM: the new legislative approach to marketing of products and harmonisation The Rationale for the New Approach The completion of the single market was dependent on the reform of the legislative procedure to facilitate legislation to complete the internal market and there also had to be anew approach to harmonisation to make it easier to secure the passage of these measures. One has to keep in mind the traditional legislative techniques had disadvantages as maintained by Pelkmans. They were slow, and generated excess uniformity. There was failure to develop links between harmonisation and standardisation, thereby leading to inconsistencies and wastage of time. These shortcomings were recognised by the Commission in the White Paper, hence the need for a new approach. The Elements of the New Approach There was to be mutual recognition through the Cassis de Dijon principles. National Rules that did not come within a mandatary requirement would be invalid; legislative harmonisation was to be restricted to laying down health and safety standards; and there would be promotion of European Standardisation. Provision of Information: National Rules that might impede Free Movement MS are obliged to provide information by Directive 83/139, now overtaken by Directive 93/34 which lays down a procedure for the provision of information in the eld of technical standers and regulations. This measure obliges a state to inform the Commission before it adopts legally binding regulations setting a technical speci cation, except where it transposes a European or International standard. The Commission goes on to notify other State, and adoption of national measure is delayed for a minimum of three months, in order that amendments can be considered. A year’s delay can result if Commission decides to press ahead with a harmonisation directive on the issue. The Directive was given added force by the ECJ’s decision in the CIA Case. A national measure which has not been noti ed in accordance with the Directive could not be relied on. Provision of Information: Obstacles to Free Movement and Serious Trade Disruption Regulation 2679/98 requires MS that have relevant information concerning obstacles to the Free Movement of Goods that can lead to serious trade disruption and loss to individuals, and which Rachel Lowell 5 fi fi fi fi fi fi fi fi requires immediate action to prevent an continuation, to notify the Commission. The MS has an obligation to take all necessary and proportionate action to ensure free movement of goods. Mutual Recognition: Normative Dimension This is the core of the ECJs and Commission’s strategy. Schmidt, amongst others, holds that mutual recognition entails a governance strategy and embodies a choice as to how to achieve market integration. This integration might be further by according primary to host state control, subject to non-discrimination. Member States open their borders to goods from elsewhere, provided that the importers meet the standards of the host country, with the obligation not to discriminate. A second strategy is harmonisation at the EU level, overcoming national regulatory sovereignty. Politics remain the mode of setting the regulatory regime, but the politics now take place at supranational level rather than in national level. Thirdly, a product ;awfully manufactured in a MS should be capable of being sold in any other MS. the underlying assumption is that MS’ regulations address alternative solutions to the same underlying problems. MS no longer retain control over the regulatory regime in their own countries. The host state must prima facie accept the goods lawfully marketed according to the regulatory requirements of the home state, which requires national governments to trust the regulatory regime of the other MS. The aforementioned is still tempered with public interest defences as per Article 36 TFEU, and by the mandatary requirements recognised in the Cassis judgement. Harmonisation efforts are concentrated on measures that are still lawful. Mutual Recognition: Practical Dimension This has been central to EU market integration. Pelkmans has pointed to the practical dif culties realising this ideal, mostly because the judicial elaboration of mutual recognition in the Cassis judgement lacks visibility for many traders, especially small and medium-sized enterprises, with the consequence that they adapt their products to the requirements of host states, even though they are not required to do so under EU Law. The Commission noticed the aforementioned, and made proposals to improve with reference to increased monitoring of mutual recognition by the said Commission, complemented by measures t improve awareness of mutual recognition by producers of goods and services. MS should deal with requests concerning mutual recognition within. Reasonable period of time, and should include a mutual recognition clause in national legislation. Mutual Recognition: Control over MS Derogation Commission resorted to hard law to improve the ef ciency of mutual recognition, by imposing tighter controls over MS’ derogation from free movement. Decision 3052/95 imposed an obligation on a MS to notify the Commission where it looks steps to prevent lawfully produced goods in another MS from being placed on the market. This did not work and was replaced in 2008. A MS that decides to prevent/hinder free movement of goods lawfully marketed in another MS on grounds listed under Art. 36 TFEU, or because of the Cassis Mandatary Requirements, must give written notice to the importer, who has twenty days in which to proffer comments contesting the decision. The MS makes a nal decision based on the comments, giving reasons for its decision which must be open to challenge before National Courts. Rachel Lowell 6 fi fi fi The MS are also obliged to establish Product Contact Points which provide information to importers as to the technical rules applicable to particular types of product, and information about the principle of mutual recognition in that MS. New Approach: Harmonisation The new approach of harmonisation is used where national rules survive scrutiny of Article 36 TFEU and the mandatary requirements. Where this is so, harmonisation is limited to laying down essential health and safety requirements. European Standardisation is central to the new approach of harmonisation because as held by Pelkmans, it reduces barriers to intra-EU trade and increases the competitiveness of European Industry. The principal bodies are the European Committee for Standardisation, the European Committee for Electrotechnical Standardisation, and the European Telecommunications Standards Institute. These ensure that standardisation processes take place in parallel with harmonisation at Council level and are based on essential requirements. Compliance with a mandated standard means that the product is premed safe under the General Product Liability Directive, and that it can, subject to some quali cations, circulate freely within the EU. Such standards are published in the Of cial Journal. It is important to note that a directive passed pursuant to the new approach establishes in general terms the health and safety requirements that the goods must meet. The setting of standards helps manufacturers to prove conformity to these essential requirements, and to allow inspection to test for conformity with them. This new approach to harmonisation has considerable advantages: Directives can be drafted more easily since they are less detailed. The excessive ‘Euro-uniformity’ of the traditional approach is avoided by combining stipulated safety objectives with exibility as to the standards through which this compliance can be achieved. The need for unanimity is obviated through Article 114. Harmonisation and standardisation are related. More EU directives can be made, and hence the gap between EU harmonisation and the volume of national technical regulations can be reduced. Incentives for Member States’ implementation of directives have been increased through judicial doctrine such as state liability in damage New Approach to Harmonisation: 2008 Reforms The basic principle is that EU harmonisation legislation is restricted to setting out the essential requirements determining the level of such protection, subject to the caveat that where recourse to essential requirements is not possible or not appropriate, in view of the objective of ensure adequate protection of consumers, public health and the environment, or other aspects of public interest protection, detailed