Free Movement of Goods

Internal market is defined by Art 26 TFEU: “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 this Treaty.”

The Free Movement of Goods concerns the following: Removal of customs duties (including CEE) Removal of quantitative restrictions (including MEEQRs) Mandatory Requirements (Cassis) Derogations

Relevant Treaty Provision Article 28(1) – Customs Union

“The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having an equivalent effect, and the adoption of a common customs tariff in their relation to third countries.”

Article 29 – Free circulationGoods from a 3rd Country entering into a MS, but have already passed all the formalities in another MS. Thus, no more formalities are necessary.

Article 30 – Prohibition on Customs DutiesProhibition on customs duties and charges having an equivalent effect (CEE)

Article 34 – Quantitative Restrictions/ImportsElimination of quantitative restrictions on imports and measures having an equivalent effect (MEQRs).

Article 35 – Quantitative Restrictions/ExportsElimination of quantitative restriction on exports and measures having an equivalent effect (MEQRs).

Article 36 – Derogations from Art 34-35

Problem Question Outline:

Customs duties – ie Fiscal BarriersSome sort of financial charge on goods because they are crossing the border, these charges are capable of hindering trade of the good.

1. must be a good, or in free circulation2. Art 30 TFEU – Prohibition on Customs Duties or charges having equivalent effect

(CEE)

“Charges having Equivalent Effect” In practice there are no blantant charges

CEE are measures that occur in practice There is no definition and jurisprudence is essential

Case C-24/68, Commission v Italy (‘Statistical Levy’) Italy imposed a Statistical Levy on goods that were exported with the task of

performing research on the type of goods being exported.

Joint Cases C-2&3/69 (‘Diamond Workers’) Belgium law which required 0.33% of all diamond sales to be paid into a social

fund for the workers of the diamond industry. The ECJ did not care that the purpose of the money had no connection with the government in any financial or other manner.

Statistical Levy+Diamond Workers

ECJ of Diamond Workers,o “…any pecuniary charge…whatever its designation and mode of

application, which is imposed…on domestic or foreign goods [because] they cross a frontier, and which is not a custom duty on the strict sense, constitutes a charge having equivalent effect…”

Article 110 TFEU – Internal Taxation Tax should apply equally to both domestic and non-domestic MS goods Internal taxation is entirely within the competence of the MS So long as it does not discriminate against domestic and non-domestic goods.

Non-Fiscal Barriers

1. Must establish that it is a GOOD, otherwise Treaty provision do not apply Definition of goods:

C-7/69, “Arts Treasures” Italy imposed a tax on the export of works of artistic value. Italy argued

that art treasures do not come under the meaning of goods in Art 28 TFEU.

ECJ,o The broad definition of goods includes: o “products which can be valued in money and which are capable

of forming the subject of commercial transactions.”

Article 29: Goods in free circulation

First look at the Customs Duties/CEEs

Harmonisation?? Art 34 and 35 are only applicable where there has been no harmonization in the area as outlined by Article 114.

o Article 114(6) – allows the Commission to reject any measures that the MS imposes that goes against the harmonization, and is not applicable to the derogations, and is discriminatory towards the function of the internal market.

2. Import or Export If import - Article 34If export – Article 35

Scope: Articles 34 and 35 only apply to MS. However, they have been interpreted broadly:

Nationalised industries such as the Post Office (Commission v France) Regulatory authorities and professional bodies established under statutory

authority (ex parte Association of Pharmaceutical importers) The Police Force (ex parte ITF Ltd)

3. Quantitative Restriction

C-7/73, Geddo“Any measure of a MS that restraints the import, transit or export of a certain good [according to quantity or value]

For example, in Sweden the import of butter from Ireland is limited to 1 million tons a year.

If it does not fall under quantitative restriction turn to MEEQRs

4. Measures having equivalent effect to quantitative restrictions

Directive 70/50/EEC - on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC TreatyArticle 2 lists matters to be observed: Distinctly applicable measures (those which apply only to imported goods) Indistinctly Applicable Measures (apply equally to imported and domestic goods) Minimum or maximum prices specified for imported products. Conditions in respect of packaging, composition, identification, size, weight, etc..,

which only apply to foreign goods. Limiting publicity in respect of imported goods as compared with domestic

products. Making it mandatory for importers of goods to have an agent in the importing

MS.

