#17337 - The Free Movement Of Goods - GDL EU Law

Types of Free Movement:

• A free trade area: Liberalises trade in these areas

• A customs union: Not only agreeing rules on how to trade internally (between each other) but also externally (i.e. with outside states)

• A single market: Not only common internal/external rules, but also common rules in a number of other areas that affect trade, e.g. regulations

Rooted in the Treaties:

• Art 3(3) TEU: The Union shall establish an internal market

• Art 26 TFEU: The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market.

• Art 28 TFEU: The Union shall comprise a customs union which shall cover all trade in goods

Two limbs:

• Positive: Union adopts legislation imposing rules

• Negative: All existing domestic rules that impose any restrictions on free movement are gradually removed

Key Principles

• Practical Necessity: Commission White Paper on the Internal Market (1986)

  • Hard practical fact that maintenance of any internal frontier controls will perpetuate the costs and disadvantages of a divided market.

• Incrementalism

  • Robert Schuman, speech 1950: “Europe will not be made all at once, or according to a single plan”

Definition of Goods:

• Commission v Italy (Art Treasures) [1968] – Italy imposed high duties on artistic pieces that it considered part of its heritage, therefore argued Union rules should not apply.

  • Held that these were goods and union rules did apply. Goods are: ‘products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions’

Two types of measures which may apply to the trade of goods:

• 1) Fiscal Measures

  • The trader must pay

• 2) Non-Fiscal Restrictions

  • Trader must do something else to ensure their product complies with domestic legislation.

Two types of fiscal measure:

• 1) Customs duties and charges of equivalent effect

• 2) Discriminatory or Protective Taxation

Articles:

• Art 28 TFEU: Customs Union

  • Prohibits customs duties and charges of equivalent effect

• Art 29 TFEU: Free Circulation

  • Once a good has entered EU from third country it can travel freely within the EU.

  • Donckerwolcke [1976] – “products entitled to ‘free circulation’ are definitively and wholly assimilated to products originating in Member States”.

• Art 30 TFEU: Prohibits CDs and CEEs

  • Following Van Gen den Loos [1963] art. 28 & 30 have direct effect.

  • There are no exceptions to this (Commission v Italy (Art Treasures) [1968])

  • Diamantarbeiders [1969] – French restrictions imposing customs duties on diamonds. Held supposed morality is also irrelevant.

The label on a charge is irrelevant hence CEEs are also illegal.

• Commission v Italy (re: Statistical Data Levy) [1969] – a charge on all imports and exports was introduced to produce trade statistics.

  • Held any pecuniary charge, however small, imposed on goods by reason of the fact that they cross a frontier constitutes an obstacle to the movement of such goods.

Examples of CEEs

• i) Tax on the export art to MS (Art Treasures [1968])

• ii) A statistical levy: (Statistical Data Levy [1969])

• iii) Duty on imported gingerbread (Commission v Luxembourg and Belgium [1961

• iv) Health inspection charges (REWE [1973])

• v) A levy imposed to protect the environment against fertilizer pollution (Orgacom [2014])

There are three exceptions:

• 1) Charges for Services Rendered

  • Four conditions

    • a) The charge must be made in consideration of a service rendered

    • b) The charge must benefit the trader

    • c) The charge must be proportional to the benefit

    • d) The service cannot be mandatory.

  • Statistical Data Levy [1969] - No specific benefit to the trader found in (benefit was vague and abstract)

  • Cadsky [1975] - Italy tried to claim that their custom duty on vegetables that would allow traders to claim their vegetables were ‘safe’, was a benefit/service to those traders.

    • Rejected as mandatory and chracge was disproportionate.

  • Bresciani [1976] – Italian public health inspection. Rejected as mandatory.

  • Deregulatory theme: EU not suggesting that free trade is more important than public health. Rather it is a matter of who pays for it.

• 2) Charges relating to requirements under EU law

  • Bauhuis v Netherlands [1977] – trader required to pay for public health inspections on exporting animals. Required by the EU therefore lawful.