speci cations may then be set out in the harmonisation legislation. Harmonisation: Minimum and Maximum Rachel Lowell 7 fl fi fi fi  The EU has choices when it enacts harmonisation legislation. It may pass legislation that sets minimum standards, which do not preclude MS from setting more exciting standards. Minimum Harmonisation enables MS to maintain more stringent regulatory standards than those prescribed by EU standards, provided that these are compatible with the Treaty. The EU can alternatively pass maximal legislation that covers the entire area, which would entail an exhaustive regulation of the given eld. The Commission favours the latter type of harmonisation, at least in areas such as consumer policy. Whether the harmonisation measure is intended to preclude any national measures that differs from the EU directive may be a contentious issue. In Ratti, the ECJ had to decide whether Directive 73/173 on the packaging and labelling of dangerous substances precluded a state from prescribing obligations and limitations which are more precise than, or at all events different from, those set out in the directive. The Italian rules required that more information should be attached to the packing than that speci ed in the Directive. The Court held that the Directive was intended to prevent the state from laying down stricter rules of its own. It may, by way of contrast, be apparent that the directive only partially regulates the area. In Grunert, a French producers of food preservative containing lactic and citric acid was prosecuted for selling the preservative for use in the making of certain pork meats. French Law prohibited such use unless authorised by national authorities, and the acids used were not on the national list. Directives 64/54 and 70/357 did, however, list the two acids as among those that could be used to protect food against deterioration. This was Grunert’s defence. The Directives went on to provide that, subject to certain conditions, they were not to affect provisions of national law specifying the foodstuffs to which the preservatives listed could be added. The ECJ decided therefore that the Member States had discretion as to the foodstuffs to which listed preservatives could be added. The Internal Market: Tensions & Concerns Consumer Interest and Commercial Power One concern is whether consumer interests are suf ciently protected in the process of attaining a single market. Many national rules that impede intra-EU trade are signed to protect consumers, as recognised under Article 36 TFEU and the Cassis Judgement. The problem is whether the directives adequately balance consumer and manufacturing interests. As Russell, the Secretary-General of ANEC, astutely observed, ‘access may be important. But access without in uence is meaningless’. There are also concerns vis-a-vis regulations about product safety and the like are made at national level. Tensions resulting from the imbalance in power between consumer and commercial interests are not created because harmonisation measures are passed at EU rather than national level. They are endemic in most Western-style market economies. Whether consumer interests fare better in the regulatory process at national or EU level will depend on the relative capacities of commercial and consumer interests to in uence the legislative process within the EU and the nation state, and the relative costs involved in operating within these differing polities. The Single Market, Market Freedom, and Structural Balance A second tension inherent in the single market project is between an EU Free Market and its impact on the weaker economies of the Union. The SEA addressed this problem through Article 27 TFEU. Ful lment of the single market project can regenerate macro-economic and social tensions between rich, poor, and middle-class economies within the EU. A market-driven national economic policy will often create regional problems within a particular country, with area of high unemployment and relative poverty. It is not therefore surprising that a vigorous EU policy of increased Rachel Lowell 8 fi fi fl fi fi fl competitiveness and breaking down trade barriers will produce similar tensions, albeit on a larger scale. Articles 174–178 TFEU provide the foundation for structural policies to address this problem. The balance between the single market and structural intervention will, however, always be problematic. The Challenge to Positive Integration Majone argues that the real costs of regulations vis-a-vis harmonisation are borne by those who have to comply with them, and not by those who make them. This means that budgetary constrains have limited impact on the regulators, with the consequences that the volume, detail, and complexity of Community regulations are often out of proportion with the bene ts that they may reasonably be expected to produce. MS often enjoy a comparative advantage in devising regulations in areas such as telecommunications, consumer protection, and environmental protection because they are not tied to the lowest common denominator approach that often limits EU regulatory provisions, and because MS have superior implementation mechanisms to the EU. Politics, Economics, and the Single Markey Enterprise Conceptions of market freedom are not value-free. This phrase and the appropriate limits to free markets are contestable. These are key issues that divide political parties. There is sound economic evidence that removing barriers to intra-EU trade will bring economic bene ts. However, there is room for different opinions about the scope of protective EU measures, even among those of differing political persuasions who are committed to the European ideal. The politicisation which accompanies market integration has been noted by commentators, such as Pelkmans and Weiler, who state that an internal-market strategy that cuts deeply into the regulatory environment, severely limiting the options available to Member States, cannot pretend to be entirely apolitical. N.B. The continuing relevance of this issue was starkly exempli ed by the French negative vote in the referendum on the Constitutional Treaty, a result, in part, of the perception that the EU was too dominated by market considerations, thereby endangering traditional French social values. The IM: Reconceptualisation The single market project did not come to an end in 1992, and there was a continuing ow of internal market legislation post 1992. There were many reports focusing on attainment of the IM in the economic sense of the term. Reference can be made to the 2003 programme; Making Most of the IM, in which issues and management of the single market were tackled. In 2006, there was a study names as the Impact and Effectiveness of the Single Market which dealt with a multitude of topics such as economic gains from the IM. These themes were all included in the Single Market Action Plan. Four goals were developed and endorsed in 1997: 1. Making rules more effective 2. Dealing with market distortion 3. Removing sectoral obstacles to market integration 4. Delivering a single market for all citizens. A broader conception of the internal market is however also to me found in a number of the papers from the Commission and the EP. The internal market is conceptualised in more holistic terms, to include not only economic integration, but also consumer safety, social rights, labour policy, and the environment. This material is therefore of relevance for the concerns voiced in the previous section. The Lisbon European Council constituted another important stage in the recon guration of the internal market agenda. The meeting in March 2000 focused on employment, economic reform, and Rachel Lowell 9 fi fi fi fi fl social cohesion. It set a ‘new’ strategic goal: the Union was to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion. Completion of the IM was one way of achieving this strategy, and modernisation of the European Social Model through an active welfare state was another. This was important in ensuring that the emergence of this new economy does not compound the existing social problems of unemployment, social exclusion, and poverty. The principal Commission reports concerning the internal market in 2000 developed the ideas of the European Council. The 2000 Review of the IM Strategy took the strategic remit of the Lisbon European Council as its starting point. The internal market should be made economically effective, but it should also foster job creation, social cohesion, and safety. In