According to Dassonville

“All trading rules enacted by MS which are capable of hindering, Directly or Indirectly, Actually or Potentially, intra-Community trade”

5. Dasonville Formula

a. Effect of MEEQR i. Has to only be capable of hindering intra-Community trade

ii. The mere possibility of an effect on intra-Community trading is sufficient.

b. Discrimination?i. Does not have to be discriminatory

ii. “All trading rules”iii. The objective is the total liberalisation of the movement of goods.iv. All measures with a restrictive effect need to be justified

c. Only Imports?i. The goods do not have to effect them in a cross border manner

ii. Extremely wide formulaiii. Also, includes the circumstances of sale (ie origin markings,

packaging, promotion…)d. State Measure

i. The measure must be a state measureii. Does not have to be legally binding (Buy Irish)

iii. Acts of private entity are also attributable when the State has a Duty to Stop (C-265/94 “French Farmers’)

6. Distinctly or Indistinctly applicable?

Dassonville did not distinguish between distinctly (measures applying only to imports, ie discriminatory) and indistinctly (measures applying to both imports and domestic goods)

NB: defence for distinctly/discriminatory measures is Article 36 – derogations. Whereas, indistinctly measures would have a defence only under Cassis.

a. Distinctly/Discriminatoryo Government sponsored campaigns to encourage consumer to buy

domestic products infringes Art 34 (Buy Irish)o However, promotion of domestic products where certain qualities are

pointed out is no infringing Art 34 (Apple and Pear Development v Lewis)

o Hygiene inspections on imported goods may infringe Art 34, because they cause delays and expenses (Rewe)

Apples into Germany were inspected for disease, but same apples grown in Germany were not.

b. Indistinctly/Non-discriminatory

o Packaging requirements (Belgian Margirine) Belgium national law required margarine to be packaged in

cubes. This was deemed to increase the cost of packaging in other MS

o Contents and Ingredients restrictions (Sandoz (Muesli Bars)) There was a defence under Article 36 on public health grounds. Defence because there was a lack of scientific evidence to

prove otherwise for control of added vitamins. Failed on proportionality because MS must prove the necessity

of protection of health. Ie. Warnings on packaging of excessive consumption to health risks.

o Name Restrictions

The Dassonville case was very board, and therefore meant that a lot of actions of MS could breach Art 34, even where they resulted from national differences and were as equally applicable to domestic products as they were to imports.

7. Keck and Beyond In 1993, ECJ acknowledged that Dassonville ‘formula’ was too wide. Facts of Case: French law prohibited the resale of goods that had not been altered or repackaged

at a price lower than the price at which they had been bought, in order to prevent so-called ‘predatory pricing’ (the process of making a short-term loss in order to force competition out of the market).

Keck had been prosecuted for having resold imported coffee at their supermarkets at a loss.

If a measure is constituted to be a “selling arrangement”, then it would not breach Article 34.

In Keck, ECJ announced to draw distinction between: Product Requirements:

o Law relating to the goods themselves. This is still governed by Article 34 and 35 and Dassonville Formula.

o Such rules are prima facie infringements Selling Arrangements:

o Not the goods themselves, but how, when and where they are marketed.

o Typically anything other than the characteristic of the product. NOT PHYSICAL CHARACTERISTICS OF PRODUCTS.

o Fall outside of Article 34 and 35, but subject to two pre-conditions:1. Apply Equally - Measures apply to all traders within the MS2. Non-Discriminatory - The measure must affect the marketing

of the goods equally of domestic and non-domestic goods

NB: This helped halt the use of Article 34 by traders where it was only used because the national rules/measures were limiting their commercial freedom.

Examples of Selling Arrangements: Prohibition of selling processed milk to infants, other than in pharmacies

(Processed Milk) Rules providing the compulsory closing of shops ie selling hours

(Tankstation) Limitation on televised advertising on certain goods (Leclerc) Legislation allowing only licensed retailer to sell alcohol National licensing time legislation – the mandatory closing times of shops on

sundays (The Sunday Closing Times)

Examples of Product Characteristics: A publication of magazines of cross word puzzles where winners could win

cash prizes. (Familiapress)

Italian Trailers Case Italian rule banned all trailers to be towing by a motorcycle. This was an

indistinctly applicable rule. Criticised to extend Keck to now include Arrangements of use for goods.

But, the ECJ based there argument on Cassis and the mandatory requirements of public interest as a justification for allowing the measure.

