#16135 - Competence - European Law

Competence 2

Unfair Contract Terms Directive (93/13/EEC), [1993] OJ L 95/29 (Preamble) 2

Case C-376/98 Germany v Parliament and Council [2000] ECR I-8419 (“Tobacco Advertising”) 4

Case C-210/03 Swedish Match [2004] ECR I-11893 8

Cases C-154/04 & C-155/04 Alliance for Natural Health [2005] ECR I-6451 and 9

Case C-380/03 Germany v. Parliament and Council [2006] ECR I-11573 (“Tobacco Advertising II”) 10

Case C-58/08 Vodafone [2010] ECR I-4999 11

Case T-526/10 Inuit Tapiriit Kanatami et al v. Commission, judgment of 25 April 2013 (Seal Products II Case) 13

Case C-547/14 Philip Morris v. Secretary of State for Health (4 May 2016) ECLI:EU:C:2016:325 (and see AG Kokott’s Opinion, ECLI:EU:C:2015:853). 14

S. Weatherill, ‘The limits of legislative harmonisation ten years after Tobacco Advertising: how the Court’s case law has become a “drafting guide”’ (2011) 12 German LJ 827 15

P. Craig, ‘The ECJ and Ultra Vires Action: a Conceptual Analysis’ (2011) 48 CMLRev 395 17

The Treaties grant special competences within policy areas, but there are two general competences: Article 114 and 352 TFEU.

Article 114 is the harmonization competence: the EU is entitled to adopt measures for the approximation of national laws “which have as their object the establishment and functioning of the internal market”.

What is its scope?

Originally, it seemed very wide, almost devoid of constitutional boundaries:

• C-350/92 Spain v Council [1995] ECR I-1985: The European legislator created a supplementary protection certificate that would be granted under the same conditions as national patents by MSs. Three constitutional hurdles:

  • Article 114 can theoretically not be used to create new European rights but can only harmonize existing national ones CJEU rejected that it created new rights

  • EU law should theoretically further the creation of a single market, but the measures extend the duration of national patents and thus prolongs the compartmentalization of the internal market rejected summarily without discussing whether EU law hindered the free circulation of pharmaceutical goods between MSs

  • At the time of adoption only 2 MSs had legislation concerning the measure; is this enough to trigger the “harmonization” power? CJEU concentrated on this question (whether Article 114 required the pre-existence of diverse national laws) and said no: the legislator was entitled to use the power to prevent future obstacles to trade or a potential fragmentation of the internal market.

But the existence of such “limits” was confirmed in Tobacco Advertising.

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Scope of power to make laws under Article 114 TFEU (internal market) = WIDE.

• Article 114 is limited to achieving the objectives of Article 26 TFEU (establishment and functioning of the internal market, defined as (Article 26(2) – an area without internal frontiers where the free movement of goods, persons, services and capital is ensured))

  • Crucially, in Article 26 the idea is the indivisibility of the internal market: internal market access is conditional on the acceptance of all four freedoms

• In principle, it is a very broad article and only QMV is required temptation is to dress up whatever provision through Article 114 (ex. if something requires unanimity, but there is one particularly reticent MS, then one can dress it up as 114)

  • Working Time Directive Case: there was a working time directive passed off as a health and safety concern

Article 114 TFEU provides the basis for, e.g., the Unfair Contract Terms Directive (93/13/EEC), [1993] OJ L 95/29).

The laws of Member States relating to unfair terms in consumer contracts show many disparities national markets differ distortions of competition may arise, notably when they sell in other MSs.

Lack of consumer awareness of laws in other MSs may deter cross-border transactions essential to remove unfair terms in order to facilitate the establishment of the internal market and to safeguard the consumer when acquiring goods at home and from other MSs (also by stimulating competition and increasing choice).

This protection needs to be harmonized at Community level or adopted directly at that level (esp. to fix in a general way the criteria for assessing the unfair character of contract).

[This may suggest a very wide scope, but its scope is nevertheless limited:

1º It covers only contractual terms that have not been individually negotiated

2º MSs have the option of affording consumers a higher level of protection than the Directive (“minimum harmonization clause”).]