economic terms, a properly functioning internal market was the key to prosperity for EU citizens. In social terms, the internal market was seen as the guarantee of rights to safe, high-quality products. The willingness to consider the IM is to be welcomed. The Treaty does not preclude taking account of non-market values, such as heart and safety, even with IM legislation, provided that the initial economic hurdle is met. There are containing tensions between the economic and social dimensions of the IM. Therefore, the priorities in the 2003-1006 Internal Market Strategy were heavily economic in nature. It is also the case that the balance between the economic and social dimensions of the Lisbon Strategy has altered over time. While both remain part of the Strategy, the economic focus has often predominated, although the French rejection of the Constitutional Treaty because it was too economic in its orientation led to some renewed emphasis on the social dimension, albeit still within a ‘tight’ economic frame. The Monti Report is premised on the need for initiatives that will generate a stronger single market, foster consensus about the single market project, and deliver the single market ideal. The Report contains a valuable analysis of the economic challenges facing the single market project, recognises the tensions between the economic and social dimensions of the single market, and seeks to address them. Free Movement of Goods: Duties, Charges, and Taxes Central Issues Freedom of Movement of goods can be impended in many ways. The most obvious form of protectionism will occur through custom duties or charges which have an equivalent effect, with the object of rendering foreign goods more expensive than their domestic counterparts. A state may also attempt to bene t domestic goods by taxes that discriminate against imports. A state may seek to preserve advantages for its own goods by imposing quotas or measures which have an equivalent effect on imports, thereby reducing the quantum of important products. The abolition of customs duties and charges having an equivalent effect is central to the idea of a customs union and a single market. On the words of the Commission, the Customs Union is a foundation of the EU and essential to the functioning of the single marker, with the implication that the (twenty seven)* customs administration of the EU must act as though they were one. Rachel Lowell 10 fi The ECJ looks to the effect of the duty, and not its purpose, and has given a broad reading to charges having equivalent effect to customs duty. It has only allowed limited exception to Articles 28-30, and any breach will be unlawful per se. The prohibition of taxes that discriminate against imports is equally central to the single market ideal. Customs duties apply when goods cross the border, and are caught by Articles 28-30 TFEU. A state may discriminate against imports through differential taxes once the goods are in its country. Articles 28-30: Duties and Charges Article 28(1): “the Union shall compromise a customs union which shall cover all trade in goods and which shall involve the prohibition between MS of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries”. The old Article 12 EEC prohibited the imposition of new customs duties and charges equivalent thereto, while the old Article 13 EEC obliged the MS to abolish existing duties within the transnational period, in accordance with Articles 13-15 EEC. The passage of time has rendered the distinction between new and existing duties redundant. Article 30 TFEU now relates to any customs duties and charges equivalent thereto, whether concerning imports or exports, with no distinction being drawn as to when such duties were imposed: “customs duties on imports and exports and charges having equivalent effect shall be prohibited between MS. this prohibition shall also apply to customs duties of a scal nature”. Duties and Charges: Effect not Purpose The Court made it clear from the outset that the application of Article 30 TFEU depends upon the effect of the duty or charge, and not on its purpose. Commission v Italy (Case 7/68 of 1968)(The Arts Treasure Case) - Italy is a country rich in cultural heritage and imposed a custom duties on goods of cultural heritage exiting Italy. The reason was to protect the Italian Cultural Heritage, however, the Court rejected this argument. The Commission took an enforcement action against Italy as per Article 2 TFEU which relates to prohibition of Customs Duties. When a tax is caught by Article 30 TFEU as a duty or charge that is of equivalent effect then it is in effect per se unlawful. Thus, attempts by Italy to argue that its tax could be defended on the basis of what is now Article 36 TFEU was rejected by the Court, since this can only be used as a defence vis-a-vis quantitative restrictions which are caught by Article 34 TFEU. It cannot validate scal measures that are prohibited under Article 30. The ECJ reaf rmed its emphasis on effect rather than purpose in other cases. It also made it clear that the Treaty provisions can be applicable even if the state measure was not designed with protectionism in mind. In the Diamantarbeiders Case, the Court considered the legality of a Belgian Law requiring 0.33% of the value of imported diamonds to be paid into a social fund for workers in the industry. The fact that the purpose of the fund was neither to raise money for the exchequer nor to protect the domestic industry did not save the charge in question. It was suf cient that the charge was imposed on goods because they had crossed a border. Charges having an Equivalent Effect: General Principles Article 30 TFEU does not only prohibit customs duties but also charges having an equivalent effect (ECC). It is deigned to catch all protectionist measures that create a similar barrier to trade to customs duties stricto sensu. The term is interpreted extensively by the ECJ. Rachel Lowell 11 fi fi fi fi  Commission v Italy (Case 24/68 of 1969) - Italy imposed a levy on goods which were exported to other MS with the purpose of collecting statistical material for use in discerning patterns. The Court reiterated its holding that customs duties were pro ted irrespective of the purpose for which the duties were imposed, and irrespective of the destination of the revenues which were collected. Moreover, the extension on the prohibition of customs duties to CEE is intended to supplement the prohibition against obstacles to trade created by such duties by increasing its ef ciency. This clear message was repeated in Diamantarbeiders. The ECJ reiterated the broad de nition of a CEE and made it clear that this would bite whether those affected by the charge were all Community citizens, those from the importing states or only the nationals from the state that was reusable for passing the measure under scrutiny. The ECJ’s strident approach was unsurprising given the centrality of abolishing custom duties and CEEs to the very notion of a single market. The abolition of such measures goes to the very heart of this ideal. It was a necessary rst step in the attainment of market integration. The eradication of customs duties and the like was vital if the broader aims of the common market were to be ful lled. It is clear that a charge which is imposed not on a product as such, but on a necessary activity in connection with the product, can be caught by Articles 10 and 110 TFEU. CEE: Inspections and the Exchange Exception A common defence is that the charge imposed on imported goods is justi ed because it is merely payment for a service which the state has rendered to the importer, and that therefore it should not be regarded as a CEE. The Court has been willing to accept this argument in principle. It has, however, been equally alert to the fact that a state might present a charge in this way when in reality it was seek-ing to impede imports, or in circumstances where there was no commercial exchange at all. The Court has therefore closely scrutinised such claims from states and has not readily accepted them. Commission v Italy (Case 24/68) - the Italian Government argued that the charge should be seen as the consideration for the statistical information which it collected. The Government contended that this information affords importers a better competitive position in the Italian market while exporters enjoy a similar advantage abroad, and that therefore the charge should be viewed as consideration for a service rendered, as a quid pro quo, and not as a