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European LawLegislative analysis & Free movement principles

October 2019

Lesson 31.  Recap of EU history

2.  EU institutions and law

3.  First critical approach: documentary on anti-EU political groups

4.  Further legislative analysis (direct effect, legal supremacy, national actions, European actions)

5.  Free movement principles (four freedoms)

Further legislative analysis

The direct effect of European law in the national legal orders. Where a European norm is directly effective, it will also be “supreme” over national law. The “supremacy” of European law. How will individuals enforce their “supreme” European rights: the dual enforcement machinery within the Union legal order. Individuals will typically enforce their European rights in national courts. In order to assist these courts in the interpretation and application of European law: preliminary reference procedure. The Union legal order has equally required national courts to provide effective remedies for the enforcement of European rights. Having the indirect enforcement of European law through the national courts vs. the direct enforcement of European law in the European.

Direct effect National actionsLegal supremacy European actions

Free movement principles

The 'internal market'

The four freedoms:

1.  Free movement of goods

2.  Free movement of persons

3.  Free movement of services

4.  Free movement of capital

Basis = art. 28 et seq. TFEU (Treaty on the Functioning of the European Union / Maastricht 1992)


Free movement of goods

The free movement of goods, the first of the four fundamental freedoms of the internal market, is secured through the elimination of customs duties and quantitative restrictions, and the prohibition of measures having an equivalent effect.

The principles of mutual recognition, elimination of physical and technical barriers, and promotion of standardisation were added in order to continue the completion of the internal market.

The adoption of the New Legislative Framework (NLF) in 2008 significantly strengthened product marketing rules, the free movement of goods, the EU’s market surveillance system and the CE mark.

The mutual recognition principle was also consolidated, and applies to a wide range of products not covered by EU harmonisation.


Legal basis

Articles 26 and 28-37 of the Treaty on the Functioning of the European Union (TFEU).

Objectives

Originally, free movement of goods was seen as part of a customs union between the Member States, involving the abolition of customs duties, quantitative restrictions on trade and equivalent measures, and the establishment of a common external tariff for the Community.

Later, the emphasis was laid on eliminating all remaining obstacles to free movement of goods with a view to creating the internal market — an area without internal borders, in which goods could move as freely as on a national market.


Achievements

The elimination of customs duties and quantitative restrictions (quotas) between Member States was accomplished by 1 July 1968, i.e. one and a half years early.

This deadline was not met in the case of the supplementary objectives — the prohibition of measures having an equivalent effect, and the harmonisation of relevant national laws.

These objectives became central in the ongoing effort to achieve free movement of goods.


Achievements

A.  Prohibition of charges having an effect equivalent to that of customs duties: Articles 28(1) and 30 TFEU

B.  Prohibition of measures having an effect equivalent to quantitative restrictions: Articles 34 and 35 TFEU

C.  Exceptions to the prohibition of measures having an effect equivalent to that of quantitative restrictions

D.  Harmonisation of national legislation

E.  Completion of the internal market


A. Prohibition of charges having an effect equivalent to that of customs duties: Articles 28(1) and 30 TFEU

Since there is no definition of the aforementioned concept in the Treaty, the case-law has had to provide one. The Court of Justice of the European Union considers that any charge, whatever it is called or however it is applied, ‘which, if imposed upon a product imported from a Member State to the exclusion of a similar domestic product has, by altering its price, the same effect upon the free movement of products as a customs duty’ may be regarded as a charge having equivalent effect, regardless of its nature or form (Cases 2/62 and 3/62 of 14 December 1962, and Case 232/78 of 25 September 1979).


B. Prohibition of measures having an effect equivalent to quantitative restrictions: Articles 34 and 35 TFEU

In its Dassonville judgment, the Court of Justice took the view that 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 (Cases 8/74 of 11 July 1974 and points 63 to 67 of Case C-320/03 of 15 November 2005).

