#15633 - Free Movement Of Goods And Services - European Law

THE FREE MOVEMENT OF GOODS AND SERVICES

Reading list

Securing the free movement of goods and services between Member States forms a cornerstone of the economic objectives of the Treaty. Product and service market integration should, as a matter of common market theory, generate an intensification of competition, the release of economies of scale and patterns of industrial restructuring stimulated by achievement of comparative advantage, thereby causing improvements in quality of goods and services and a reduction in price. The consumer should win. In this seminar, the Treaty provisions devoted to opening up markets for goods and services in the EU are the subject of study. Be aware of Articles 30 TFEU / ex 25 EC (prohibiting customs duties) and 110 TFEU / ex 90 EC (prohibiting discriminatory taxation); but the focus will be on Articles 34-36 TFEU / ex 28-30 EC (prohibiting quantitative restrictions and measures having equivalent effect on the movement of goods across borders) and Articles 56-63 TFEU / ex 49-55 EC (governing the free movement of services).

Much of the case law has involved the demolition by litigation of national barriers to trade. This leads to enhanced consumer choice in the market at the expense of (national) public regulation of the market. On the other hand, the impetus towards trade integration is not absolute and the Court of Justice accepts that it is open to a regulating State to show that it possesses a justification for its regulatory strategies of sufficient weight to override the interest in integration.

This balance was first explained in a sophisticated form in the Court’s famous ruling in Cassis de Dijon in 1979 (Case 120/78). The implication is that, insofar as a national barrier to trade is treated as justified by a court, the institutional focus is turned away from the judicial process and on to the EU legislature, which is competent to drive forward the process of integration, most obviously by choosing to harmonise the subject matter under EU legislation (remember discussion of the scope of Article 114 TFEU (ex 95 EC, ex 100a EEC) in Tutorial 1).

The case law reveals a Court in Luxembourg anxious lest the scope of these provisions, in particular Article 34 TFEU /ex 28 EC, be drawn too broadly, thereby depriving national authorities of the competence to select forms of local market regulation which do not interfere with the process of market-building in the EU. This is the essence of the 1993 ruling in Keck and Mithouard, the ramifications of which are still not settled today. The substantive law of free movement remains one of the most dynamic of all areas of EU law, and it is victim of what some criticise as a disturbing lack of coherence in the judgments of the Court on several levels, including whether a common approach does and should apply to all the types of free movement envisaged by the Treaty.

THE INTERNAL MARKET

Treaty Articles

Art 3 TFEU

• 1. The Union’s aim is to promote peace, its values and the well-being of its peoples...

• 3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance. It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child. It shall promote economic, social and territorial cohesion, and solidarity among Member States. It shall respect its rich cultural and linguistic diversity, and shall ensure that Europe's cultural heritage is safeguarded and enhanced....

My thoughts: from this we can say that the internal market is not an end in itself, but it is clear that it lies at the heart of the EU’s activities.

Art 26(2) TFEU

• The internal market shall comprise 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.

Economic rationale: the internal market is designed to ensure competition, leading to technical innovation from firms seeking a comparative advantage and lower prices. The idea is that ultimately there will be better goods at lower prices —a large benefit to consumers.

Implementation of measures designed to regulate the internal market: Gebhard (1995) - a case on the freedom of establishment: “It follows... from the Court' s case-law that national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it”

FREE MOVEMENT OF GOODS

Treaty Articles

Imports: Art. 34 TFEU: Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.

Exports: Art. 35 TFEU: Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States.

Derogations: Art. 36 TFEU: The provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or 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.

The fundamental idea here is balance: the articles are concerned with balancing: (i) impetus towards free trade; with (ii) accepting that MS retain a strictly defined competence to lawfully restrict free trade to protect certain important domestic interests. To make this more vivid: consider a country banning the import of porn in the interest of public morality.

Definitions

We need to define what a trade barrier is — it is crucial o remember that trade barriers can be lawful if they are justified. The Articles thus establish a two-stage enquiry: (i) is it a barrier to trade; (ii) if so, is it justified? Art. 34 catches quantitative measures and all measures that have an equivalent effect:

Quantitative restrictions: “measures which amount to a total or partial restraint of, according to the circumstances, imports, exports, or goods in transit.” C/273 Geddo v Ente [1973] ECR 865. This includes bans on imports and imposed quotas on imports.

Measures having equivalent effect (MEQR’s) “not only take the form of restraint described: whatever the description or technique employed, they can also consist of encumbrances having the same effect.” (Geddo). We need to consider what this means in more detail:

• Directive 70/50: this is no longer applicable, but continues to give some idea of the scope of MEQR’s. The directive identified two groups of such measures:

• Distinctly applicable measures (Art. 2 of directive): these do not apply equally to domestic and imported goods (e.g. they make importation more difficult / costly relative to domestic products) —e.g. higher standards for imported goods.

• Indistinctly applicable measures (Art. 3 of directive) these measures appear on their face to be equally applicable to domestic and imported goods, but the effect of the measure disadvantages imported goods by requiring them to satisfy a domestic set of rules for similar products —e.g. conditions on the packaging / composition of goods.

• ECJ in Dassonville: here the ECJ give an effect based definition — i.e. if a national measure has a prejudicial effect to the internal market, unconcerned with intention: “all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade.”

Several categories of obstacle can be identified in the EU case law

CAT 1: PHYSICAL BARRIERS TO TRADE AND DISCRIMINATORY PRACTICES

This is the category of measures that fall under Art. 2 of Directive 70/50. This type of barrier was characteristic of the earlier cases, where relatively easy-to-identify interferences with trade integration were attacked. This category does not apply to goods with distinctive characteristics that may be national or regional in origin —e.g. Stilton Cheese, Parma Ham etc.

Imposing additional requirements on imported goods

Case 251/78 Firma Denkavit Futtermittel GmbH v Minister fur Ernahgrung (1979): the requirement that imported goods should be inspected was held to breach Art. 34 because of the delays in inspection process and increased transport costs.

National rules giving preferences to domestic goods

Commission v Ireland (1980)

Facts: The “Irish Souvenirs” case. Ireland passed a law requiring imported jewellery bearing certain motifs or characteristics to be sold as souvenirs to bear the word ‘foreign’ if not produced in Ireland.

ECJ: “

• The orders concerned in the present case are not measures which are applicable to domestic products and to imported products without distinction but rather a set of rules which apply only to...