CEE. However, the Court was unconvinced and held that such information was bene cial to the whole economy and to the administrative authorities. Even when the charge is more directly related to some action taken by the state with respect to speci c imported goods, the Court has been reluctant to accept that the charge can be characterised as consideration for a service rendered. This is also apparent in the Bresciani Case. The Italian authorities imposed a charge for the compulsory veterinary and public-health inspections which were carried out on important raw cowhides. This judgement indicates clearly the ECJ’s reluctance to accede to arguments that will take pecuniary charges outside the Treaty. Firstly, the fact that the charge was propionate to the quantity of imported goods made no difference, since Article 30 TFEU prohibited any charge imposed by reason of the fact that goods caused a frontier. The Court went on by saying that the cost of inspections to maintain public health should be borne by the general public. The ECJ’s conclusion was, however, designed to limit the ambit of any exceptions to what are now Articles 28–30 TFEU. Rachel Lowell 12 fi fi fi fi fi fi fi fi CEE: Inspections and Ful lment of Mandatory Legal Requirements Where EU legislation permits an inspection to be undertaken by a state, the national authorities cannot recover any fees charges from the traders as seen Commission v Belgium (1984). The Court has, however, accepted that a charge imposed by a state will escape the prohibition contained in Articles 28-30 TFEU when it is levied to cover the cost of a mandatary inspection required by the EU Law as evident in IFG v Freistaat Bayern (1984). Recovery of Unlawful Charges The general principle is that a MS must repay charges that have been unlawfully levied as per Amministrazione delle Finanze dello Stato v San Giorgio (1999). The procedural conditions for such repayment may be less favourable than those applying in actions between private individuals, provided that they do not make recovery impossible or excessively dif cult. There is, however, an exception to this general rule for circumstances in which the trader has passed on the loss to customers, since reimbursement could lead to the trader being unjustly enriched. This very exception may itself be quali ed where the trader can, nonetheless, show that it has suffered loss. The burden of proving that the duties have not been passed on to others cannot however be placed on the taxpayer. The Customs Union: The Broader Perspective The consequence of the breaking down of customs barrier between MS is that once goods are in the EU they move freely. The corollary is that the ring fence around the single market is only as strong as its weakest link, and there is no second chance to impose limits on goods coming from a third country. The EU has a strong interest in combating fraud. The fact that there is in effect only ever one customs barrier for goods to enter the EU also has implications for the battle against organised crime, counterfeit goods, and the like. It is clear that customs have a role to play in the ght against terrorism. This has led to a number of organisational initiatives designed to meet these new challenges. There is no EU customs service. The EU works through and with the customs authorities in the MS. Articles 100-113: Discriminatory Tax Provisions Article 110: “No MS shall impose, directly or indirectly, on the products of other MS any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. Furthermore, no MS shall impose on the products of other MS any internal taxation of such a nature as to afford indirect protection to other products”. The Purpose of Article 110 The aim is to prevent the objectives of Articles 28-30 from being undermined by discriminatory internal taxation. The article has been recognised by the ECJ, which demands complete neutrality of internal taxation as regards domestic and imported products evident in Gabriel Bergandi v Directur Général des Impôts (1988). Article 110(1): Direct Discrimination This Articles does not stipulate that a MS must adopt any particular regime of internal taxation. It requires only that whatever system is chosen should be applied without discrimination to similar imported products. In Commission v Italy (21/79) the Italian Government charged lower taxes on regenerated oil than an ordinary oil. The policy was motivated by ecological considerations, but imported regenerated oil did not bene t from the same advantage. Italy argued that it was not possible to determine Rachel Lowell 13 fi fi fi fi fi  whether imported oil was regenerated or not. This argument was rejected by the ECJ, which held that it was for the importers to show their oil came within the relevant category, subject to reasonable standards of proof, and that a certi cate from the state of export could be used to identify the nature of the oil. Similarly, in Hansen, the ECJ insisted that a German rule making tax relief available to spirits made from fruit by small businesses and collective farms must be equally applicable to spirits in the same category coming from anywhere else in the EU. In Commission v Ireland (55/79), although the tax applied to all goods irrespective of origin, domestic producers were treated more leniently as regards to payment, being allowed a number of weeks before payment was actually demanded, whereas importers had to pay the duty directly on importation. Article 110(1): Indirect Discrimination There may well be tax rules that do not explicitly differentiate between the tax liability of goods based on country of origin, but which nonetheless place a greater burden on commodities coming from another MS. the RCJ has emphasised that a tax system will be compatible with Article 110 only if it excludes any possibility of imported products being taxed more heavily than similar domestic goods. Humblot Case (112/84) - French law imposed an annual car tax. The criterion for the amount of tax to be paid was the power rating of the car. Below a 16CV rating the tax increase gradually to a maximum of 1.1k francs. For cars above 16CV, in power there was a at rate of 5k francs. There was no French car which was rated above 16CV, and thus, the higher charge was borne only be those who has imported cars. Humblot was charged 5k francs on a 36CV imported vehicle, and argued that this tax violated what is now Article 110. This case provides a good example of the ECJ’s determination to catch indirect discrimination. Such tax provisions can still distort the competitive process in the car markets. The French authorities duly revised the tax rules in the light of the Courts’s, decision, but the new scheme was challenged and found in breach of Community Law. This was because although the new scheme was less discriminatory than that considered, it was still the case that the tax rate increased sharply above 16CV. This new tax system was considered in Fedlain. Article 110: National Autonomy and Fiscal Choices While direct discrimination on grounds on nationality cannot be justi ed, tax rules of a MS that tend nonetheless to favour national procedures may be saved if there is some sort of objective justi cation. This idea is relevant to other articles, for example, those on the free movement of goods, free movement of workers, and equal treatment. In this way, such Treaty Articles are prevented from becoming too harsh or draconian in their application. This was exempli ed in the Chemical Case (140-79). Italy taxed synthetic ethyl more highly than ethyl alcohol obtained from fermentation, even though the products could be used interchangeably. Italy was not a major producer of synthetic products. The object was to favour the manufacture of ethyl alcohol from agricultural products, and to restrain the processing into alcohol of ethylene, a petroleum derivative, in order to reserve that raw material for more important economic uses. The Court predicates its acceptance of the Italian policy on the basis that it does not result in any discrimination, whether direct or indirect. Notwithstanding this, the ECJ’s reasoning bears testimony to its willingness to accept objective justi cations where the national policy is acceptable from the EU’s perspective, even if this bene ts domestic traders more than imports. Rachel Lowell 14 fi fi fi fi fi fl fi  In Commission v France (196/85), the Commission alleged a French rule which taxed sweet wines produced in a traditional manner at a lower rate than liquor wines was contrary