Academic Reaction: Criticised for impeding market access In a way it goes against the Internal Market and acts as an exception

where it involves selling arrangements – same as Weatherill’s objections in his article below.

Weatherill – Substantial restriction testo Whether a measure has substantially restricted the entrance of a good

into a particular state AG Jacobs – Substantial hindrance test

o Same as whetherill

Weatherill’s three objections to the Keck test from article (After Keck: Some Thoughts on how to Clarify the Clarification)

1. The categorisation of national measures as Selling Arrangements was inappropriately rigid

2. The distinction drawn between selling arrangements and product characteristics was ‘artificial’ and ‘unworkable’

3. The Selling Arrangements test did not reflect the objectives of the Treaties, ie the Internal Market.

Peter Oliver criticised Weatherill’s test as being unworkable as it would require an evaluation of complex economic data.

8. Article 36 – Derogations from Art 34 and 35

NB: MS relying on Article 36 must also rebut the presumption of mutual recognition. Mutual recognition means that where goods are satisfactorily produced in one state they should be satisfactory for the other state.

Principle can be rebutted by pointing to specific national characteristics. Muller – baking ingredient banned in France, but not Germany, because

French eat more pastries and could be harmful to their citizens.

Article 36 applies to both distinctly and indistinct measures.“The provisions of Article 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 Protection of Health and Life of Humans, Animals or Plants Protection of National Treasures possessing artistic, historical or archaeological

value Protection of industrial and commercial property.

Member states remain responsible for exceptions, in order to protect them

General principles of the Exceptions: List is exhaustive The objectives all non-economic in nature The objectives have to be narrowly construed The measure has to be proportionate. MS must not abuse the derogation of Article 36. (Art 36, sent 2)

Public MoralityHenn and Darby (1979)

UK law imposed an absolute ban on the import of pornography, even though domestic law did not ban the possession or even dissemination of such material.

Henn and Darby were convicted of fraudulently evading this ban by importing pornography from the Netherlands to the UK. They argued that the ban was contrary to Art 34 TFEU.

ECJ,o It is for each MS to determine the standards of public morality in its

territory. o The import ban is not covered by Art 36, sentence 2 TFEU (ie non-

discriminatory) (abuse) as its purpose is to restrain the manufacture and marketing of pornography.

o Import ban is justified by Art 36

But, such products are equally banned for domestic products – thus non-discriminatory.

Conegate “Rubber Dolls” (1985) Conegate imported life-size inflatable “love love dolls” from Germany to the UK. ECJ,

o “MS may not rely on grounds of public morality to prohibit the importation of goods from other MS when its legislation contains no prohibition on the manufacture or marketing of the same goods from its own territory.”

o Thus, the manufacture of the goods in its own state was not banned. This measure was distinctly applicable and thus could not rely on public morality grounds of Art 36.

Public PolicyC-177/83 Kohl

Strict interpretation of Public Policy is required, not to give a broad definition.

C-231/83, Cullert French legislation imposed minimum retail prices for fuel, which was to be

fixed primarily to ex-refinery prices and French refinery costs. France argued that there would be civil unrest if they did not fix the prices.

ECJ,o The French legislation constituted an MEQR in the strict sense of Art 34.o France has not shown that they do not have the resources to deal with such

civil unrest.Public SecurityC-72/83, Campus Oil

Irish required importers of petrol into Ireland to buy 35% of their supply from a State-owned refinery at prices fixed by the Government.

The argument was that it was vital for the public security of Ireland. This was to ensure that since it had only one refinery in Ireland to make it fair that those products would be marketed.

Considering it’s an island the supply/demand and thus prices could cause major problems on the island.

ECJ,o The argument based on public security succeeds. The idea that Irish

laws insisting that 35% of petrol supplied be purchased from the State refinery were held to be acceptable.

o “…petroleum products…exceptional importance as an energy source…are of fundamental importance for a countries existence…its essential public services and even the survival of the inhabitants depends upon them.”

o “An interruption of supplies of petroleum products, with the resultant dangers for the countries existence, could therefore seriously affect the public security that Art 36 allows States to protect.”

o “Article 36 refers to matters of a non-economic nature…However, …the … seriousness of…a country’s existence, …ensuring a minimum supply of petroleum products… is to be regarded as transcending purely economic considerations and thus as constituting an objective covered by the public security.”

o Reasoning was on Proportionality: ECJ deals with public security more leniently and thus MS

would be more successful under this head of Art 36.