  • Commission v Germany (Animal Inspections)(1988)– same conclusion.

• 3) Charges relating to requirements under international law

  • Commission v The Netherlands [1977] – charges made by Dutch authorities for plant exports relating to international law. Outside scope of art 30.

Two types of taxation:

• Direct – imposed on persons or companies.

• Indirect – taxation that may be passed on to the consumer.

Taxation refers to measures imposed once product has crossed boarder.

• Capolongo v Maya [1973] - Fiscal measures imposed by domestic legislation cannot be both a CEE and an internal tax measure. Mutually exclusive categories.

Art 110 TFEU: No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

• Neither any tax that affords indirect protection.

• Directly Effective: Lutticke [1966]

Two Principles underlying Art 110 (from Commission v France [1980])

• 1) The Principle of Fiscal Autonomy: Member states are free to decide what tax to impose and on what basis. EU law does not require member states to adopt the same tax policy.

• 2) The Principle of Tax Neutrality Whatever tax member states decide to impose, on whichever product on the basis of whatever criteria, that tax should not discriminate on the basis of the origin on that product.

Has to be a genuine non-discriminatory tax to escape art. 110

• Commission v France(Reprographic Machines) [1979] – a non-discriminatory tax will be genuine if it is part of a “general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of origin”

The scope of Art 110:

• Bobie [1976] – beer legistation, in certain circumstances importers of beer into Germany were subjected to a higher tax than domestic producers, while in other circumstances they were subjected to a lower tax.

  • Held this was discriminatory legislation even though the discrimination only occurred in certain limited circumstances.

  • NB EU law does not prevent reverse discrimination (i.e. making life easier for importers than domestic producers)

Discrimination may be direct or indirect

• John Walker [1986] – Danish legistlation taxed cereal based alcoholic products more heavily than fruit based. John Walker argued this was discrimination as there was no whiskey produced in Denmark.

  • However, a number of other products were also being subjected to this tax, including domestically produced products, therefore there was no indirect discrimination.

• Humblot [1985] – French car tax. Up to a certain point there was a sliding scale on tax depending on how powerful the engine was. Then at a certain power level, there was a sudden leap re the tax to a lump sum, and a very high lump sum was charged.

  • Court found indirect discrimination due to the fact that France produced no cars in the higher tax bracket.

NB there is a provision that provides competence for the union to adopt legislation on taxation (Art 112). However, this must be done unanimously.

Scope of Article 110(2) – Prohibits Protectionist Taxes

• Commission v UK (re: Wine and Beer) [1983] – Commission argued UK discriminated against wine producers. Tax on wine was very high, tax on beer was very low. No production of wine in the UK at the time.

  • UK argued wine was luxury product. Com argued this was because tax on beer so low. Could compare cheap wine with more expensive beer. UK in violation.

  • Court held: “Domestic legislation may not crystallise consumer habits”

There is an exception if the tax related to economic policy objectives

• Chemial Farmaceutici v DAF [1981] - Re Italian legislation on production of alcohol. Taxed alcohol produced from petroleum derivative higher than that produced by fermentation. No one in Italy produced by the former method.

  • Italian government argued that it was necessary as the state should not be reliant on petrol products.

  • Held compatible with Community law if it pursues economic policy objectives which are themselves compatible with the requirements of the Treaty

• This is very important for two reasons:

  • In areas that are very sensitive for member states the court may be prepared to be more flexible.

  • Once we’ve left the border area and penetrated the domestic market then exceptions to free movement have to be acknowledged.

Tax Harmonisation:

• Do you pay tax in the country of purchase or the country in which a product is used? States are not happy with this as it attracts consumers from other states.

• Compromise is that if it is for personal use then do not have to pay domestic tax, but if for commercial use then you do.

• Council Directive 2008/118 EC concerning the general arrangements for excise duty

  • “excise goods” to which it applies, namely: energy products and electricity; alcohol and alcoholic beverages, and manufactured tobacco.

Articles:

• Article 34: Prohibits quantitative restrictions (‘...