to what is now Article 110 TFEU. The Court disagreed by maintaining that there was no direct discrimination on grounds of origin or nationality, hence there was an objective justi cation. In the Outokumpu Oy Case, the ECJ held that it was legitimate for a MS to tax the same or similar product differentially, provided that this was done on the basis of an objective criteria, such as the nature of the raw materials used or the production process employed. It is also possible for differential tax rates on cars, the Humblot Case notwithstanding, to escape the prohibition of Article 100. This could be so if the differential rates were to encourage the use of more environmentally friendly models, provided they did not discriminate against imports. The relationship between Article 110(1) and (2) The rst subsection prohibits the imposition of internal taxes on products from other MS in excess of those levied on similar domestic products. The dividing line between the rst and second subsections may be problematic, since it can be contestable whether goods are deemed similar or not. Article 110(2) is designed to catch national tax provisions that apply unequal tax ratings to goods that may not be strictly similar, but which may nonetheless be in competition with each other. The object is to prevent these differential tax rates from affording indirect protection to the domestic goods i.e. wine & beer. Economists terms this relationship cross-elasticity of demand. Reference can be made to Commission v France (168-/78) in which France had higher tax rates for spirits based on grain, such whisky, rum, gin, and vodka, than those based on wine/fruit such as cognac, calvados, and armagnac. France produced very little of the former, but was a major producer of fruit-based spirits. The Commission brought an action via what is now Article 258 TFEU alleging that the French tax regime violated what is now Article 110. Article 110(1) and (2): The Determination of Similarity If products are similar, Article 110(1) would apply. If they are not then the tax rules may still be caught by Article 110(2). In Fink-Frucht GmbH v Hauptzollamt München-Landsbergerstrasse, the ECJ held that products would be regarded as similar if they came within the same classi cation. However, in some cases the ECJ condemned the tax without too detailed an analysis of whether this was because of Article 110(1) or (2). This approach is particularly apparent in the early ‘spirits cases’ such as Commission v Denmark (1980). The reason the ECJ did not trouble unduly whether the condemnation should be based on Article 110(1) or (2) is apparent in the case of Commission v France (168/78). These early spirit cases demonstrate that the Court will not be overly concerned whether a cased is characterised as relating to the rst or second sub-article, if the nature of the products renders such classi cations dif cult and if the Court feels that the tax should be condemned because the goods are in competition and the tax is protective. However, later Courts have been more careful to determine whether the analysis such proceed under Article 110(1) or (2), as exempli ed in the John Walker Case. The issue was whether liqueur fruit wine was similar to whisky for the purposes of Article 110(1). The ECJ analysed the objective characteristics of the products, their alcohol content and method of manufacture, and consumer perceptions of the products. It decided that the goods were not similar, since they did not possess the same alcohol content, nor was the process of manufacture the same. Rachel Lowell 15 fi fi fi fi fi fi fi fi Article 110(2): Determination of Protective Effect The Commission brought an enforcement action against the UK, in Commission v UK (170/78), for discriminatory taxation of wine with respect to beer i.e. the UK levied an excise tax on certain wines roughly ve times that levied on beer. This was more dif cult than the aforementioned cases, because there was undoubtedly a greater difference wine and beer than between two spirits. It is for this reason that the ECJ initially declined to rule that the UK provisions were in breach of Article 110, and required further information on the nature of the competitive relationship between the two products. The case sheds interesting light on the methodology used when adjudicating on Article 110(2). The Court’s judgement proceeds in two stages: 1. The ECJ is concerned to establish that there is some competitive relationship between the two products a to render Article 110(2) applicable at all. In this case, the Court rightly accepted that the meaningful comparison was between beer and the cheaper of the wine in the market. 2. The Court then considered whether the tax system was protective of beer. It was willing to apply varying criteria suggested by the parties to decide whether a protective effect had been established or not. It was dif cult to contest the conclusion that the UK tax was indeed discriminatory. The existence of harmonisation will not preclude the application of Article 110 where it is only minimum harmonisation. In Socridis, Community legislation was held to require only that MS imposed a minimum duty of beer. It did not preclude the application of Article 110 to determine whether a taste was being protectionist in its treatment of beer as opposed to wine. Taxation: the Broader legal perspective Tax issues can be judged for compliance with other Treaty provisions concerning free movement. This is signi cant because while the approach under Article 110 is discrimination-based, the case law on free movement has moved beyond this to catch national rules that impede trade even if they are not discriminatory. While case-law is not entirely clear, the ECJ has been cautious about applying the full force of its law on free movement to national scal rules, although commentators such as J Snell, remain divided as to the best interpretation of this jurisprudence. Taxation: the Broader Political Perspective Taxation can be direct or indirect. The paradigm of direct taxation is income tax; the paradigm of indirect taxation is a tax on sales. The EU does not exercise any general control over direct taxation. This is regarded as central to national sovereignty. EU law will be relevant only to prevent cross- border discrimination, interference with free movement, and the like, although some tax matters have been dealt with through Articles 114 and 115 TFEU, where the conditions laid down therein have been satis ed. EU has much greater impact of indirect taxation, and is now striving for a more coherent tax policy. In the context of indirect taxation, this is manifest in proposed improvements to the regimes governing VAT, excise duty, and the like. In the context of indirect and direct taxation, there is the growing realisation of the extent to which national tax policy can impact on other policies, over which the EU does have competence. These include employment, the environment, economic and monetary union, health, and consumer protection. Rachel Lowell 16 fi fi fi fi fi fi  The Boundary Between Articles 28-30 & 110-113 The general principle is that the two sets of Articles are mutually exclusive. They both concern imposition of scal charges by the state. Articles 28 to 30 bite on those duties or charges levied as a result of goods crossing a border. Articles 110-113, by contrast, are designed to catch scal policy which is internal to the state. They prevent discrimination against goods once they have entered a particular MS. Which set of Treaty Articles is applicable is of importance since the result can be signi cant for the legal test that is applied as se in the Cooperative Co-futta Srl Case. If a state scal measure is caught by Article 30 TFEU then it will be unlawful. This re ects the importance of breaking down trade barriers. If, by way of contrast, a scal measure falls within Article 110 TFEU then the obligation on the state is different. The taxation levels set by the state are not unlawful under the Treaty, and thus the inquiry will be whether the tax discriminates against the importer under Article 110(1), or has a protective effect under Article 110(2). There are three situations in which the aforementioned is more dif cult: 1. Levies Imposed on Importers Such a case would normally be decided on the basis of Article 30, and the levy would be deemed to be a CEE. The state would be condemned unless it could show that the levy was consideration for a a service given to the importer, or that it was imposed pursuant to mandatary requirements of EU Law. Attempts to argue that they levy should be instead considered under Article 110 have not been successful as seen in Bresciani. In exceptional circumstances the Court may, however, decide that although a charge/levy is taken at the border is not to be characterised as a CEE under Article 30, but as tax, the legality of which will be tested under Article 110 as seen in Denkavit. 