The Court’s reasoning was developed further in the Cassis de Dijon (Case 120/78 of 20 February 1979) jurisprudence, which laid down the principle that any product legally manufactured and marketed in a Member State in accordance with its fair and traditional rules, and with the manufacturing processes of that country, must be allowed onto the market of any other Member State.


B. Prohibition of measures having an effect equivalent to quantitative restrictions: Articles 34 and 35 TFEU

This was the basic reasoning underlying the debate on defining the principle of mutual recognition, operating in the absence of harmonisation. As a consequence, even in the absence of European harmonisation measures (secondary EU legislation), Member States are obliged to allow goods that are legally produced and marketed in other Member States to circulate and to be placed on their markets.

Importantly, the field of application of Article 34 TFEU is limited by the Keck jurisprudence, which states that certain selling arrangements fall outside the scope of that article, provided that they are non-discriminatory (i.e. they apply to all relevant traders operating within the national territory, and affect in the same manner, in law and in fact, the marketing of domestic products and products from other Member States).


C. Exceptions to the prohibition of measures having an effect equivalent to that of quantitative restrictions

Article 36 TFEU allows Member States to take measures having an effect equivalent to quantitative restrictions when these are justified by general, non-economic considerations (e.g. public morality, public policy or public security). Such exceptions to the general principle must be interpreted strictly, and national measures cannot constitute a means of arbitrary discrimination or disguised restriction on trade between Member States.

Exceptions are no longer justified if Union legislation that does not allow them has come into force in the same area.

Finally, the measures must have a direct effect on the public interest to be protected, and must not go beyond the necessary level (principle of proportionality).


C. Exceptions to the prohibition of measures having an effect equivalent to that of quantitative restrictions

Furthermore, the Court of Justice has recognised in its jurisprudence (Cassis de Dijon) that Member States may make exceptions to the prohibition of measures having an equivalent effect on the basis of mandatory requirements (relating, among other things, to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer).

Member States have to notify national exemption measures to the Commission. Procedures for the exchange of information and a monitoring mechanism were introduced in order to facilitate supervision of such national exemption measures.


D. Harmonisation of national legislation

Since the late 1970s, considerable efforts have been made to harmonise national legislation. The adoption of harmonisation laws has made it possible to remove obstacles created by national provisions by making them inapplicable and to establish common rules aimed at guaranteeing both free circulation of goods and products and respect for other EC Treaty objectives, such as protection of the environment and of consumers, competition, etc.

Harmonisation has been further facilitated by the introduction of the qualified majority rule, required for most directives relating to the completion of the single market (Article 95 of the EC Treaty, as modified by the Maastricht Treaty), and by the adoption of a new approach, proposed in a Commission White Paper of June 1985, aimed at avoiding onerous and detailed harmonisation.


D. Harmonisation of national legislation

In the new approach based on the Council resolution of 7 May 1985 (confirmed in the Council resolution of 21 December 1989 and Council Decision 93/465/EEC), the guiding principle is the mutual recognition of national rules.

Harmonisation must be restricted to essential requirements, and is justified when national rules cannot be considered equivalent and create restrictions.

Directives adopted under this new approach have the dual purpose of ensuring free movement of goods through the technical harmonisation of entire sectors, and guaranteeing a high level of protection of the public interest objectives referred to in Article 114(3) TFEU (e.g. toys, building materials, machines, gas appliances and telecommunications terminal equipment).


E. Completion of the internal market

The creation of the single market necessitated the elimination of all remaining obstacles to free movement of goods. The Commission White Paper of June 1985 set out the physical and technical obstacles to be removed, and the measures to be taken by the Community to this end.

Most of these measures have now been adopted. However, the single market still requires substantial reforms if it is to meet the challenges of technological progress — the key factor in improving the EU’s competitiveness on global markets.


Tariff restrictions

Art. 30 TFEU

Import and export duties or charges having equivalent effect shall be prohibited between Member States. This also applies to customs duties of a fiscal nature.

Difference of charge having an effect equivalent to a customs duty with domestic tax. The domestic tax affects both imported and domestic products.

