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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:
o 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.
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))
o 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)
o 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).


Page 2 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 TFEUArticle 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)
o 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)
o 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)
o 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
o 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)
o 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)


Page 3 ?

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).
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 trade of some goods where advertising was banned was negligible (ashtrays, parasols).
3o The Directive was a covert health protection measure (and not primarily aimed at improving the operation of the market); this was not only outside the scope of Article 114, but was prohibited in
Article 168 TFEU (permits public health measures but excluding harmonization).
The CJEU annulled the directive (for the first time ever on the Article 114 ground), holding that Article 114 is the wrong legal base as the objective pursued by the Directive cannot be seen as genuinely aimed at the improvement of the conditions for the establishment and functioning of the internal market. Article 114 could not grant the Union an unlimited power to regulate the internal market, and a measure adopted on this basis must genuinely have as its object the improvement of the conditions for the establishment and functioning of the internal market.
The Court insisted on several constitutional limits:
1o An EU law must harmonize national laws (cannot leave unchanged the different national laws already in existence)


Page 4 2o A simple disparity in national laws will not be enough to trigger the harmonization power; it must give rise to obstacles in trade or appreciable distortions in competition. Otherwise, Article 114 would amount to an open-ended harmonization power contrary to the principle of conferral.
3o If it's harmonizing future disparities, then it must be likely that the divergent development of national laws leads to obstacles in trade 4o EU legislation must genuinely contribute to the elimination of obstacles to free movement or distortions of competition.
However, provided that the measure does contribute to free movement or undistorted competition,
then it is not rendered invalid merely because it also contributes to public health. Article 168 TFEU is only a ban on harmonizing public health using that Article, not on integrating public health concerns into internal market rules.
Applied in this case, the CJEU held that:
1o The claimed distortions of competition were not significant 2o A number of provisions of the Directive did not in fact contribute to free movement (ex. banning in cinemas, cigar shops, ashtrays or parasols)
According to Chalmers et al., this is not convincing because while interstate trade is few, there is no reason why it can't exist (ironically, interstate trade might not exist without a ban because then ashtrays and parasols will be given for free by tobacco companies, whereas if it's banned then there might be an interstate trade because restaurants etc. will have to buy them). It must be seen in the context of likely future obstacles - an interstate trade is a mere imaginable possibility and not likely.
Judgment (on incorrect legal basis)
1o Arguments of the applicant (Germany):
Tobacco products advertising is essentially an activity whose effects do not extend beyond MS borders,
because it is conceived based on the particular cultural features of each market + trade in "static"
advertising media (posters, cinema, parasols, ashtrays) is almost non-existent, while intra-Union trade in "non-static" media (the press) is limited ? they are not subject to restrictions by MSs that prohibit tobacco advertising + the Directive does not eliminate distortion of competition because this is negligible.
To use Article 114, the measure has to actually contribute to the improvement of the internal market (a mere reference to Article 114 in the Preamble is not enough, otherwise JR of the legal basis will be impossible). This is not the case here; the Directive amounts to (in practice) a total prohibition on tobacco advertising (because the only form allowed accounts for just 2% of the industry's advertising expenditure) ? it negates the freedom to provide services in the tobacco industry rather than promoting it ? The Directive has the sole result of introducing new obstacles to trade (and is distinguishable from other prohibitions because, ex. the prohibition of misleading advertising is intended to promote cross-border trade by guaranteeing fair advertising across the EU).
Article 114 should only be available where the obstacles and distortion of competition are considerable,
or "appreciable", not the case here.
Article 114 cannot be used where the "centre of gravity" of a measure is focused on protecting public health and not promoting the internal market (whether or not it also incidentally harmonizes market conditions).
2o Argument of the defendants:
There is an internal market in the tobacco products advertising sector: the same advertising media can be used in several MSs because the language is often English, free movement of magazines is likely to be hindered by legislative differences between MSs.


Page 5 The power granted by Article 114 is not necessarily concerned with the liberalization of trade but rather with market regulation (so prohibitions are possible); the measure must not necessarily have the effect of increasing the volume of cross-border trade, merely eliminate disparities in conditions of competition.
Recourse to Article 114 is possible not merely possible where legislative differences actually give rise to obstacles or distortion of competition, but also those liable to hinder the free movement of goods, or to prevent the heterogeneous development of national laws leading to further disparities (Spain v Council
(1995)). The present tolerance of publications with tobacco advertising may change in view of the evolution of national regulations (becoming stricter) ? risk of increased obstacles to trade that the
Directive intends to eliminate.
The "appreciable" obstacles distinction should be rejected in the sphere of Article 114 because it is based on competition law, whereas here universal and objective criteria are necessary. In any case,
there is a real distortion of competition (potential profit of advertising agencies differ according to place of establishment...)
The public health objective is certainly an objective, but it is not the principal one (as evidenced by the fact that the Directive allows MSs to adopt provisions more stringent than those in the Directive to ensure public health protection). The apparent emphasis on public health stems from the fact that it is the sole or main objective of the national measures being harmonized, but in the context of harmonization, it becomes a secondary objective. The objectives of harmonization and protection of human health are inseparably linked; the applicant's approach of determining which is more important is unworkable and contrary to the objective of the test propounded by the CJEU.
3o The Court's analysis:
The measures referred to in Article 114 are intended to improve the conditions for the establishment and functioning of the internal market (read together with Article 3 TEU (the internal market is characterized by the abolition between MSs of all obstacles to the free movement of goods, persons services and capital), and Article 24 TFEU (the market is to comprise an area without internal frontiers where the free movement of goods, persons, services and capital is ensured)). To construe it as meaning that it vests in the EU legislature a general power to regulate the internal market would be contrary to the express wording of the provisions + incompatible with the principle of conferral.
A measure adopted on the basis of Article 114 must genuinely have as its objective the improvement of the conditions for the establishment and functioning of the internal market. A mere finding of disparities between national rules and abstract risk of obstacles or distortions of competition are not sufficient to justify the choice of Article 114 TFEU; otherwise, JR of compliance might be rendered nugatory. Thus, the CJEU must verify whether the measure in fact pursues the objectives stated by the
Union legislature.
Article 114 can be used to prevent the emergence of future obstacles (Spain v Council) but these must be likely and the measure must be designed to prevent them.
However, provided that the measure does contribute to free movement or undistorted competition,
then it is not rendered invalid merely because it also contributes to public health (or even if this is a decisive factor). Article 168 TFEU is only a ban on harmonizing public health using that Article, not on integrating public health concerns into internal market rules.
In this case, does the directive actually contribute to eliminating obstacles to the free movement of goods and freedom to provide services, and removing distortions of competition?
ao Elimination of obstacles (no):
Obstacles concerning the press do exist or may well arise because of the trend in national legislation towards greater restrictions, so a Directive prohibiting advertising of tobacco products in the press could in principle be adopted on the basis of Article 114 with a view of free movement of press products. But this is not true of numerous other products (posters, parasols, ashtrays...).


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