2. Imports Taxed but not made by the State of Import One might have thought that the ECJ would posse Article 30 vis-a-vis characterisation, since there are no similar domestic goods. However, this will not always be so as seen in the Co-Frutta Case. This was a case which arose from the imposition by Italy of a consumption tax on bananas, even though no such tax was levied on other fruit produced in Italy. The action was brought by a banana importer via Article 267 TFEU to test the legality of the tax. The Court considered whether this should be viewed as a CEE under Article 30, or as a tax under Article 110. The ECJ’s reasoning makes good sense. If any charge imposed by a state on a product which it did not make at all, or only in negligible quantities, were to be classi ed as a CEE under Article 30 then the charge would be automatically unlawful, and the importing state could not tax goods which it did not produce itself, since any such tax would be condemned under Article 30. 3. Selective Tax Refund The position appears to be as follows: if the money from a tax ows into the nation exchequer and is then used for the bene t of a particular domestic industry, this could be challenged as State Aid. Classi cation problems as between Articles 30 and 110 arise when the money that has been refunded can be linked to what has been levied pursuant to a speci c test. The correct classi cation will depend upon whether the refund or other bene t to the national producers wholly or partially offsets the tax. Barents identi es three conditions for a charge to be considered under Article 30 then under Article 110: rstly, the charge must be destined exclusively for nancing activities which very largely bene t the taxed domestic product; secondly, there must exist identity between the taxed product Rachel Lowell 17 fi fi fi fi fi fi fi fi fi fl fl fi fi fi fi fi fi fi  and the domestic product bene ting from the charge; and thirdly, the charges imposed on the domestic product must be completely compensated. The aforementioned is exempli ed by Scharbatke. There was a challenge to mandatory contributions levied in Germany when slaughtered animals were presented for inspection. The contribution was applied under the same conditions to national and imported products, and the money was assigned to a marketing fund for agricultural, forestry, and food products. The ECJ held that the mandatory contribution constituted a para scal charge. Where the resulting revenue bene ted solely national products, so that the advantages accruing wholly offset the charge imposed on the products, then the charge would be regarded as a CEE within Article 30. If the advantages which accrued only partially offset the charges imposed on national products, then the charge might constitute discriminatory internal taxation under Article 110. Free Movement of Goods: Quantitative Restrictions Article 34 is the central provisions and states that: quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between MS. Article 35 contains similar provisions relating to exports, while Article 36 provides an exception for certain cases in which a state is allowed to place restrictions on the movement of goods. The objective of these provisions is to prevent MS from engaging in the aforementioned strategies. The interpretation of such articles has been important in achieving a single market integration. The Court has given a broad interpretation to the phrase measures having equivalent effect, and has construed the idea of discrimination broadly to capture both direct & indirect discrimination. The ECJ also held that Article 34 can be applied in instances of non-discrimination i.e. Cassis De Dijon. There are six central issues to this area: 1. The ECJ’s jurisprudence led to dif cult issues about where this branch of EU Law stops, especially vis-a-vis the idea of Article 34 and its applicability. 2. There is a problem concerning relationship between negative and positive integration. 3. There is a tension between EU integration and national regulatory autonomy. 4. The choice between a discrimination approach and a rule of recognition approach of the kind introduced by Cassis is important for this reason: the former approach vests control in the host state, normally the country into which the rm is trying to import. The ‘Cassis approach’ reverses the onus: the host state must accept the regulatory provisions of the home state, subject to the exceptions discussed below. 5. This topic exempli es the interconnection between the judicial and legislative initiatives for attaining the EU’s objectives. 6. EU Courts also maintained tight control over the application of Article 36, which is concerned with defence against a prima facie breach of Article 34. The ECJ has interpreted Article 36 strictly to ensure that discriminatory restrictions on the free movement of goods are not easily justi ed. Rachel Lowell 18 fi fi fi fi fi fi fi fi Directive 70/50 & Dassonville Article 34 will catch quantitative restrictions and MEQR i.e. measure equivalent to a quantitive restrictions. It can apply to EU measures as seen in the Criminal Proceedings against Keiffer and Thrill, as well as those adopted by MS. This notion was de ned broadly in the Geddo Case to mean measures which amount to total or partial restraint of, according to the circumstances, imports, exports, or goods in transit. MEQRs are more dif cult to de ne. Directive 70/50 was only applicable during the Community’s transitional period, but it continues to furnish some idea of the scope of MEQRs. The list of MEQRs is found under Article 2: 1. Minimum and Maximum prices for imported products 2. Less favourable proves for imported products 3. Lowering the value of the imported product which differ from those for domestic products 4. Conditions in respect of packaging, composition, identi cation, size, and weight, which only apply to imported goods or which are different and more dif cult to satisfy than in the case of cosmetic goods 5. The giving of a preference to the purchase of domestic goods as opposed to imports, or otherwise hindering the purchase of imports 6. Prescribing stocking requirements which are different from and more dif cult to satisfy than those which apply to domestic goods 7. Making it mandatary for importers of goods to have an agent in the territory of the importing state It should be noted that the Commission was always thinking of the potential reach of Article 34 to indistinctly applicable rules, since Article 3 of the Directive regulates such rules to some degree. The interpretation of MEQRs can be spoken of in relation to Dassonville. The aforementioned is a criminal case from Belgium. EU Law is important in all elds of law. Dassonville was the trader. This is a preliminary reference from a Belgian Criminal Court. A prosecution happened in Belgium, because the defendant breached a local trading rule. The domestic court sent a question to Luxembourg. There was a trading law stating that when one imports whiskey, the alcoholic drink had to include a label of origin. For this whiskey to be admitted, it had to be accompanied with a certi cate of origin, in this case, from Scotland. This EU Law was not in breach of EU Law. However, during this period, Scotland was not an EU Member State, and thus, the whiskey was imported from a third party middleman in France. Whiskey travelled from Scotland, from France, to Belgium. French Law did not require certi cate of origin, so whiskey was imported into France with full compliance to its legislation. The problem was that French law did not require the certi cate, but Belgian Law required it, yet there was no room for creating trade between France and Belgium. Both created their own rules, and fell foul though Belgian Legislation. Article 34 is very clear, however, the requirement of needing a certi cate did create an obstacle. The situation was problematic because the individual laws were not in agreement, leading to the Rachel Lowell 19 fi fi fi fi fi fi fi fi fi fi fi  defendant’s prosecution. The Belgian Court asked the Court of Justice whether Article 34 