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Free Movement Of Goods And Services Notes

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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.

? 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 nondiscriminatory 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: o 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. o 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 imported products and are therefore discriminatory in nature" [9]
The measure was discriminatory because "the essential characteristic of the souvenirs in question is that they constitute a pictorial reminder of the place visited which does not by itself mean that a souvenir, as defined in the orders, must necessarily be manufactured in the country of origin." [15]
Would be nothing wrong with leaving "domestic manufacturers to take appropriate steps such as affixing, if they so wished, their mark of origin to their own products of packaging."

Restricting channels for the distribution of imported goods Case 8/74 Procureur de Roi v Dassonville [1974] ECR 837 ECJ held that a Belgian requirement that importers of Scotch whisky possess a British certificate of authentication was incompatible with Art. 34 TFEU. Belgians had imported Scotch whisky from free circulation in France. The rule favoured direct importers over traders importing Scotch whisky into Belgium from other MS in which the goods were already in free circulation. This 'channelled' trade and distorted the market.
? [5] A distorting measure is: "all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade."
? [6] "In the absence of a Community system guaranteeing for consumers the authenticity of a product's designation of origin, if a MS takes measures to prevent unfair practices in this connexion, it is however subject to the condition that these measures should be reasonable and that the means of proof required should not act as a hindrance to trade between MS and should, in consequence, be accessible to all Community nationals."
? [7] Art 36 does not apply to arbitrary discrimination or disguised restrictions on trade
? [8] "That may be the case with formalities, required by a MS for the purpose of proving the origin of a product, which only direct importers are really in a position to satisfy without facing serious difficulties." Licences International Fruit Company v Produktschap voor Froenten en Fruit (No 2) (1971): Facts: Court asked to consider whether Art. 34 applies to "national legislative provisions prohibiting imports and exports without a licence but which in fact are not applied because exemptions are granted from the prohibition and, there this is not so, because the licence is always granted on request"

? Noted that: "Apart from the exceptions for which provision is made by Community law itself those provisions preclude the application to intra-Community trade of a national provisions which requires, even purely as a formality, import or export licences or any other similar procedure"
? More permissive approach to lawfulness of controls over trade with third countries outside the EU CAT 2: PROTECTIONIST EFFECTS FROM NATIONAL LAW DISPARITIES This is the category of measures that fall into Art. 3 of Directive 50/70 (indistinctly applicable rules). Even though there might be no explicit reference to the origin of goods, disparities between national laws may themselves generate measures having equivalent effect within the meaning of Art. 34 TFEU. Cassis de Dijon This was a crucial development, since it concerns controlling national regulatory autonomy in establishing technical standards in so far as it may impede European market building. Case 120/78 Cassis de Dijon [1979] ECR 649 Facts: A German law specified a minimum alcohol level of 25% for certain spirits including cassis (made in France). The law was indistinctly applicable because it applied to both domestic and imported liqueurs, but had the effect of impeding the importation of French cassis which had alcohol content between 15% and 20%. ECJ: accepted that the German requirement amounted to an MEQR.
? 14: "In practice, the principal effect of requirements of this nature is to promote alcoholic beverages having a high alcohol content by excluding from the national market products of other MS which do not answer that description.
? It therefore appears that the unilateral requirement imposed by the rules of a MS of a minimum alcohol content for the purposes of the sale of alcoholic beverages constitutes an obstacle to trade which is incompatible with [Art 34]
? There is therefore no valid reason why, provided that they have been lawfully produced and marketed in one o the MS, alcoholic beverages should not be introduced into any other MS; the sale of such products may not be subject to a legal prohibition on the marketing of beverages with an alcohol content lower than the limit set by national rules."

Minimum fat requirement in cheese Case 286/86 Deserbais (1988) Facts: French legislation restricted use of the name 'Edam' to choose with a minimum fat content of 40%. D imported cheese from Germany where it was lawfully produced with a lower fat content. D marketed the cheese as 'Edam' and was prosecuted for unlawful use of a trade name. D argued Art 34 provided him with a complete defence to the charge. ECJ:
? [12] "It would be incompatible with [Art 34]... and the objectives of a common market to apply such rules to imported cheeses of the same type where those cheeses have been lawfully produced and marketed in another MS under the same generic name but with a different minimum fat content. The MS into which they are imported cannot prevent the importation and marketing of such cheeses where adequate information for the consumer is ensured."
? 13: Question may arise if same rule must be applied where a product under a name is so different (in terms of composition or production) from products generally known by the name that it cannot be regarded as falling within the same category. But this case is not such a case. NB: there could be a case where a such a rule was legitimate. CAT 3: SELLING ARRANGEMENTS This is where obstacles to commerce diminish the overall volume of trade, but do not affect imports more than domestic products. Such measures are not caught by Art. 34. Background: Sunday Trading cases Case 145/88 Torfaen BC v B&Q plc (1989) Facts: B & Q was prosecuted for violating the Shops Act 1950 by allowing its retail premises to be open on Sunday other than for limited range of permitted transactions under that Act. B&Q argued that 'Sunday trading' depressed sales, including sales of imported products. ECJ:

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