In this vein read also Art. 352 TFEU

• Article 352: the residual competence (if EU action should prove necessary to attain one of the objectives set out in the Treaties, and the Treaties have not provided the necessary powers, then the Council can act unanimously (after proposal from Commission and consent of the EP) to adopt the appropriate measures)

  • It is not a complete freeway, but must be used to attain one of the objectives set out in the Treaty (but in practice very braod because in Article 2 TEU the objectives are defined very widely)

  • Can be used in two ways:

    • where the Union has a specific competence, but this is insufficient to achieve a specific objective

    • to develop a policy area with no specific title within the Treaties (more dangerous)

      • ex. the development of a Union environmental policy prior to the Single European Act (introducing an express competence)

  • Limits:

    • Textual limits:

      • Measures cannot entail harmonization where the Treaties exclude such harmonization (i.e. cannot be used in policy areas where the Union is limited to complementing national action)

      • Measures cannot be for attaining objectives pertaining to the common foreign and security policy

      • Article 40 para 2 TEU: it is never for the EU to change its own treaties – the EU cannot change fundamentally the scope of Union powers, only the MSs can change this

    • The third limit was confirmed by the CJEU:

      • It can be used for “small” amendment of the Union legal order, but cannot be used to effect “qualitative leaps” that constitute big changes to the constitutional identity of the EU it cannot serve as a basis for widening the scope of Union powers beyond the general framework created by the Treaties (in particular, by those that define the tasks and activities of the Union.

        • Confirmed when the CJEU was asked about the EU’s power to accede to the ECHR without specific power in the Treaties, holding that accession to the ECHR would not cause a small amendment to the Union legal order but one with “fundamental institutional implications for the Union and for MSs” + accession would be of “constitutional significance” beyond the scope of Art 352, must use Treaty revision (so MSs did this: Article 6(2) TEU but it has not yet acceded because the CJEU said no again, the power has not been lawfully exercised)

        • Read para 29 s. of Opinion 2/94 (on accession to the ECHR) – Article 235 is designed to fill the gap where no specific Treaty provision confers an express or implied power to act but that power is nevertheless necessary to enable the EU to carry out its functions. It cannot be used for widening the scope of EU powers beyond the general framework created by the provisions of the Treaty (because of the principle of conferral)

Respect for human rights is already a condition of the lawfulness of EU acts, but accession to the ECHR would entail a substantial change in the present EU system and equally fundamental institutional implications for the EU and member states. This would be of constitutional significance and therefore beyond the scope of Article 235 – it must be brought about by Treaty amendment.

• However, the only real limit appears to be the political safeguard of unanimous voting in the Council (and consent by the Parliament), but this is increasingly seen as insufficient several MSs have established prior parliamentary authorizations for Article 352 (ex. European Union Act 2011 (UK) s8: a Minister may not vote in favour or support an Article 352 decision unless Parliament approved).

But today, this Article isn’t used anymore because there are too many constitutional implications.

***

The Tobacco Advertising Directive 1998 banned the advertising and sponsorship of tobacco products on a wide range of platforms (including in cigar shops and cinemas, on ashtrays and parasols), on the basis of (inter alia) Article 114 TFEU.

Germany (C) argued (inter alia) that

1º the harmonization power could only be used to promote the internal market, and that this was not so where the EU legislation constituted in practice a total prohibition of tobacco advertising (so that Article 114 was not the appropriate legal basis)

2º Infringement of proportionality and subsidiarity

Ds (Council, EP, France, Finland, UK, Commission) argued that the laws on tobacco advertising varied from state to state, resulting in obstacles to free movement and distortions of competition (magazines with tobacco advertising cannot be exported to other MSs, and MSs that allow it generate a source of revenue denied in other states).

Objections:

1º Distortions of competition were marginal; they did not reach the level of a serious market problem.

2º The Directive went beyond the obstacles and banned advertising in contexts where it was not obvious that this made any contribution to interstate trade (ex. in cinemas or cigar shops). The interstate...