Public HealthClosely scrutinize whether public health is the real purpose, or the protection of domestic products (Poultry Meat)

Dutch Vitamins Dutch rules prohibited the use of added vitamins in foods. Dutch claimed that although vitamins were not dangerous, when consumed in

excess would be dangerous. ECJ,

o Ban was illegal and against Art 34 TFEUo Justified under Art 36 for Protection of Humans and Life, if based on a

real threat, analysed through a risk assessment/scientific studies.o Dutch only used generalized studies and thus would be very inconclusive

to the real threat. So, it failed the justification criteria

Sandoz (Muesli Bars) Netherlands refused the sale of Muesli Bars because they contained added

vitamins, on the grounds that it was against public health policies and that these were dangerous to the health of humans.

There was no real scientific proof ECJ,

o The argument of Art 36, was accepted because there was uncertainty in scientific evidence for the added vitamins and because the consumption of them could not be monitored.

o Thus, based on the “precautionary principle” discretion is provided to MS to regulate such protection of humans in the absence of EU laws. *Justified*

o Step 2: is it proportionate? No – it was too restrictive of a measure. Labelling of a warning could be far more effective and less

restrictive to enable the objective of Art 26 (Free movement of Goods).

Thus, Two Stages:1. Is the measure justified under one of the 5 heads2. Is the measure proportionate?

a. Is there something that is far less restrictive to free movement, yet effective to its protection.

9. Cassis – Mandatory Requirements Derogation from Art 34 Usually based on Consumer Protection Laws Applies only to non-distinctly/non-discriminatory measures Thus, cannot apply to exports and Art 35

Cassis de Dijon – Rule of Reason German law prohibited sale of various liquors (including cassis) in Germany

with an alcohol content lower than 25%. Claimant wanted to import French cassis into Germany, which had alcohol content 15% to 20%.

Germany argued that it was for the protection of public interest and health. ECJ,

o Restriction would be allowed if they could satisfy mandatory requirements justified by an objective of public interest:

Effectiveness of fiscal supervision Protection of Public Health Fairness of Consumer Transactions Defence of the Consumer They must be justified and proportional

o Cassis failed as it was disproportionate as a measure. Simply labelling the alcohol content would have been effective to allow consumer to make an informed decision on quality.

o ECJ felt alcohol content was more of a quality factor, but did not alter public interests.

NB: Cassis pointed out that Dassonville Formula was too broad and there was some measures that were infringing Art 34, but was excusable – rule of reason.

Examples of Exceptions under Cassis Rule1. Road Safety – Italian Trailers – ban of trailers to be towed by motorcycle.

Due to uncertainty of safety – it was justified/proportionate of ban.2. Protection of a MS culture – Cinetheque – French ban for 1 year of marketing a

movie after it has played in the cinema first. was necessary and was proportionate, unlike Cassis

3. Ensuring cohesion of the tax system - Bachmann4. Preservation of the variety of the media - Familiapress

Examples failed due to being disproportionate1. Consumer Protection – German Purity Beer

Although justified on protection of consumers for ingredients apparent – mutual recognition principle – if sold as beer in one MS, it should be sold as beer in Germany

Thus, disproportionate1. Protection of the Environment – Danish Bottles

certain bottles allowed to make recycling more efficient and effective failed because it was disproportionate

10. Proportionality

3 Part Test: Suitability – of the attainment of the desired objective Necessity – is there a less restrictive measure available? Proportionality strict sensu

Suitability: Measure must be Suitable or Appropriate or Pertinent to obtain the desired

objective

Necessity: Is there alternative means or less restrictive measure to intra-Community trade? Least onerous and equally effective alternative would be selected

Proportionality in the strict sense Cost/benefit analysis Infringement on Art 34 if a rule is deemed to be excessive to intra-Community

trade. Problems:

o Lack of expertise in gathering information

Could Measure Breach Art. 34?

QR? yes MEEQRs

Only if they fall under Dassonville Formula

Directive 70/50

Distinctly Applicable? yes Indistinctly Applicable?

Only if they do not pass the rule of reason (Cassis)

Subject now to Keck

Product Requirement? Look at Cassis Selling arrangement?

Not subject to Art. 34Yes

Possibility of Art 36 Derogation