should be interpreted in such a way as means that any laws in any MS that could make it more dif cult to trade would be deemed in breach of Article 34. All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions. Two aspects of the ECJ’s reasoning should be noted. First, it is clear that the crucial element in proving an MEQR is its effect: a discriminatory intent is not required. The ECJ takes a broad view of measures that hinder the free ow of goods, and the de nition does not even require that the rules actually discriminate between domestic and imported goods. Dassonville thus sowed the seeds which bore fruit in Cassis de Dijon, where the ECJ decided that Article 34 could apply to rules which were not discriminatory. Secondly, the ECJ indicates that reasonable restraints may not be caught by Article 34. This is the origin of what became known as the ‘rule of reason’. In the Dassonville Case, the difference in the law was creating an obstacle - an equivalent to a measure to a quantitive restriction. The Belgian Law was found to be in breach of Article 34, and had to be set aside. Once the goods were in free circulation within the EU, any trading law creating obstacles is in breach of Article 34. Discriminatory Barriers to Trade Article 34 can bite if the national rule favours domestic goods over imports, even oil the case, on its facts, is con ned to products and parties from one MS. The same article can apply to a national measure preventing important from one to another part of the MS. Import and Export Restrictions The ECJ has always been harsh on discriminatory import or export restrictions, thus caught under Article 34. This is exempli ed by Commission v Italy (Case 154/85) in which the ECJ held that procedures and data requirements for the registration of imported cars, making their registration linger, complicated, and more costly than that of domestic vehicles were prohibited by Article 34. Moreover, in Bouhelier, a French rule which imposed quality checks on watches for export, but not on those intended for the domestic market, was in breach of Article 35. Promotion or Favouring of Domestic Products Article 34 prohibits action by a state that promotes or favours domestic products to the detriment of competing imports. This can occur in many ways. The most obvious is where a state engaged in a campaign to promote the purchase of domestic as opposed to imported goods. Reference can be made to Commission v Ireland (Case 249/81), in which the Irish Government sought to promote sale of Irish goods, the object being to achieve a switch of 3% in consumer spending from imports to domestic products. It adopted a number of measures to do so, such as the organisation of a publicity campaign by the Irish Goods Council in favour of Irish products, designed to encourage consumers to buy Irish products. The Commission brought an action under Article 258, alleging that such campaign was an MEQR. Ireland argued that it had never adopted measures for the purpose of Article 34, and that any nancial aid given to the Irish Goods Council should be judged in light of Articles 107 and 108. The members of such Council were appointed by an Irish Minister and its activities were funded in proportion of about six to one by the Irish Government and the private industry, respectively. The Rachel Lowell 20 fi fi fi fl fi fi  ECJ held that the Irish Government was reasonable under the Treaty for the activities of the Council even though the campaign was run by a private company. This exempli es the general strategy under Article 34. It looks to substance and not to form. A second type of case caught by this article us where a state has rules on the origin-marking of certain goods. In Commission v UK (Case 207/83), the Commission brought an action under Article 258 arguing that the UK legislation which retried that certain goods should not be sold in retail markets unless they ere marked with their country of origin was in breach of Article 34, as an MEQR. The Uk argued that the legislation applied equally to imported and domestic products, and that this information was of important to consumers since they regraded origins an indication of the quality of the goods. MS legislation which contains rules on origin-marking will normally only be acceptable if the origin implies a certain quality in the goods, that they were made from certain materials or by a particular form of manufacturing, or where the origin is indicative of a special place in the folklore or tradition of the region in question. The third type of case: public procurement cannot be structured so as to favour domestic producers. In Commission v Ireland (Case 45/87), the Dundalk Council put out to tend a contract for water supply. One of the contract classes was that tenderers had to submit bits based on the use of certain pipes which complied with a particular Irish standard. One of the bids was based on the use of a piping which had not been certi ed by the Irish authorities, but which complied with international standards. The Council refused to consider it for this reason, thus, Commission argued that there was a breach of Article 34. A fourth type of case is where the discrimination in favour of domestic goods is evident in administrative practise, as exempli ed by Commission v France (Case 21/84). French Law discriminated against imported postal franking machines. The law was changed, but a British company claimed that, notwithstanding this, the French authorities repeatedly refused to approve its machines. The ECJ held that general administrative discrimination against imports could be caught by Article 34. The discrimination could, for example, take the form of delay in replying to applications for approval, or refusing approval on the grounds of various alleged technical faults that were inaccurate. Price Fixing A state cannot treat imported goods less favourably in law or fact than domestic products through price- xing regulations. Reference can be made to Fachverband der Buch-und Medienwirtschaft v LIBRO Handelsgesellschaft mbH in which Austrian Law provided in effect that an importer of books could not x a price below the retail price xed or recommended by the publisher for the state of publication. Measures which make Imports more dif cult or costly There are numerous ways in which a MS can render it more dif cult for importers to break into that market, as exempli ed by the Schloh Case. Schloh bought a car in Germany and obtained from a Ford dealer in Belgium a certi cate of conformity with vehicle types in Belgium. Under Belgian Law, he was required to submit his car to two roadworthiness test, for which fees were charged. He challenged the tests, arguing that they were an MEQR. The ECJ held that the Belgian rule was contrary to Article 34, save in relation to cars which were already on the road, provided that in this type of case the rules were applied in a non-discriminatory manner. Rachel Lowell 21 fi fi fi fi fi fi fi fi fi fi  National Measures v Private Action The issue of what constitutes a state entity has to be addressed. In the Buy Irish Case it was seen that the ECJ rejected the argument that the Irish Goods Council was a private body and therefore immune from Article 34. The Irish Government’s involvement with funding the organisation and appointment of its members rendered it public for these purposes, while in the Apple and Pear Development Council Case the existence of a statutory obligation on fruit growers to pay certain levies to the Council suf ced to render the body public for these purposes. Institutions concerned with trade regulation may come within the de nition of the state for these purposes even if they are nominally private, provided that they receive a measure of state support or ‘underpinning’. Article 34 can also apply against the state even though private parties have taken the main role in restricting the free movements of goods, as exempli ed by Commission v France (Case 265/95). Indistinctly Applicable Rules: Cassis de Dijon Foundations The removal of discriminatory trade barriers is a necessary, but not suf cient, condition for single market integration. There are many rules that do not discriminate between goods dependent on origin, but which nevertheless create barriers to trade between MS. Cassis is a fruit speciality in Dijon. The legal problem in this case was a German Law. The Cassis de Dijon is known for its 15% of alcoholic content. It is produced according to French Law and is classi ed as a fruit liquor. There is no