This is therefore a general prohibition with only very limited exceptions.


Tariff restrictions

Art. 110 TFEU

Member States shall not levy, directly or indirectly, on products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Moreover, Member States do not levy internal taxes on the products of the other Member States, thereby indirectly protecting other productions.

"Discriminating effet" French tobacco shop


Non-tariff restrictions

Art. 34 and 35 TFEU

Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.

Quantitative restrictions on exports and all measures having equivalent effect shall be prohibited between Member States.

"Obstacles" Cassis de Dijon case law


Non-tariff restrictions

Two types of exceptions, see art. 36 TFEU:

1. The provisions of Articles 34 and 35 do not preclude prohibitions or restrictions on imports, exports or transit which are justified on grounds of the protection of public morality, public policy, public security, health and life, animals or plants, the national artistic historical and archaeological property or by virtue of the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

2. case-law "rule of reason" exceptions (= mandatory requirements of general interest)


Free movement of employees

Art. 45 TFEU

1. The movement of workers within the Union is free.

2. This entails the abolition of any discrimination on grounds of nationality between workers of the Member States as regards employment, remuneration and other conditions of employment.



3. It reserves the right, subject to limitations justified on grounds of public policy, public security or public health, to

a) to accept an actual offer of employment;

(b) to move freely within the territory of Member States for this purpose;

(c) reside in one of the Member States for the purpose of pursuing a profession in accordance with the laws, regulations and administrative provisions governing the employment of national workers;

(d) to remain in the territory of a Member State after having been employed in that State in accordance with the conditions to be laid down in regulations to be adopted by the Commission.



4. The provisions of this article shall not apply to employment in the public service.


Essential questions:

Conceptual notion "employee"

Exceptions:

-  employment in the public service

-  public order

-  public safety

-  public health

Also jurisprudential 'rule of reason' exceptions (= mandatory requirements of general interest)


Freedom of establishment

Art. 49 TFEU:

The following provisions prohibit restrictions on freedom of establishment for nationals of a Member State on the territory of another Member State. This prohibition also concerns restrictions on the setting up of agencies, branches or subsidiaries by the nationals of a Member State established in the territory of a Member State.

Freedom of establishment shall, subject to the provisions of the chapter relating to capital, include access to non-salaried employment and the exercise thereof and the formation and management of undertakings, and in particular to companies within the meaning of the second subparagraph of Article 54, in accordance with the provisions laid down for the own nationals by the law of the country of establishment.


Freedom of establishment

Who can derive rights from it? Both physical and legal persons, as long as it concerns real and actual economic activity.

Exceptions:

- not applicable to the activities for the exercise of public authority

- also jurisprudential 'rule of reason' exceptions (= mandatory requirements of general interest)


'rule of reason' exceptions

They originate in ratio (reason, reasonableness) and were developed through jurisprudence

Such an exception has to pursue the 'common interest':

1.  the measure must be effective,

2.  it equally has to be proportional,

3.  there may not be any economic motives,

4.  no harmonisation yet (so one may not be more strict thant the EU).


Single Market for services / freedom to provide services

Article 56 of the Treaty on the functioning of the EU (ex Article 49 TEC) states that restrictions on "freedom to provide services" within the Union are prohibited in respect of nationals of Member States who are established in a State other than that of the person for whom the services are intended.

Any discrimination concerning the provision of services on the basis of nationality is prohibited directly by this Article (without the need of specific European legislation). Under Article 57 of the TFEU (ex Article 50 TEC), services shall be considered as such where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.


Free movement of capital

Art. 63 TFEU

1. In the context of the provisions of this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.

2. Within the framework of the provisions of this Chapter, all restrictions on payments between Member States and between Member States and third countries shall be prohibited.

Exceptions – Brussels Airport! (See Article 65 TFEU)


Free movement of capital

Article 65 TFEU

1. The provisions of Article 63 shall be without prejudice to the right of Member States:

(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;

(b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security.

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