EU Law establishing or de ning what this is. However, German Law said that a liquor to be classi ed as such had to have 25% of alcoholic content. Again, as per the previous case, there is con ict between the community law, non of which were illegal prima facie. The problem arose because an importer tried to sell the French Liquor in Germany. The moment this liquor was sold, the problem popped out because of the percentage. This meant that the drink could not be sold as a fruit liquor in Germany. This meant that if one is a German consumer looking for liquors, the Cassis de Dijon would not have been found. All trading rules enacted by the MS which are capable of being directly or indirectly a barrier trade is in breach of what is now Article 34 TFEU. An obstacle was evidently created. German Law should be in breach of the Treaty. When there was the Preliminary Reference from the German Court, the problem was that the domestic authorities, even supported by the Commission, were saying that this was a consumer habit. The argument was that German Consumers considered that a liquor would have 25% alcoholic content. In the Cassis Case, the Court conclude that there are other ways of ensuring the aforementioned, pinpointing fact that the alcoholic content is different from the standard without banning the product. The outcome of this case was similar to that of the Dassonville Case, in fact, it can be said that the Dassonville judgement was developed further. It af rmed paragraph 5 of Dassonville: what is now Article 34 could apply to national rules that did not discriminate against imported products, but which inhibited trade because they were different from the trade rules applicable in the country of origin. The fundamental assumption was that when goods had been lawfully marketed in one Member State, they should be admitted into any other state without restriction, unless the state of import could successfully invoke one of the mandatory requirements. The principle of mutual recognition was encapsulated. Rachel Lowell 22 fi fi fi fl fi fi fi fi fi  Moreover, in the absence of harmonisation, reasonable measures could be taken by a state to prevent unfair trade practices. The Court came up with was is known as the mandatory requirements. If the justi cation is objective, the MEQR is not caught up by Article 34. The Court gave us examples of four mandatary requirements: (1) Effectiveness of Fiscal Supervision (2) The Protection of Public Health (3) The Fairness of the Consumer Transaction (4) The Defence of the Consumer The reasoning in Cassis is signi cant as the result. The ECJ began by af rming the right of the states to regulate all matters that had not yet been the subject of Community harmonisation. However, what began by an assertion of states’ rights was transformed into a conclusion that required the state to justify the indistinctly applicable rules under the rule of reason. Application: Post-Cassis Jurisprudence In Deserbais an importer of Edam cheese from Germany into France was prosecuted for unlawful use of a trade name. In Germany such cheese could be lawfully produced with a fat content of approximately 34%, whereas in France this was restricted to 40%. The importer relied on Article 34 by way of defence to the criminal prosecution. The ECJ held, in accord with Cassis, that the French rule was incompatible with this Article, and could not be saved by the mandatory requirements. The same result was reached in the case of Gilli and Andres where importers of apple vinegar from Germany into Italy were prosecuted for fraud because they had sold vinegar in Italy which was not made from the fermentation of wine. The rule hampered Community trade and did not bene t from the mandatory requirements, since proper labelling could alert consumers to the nature of the product, thereby avoiding consumer confusion. The same approach was apparent in Rau, which was concerned with national rules on packaging rather than content. Belgian law required all margarine to be marketed in cube-shaped packages, irrespective of where it had been made, but it was clearly more dif cult for non-Belgian manufacturers to comply without incurring cost increases. The ECJ held that Article 34 was applicable, and that the Belgian rule could not be justi ed on the basis of consumer protection, since any consumer confusion could be avoided by clear labelling. Indistinctly Applicable Measures: Article 35 This prohibits quantitive restrictions and MEQRs in relation to exports in the same manner as does Article 34 in relation to imports. However, whereas Article 34 will apply to discriminatory provisions and also to indistinctly applicable measures, Article 35 will, it seems, apply only if there is discrimination. The rational for making the former article applicable to measures which do not discriminate is that they impose a dual burden on the importer, which will have to satisfy the relevant rules in its own state and also the state of import. This will not normally be so in relation to Article 35 as seen in Groenveld. Dutch legislation prohibited all manufacturers of meat products from having in stock or processing horse-meat. The purpose was to safeguard the export of meat products to countries that prohibited the marketing of horse esh. It was impossible to detect the presence of horse-meat within other meat products, and therefore the ban was designed to prevent its use by preventing meat processors from having such horse-meat in stock at all. The sale of horsemeat was not actually forbidden in the Netherlands. Nonetheless the Court held that the Dutch rule did not infringe what is now Article 35. The Article was aimed at national measures which had as their speci c object or effect the restriction of exports, so as to provide a particular advantage for national production at the expense of the trade of other Rachel Lowell 23 fl fi fi fi fi fi fi fi  Member States. This was not the case here, said the Court, since the prohibition applied to the production of goods of a certain kind without drawing a distinction depending on whether such goods were intended for the national market or for export. It is clear from Gysbrechts that the ECJ is willing to nd a breach of Article 35 even where the rule applies to all traders if it has a greater effect on exports than on domestic traders. In this case, Belgian law prohibited a supplier in a distant selling contract from requiring that the consumer provide his payment card number, even though the supplier undertook not to use it to collect payment before expiry of the period in which the consumer could return the goods. The ECJ cited Groenveld for the proposition that Article 35 caught national measures which treated differently the domestic and export trade of a Member State so as to provide an advantage for the domestic market at the expense of trade of other MS. It concluded that even if the prohibition was applicable to all traders active in the national territory, its actual effect was nonetheless greater on goods leaving the market of the exporting MS and thus caught by Article 35. It held moreover that although consumer protection could constitute a justi cation, the challenged rule was disproportionate. Indistinctly Applicable Measures: Limits of Article 34 Cassis signalled the ECJ’s willingness to extend Article 34 to catch indistinctly applicable rules. The dif culty is that all rules that concern trade, directly or indirectly, could be said to affect the free movement of goods in various ways. Thus, as Weatherill and Beaumont note, it could be said that rules requiring the owner of a rearm to have a licence, or spending limits imposed on government departments, reduce the sales opportunities for imported products. However, a distinction can be noted between dual-burden & equal burden rules. Cassis is concerned with the former: State A imposes rules on the content of goods. These are applied to goods imported from State B, even though such goods have already complied with the trade rules in State B. Cassis prevents state A from imposing its rules in such instances unless they can be saved by the mandatory requirements. On the other hand, the latter are those applying to all goods, irrespective of origin, which regulate trade in some manner. They are not designed to be protectionist. In some cases the ECJ held that rules which do not relate to the characteristics of the goods and did not impose a dual burden on the importer, but concerned only the conditions on which all goods were sold, were o