Free Movement of Goods PDF

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EU Law- free movement of goods...

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LAW2221 EU Law Topic 5: The FREE MOVEMENT of GOODS Key Learning Objectives: on completing this topic, you should be able to; 1. Explain the prohibition set out in Articles 34-35/TFEU, including applying the definition of ‘goods’ and the ‘State’; 2. With reference to relevant cases, define a quantitative restriction (QR) and measure equivalent to a quantitative restriction (MEQR) and apply to factual scenarios; 3. With detailed reference to relevant cases, explain and apply the exceptions available under Article 36/TFEU in the case of QRs and discriminatory MEQRs; 4. Explain and critically apply the Cassis de Dijon rule of reason with relevant cases; 5. Critically discuss and apply Keck in respect of selling arrangements; and 6. Explain and apply the provisions of secondary legislation to State action that may impede the free movement of goods. How you will study this topic In the absence of class sessions, this Subject Outline provides 1. A detailed explanation of the legal principles, with relevant primary legislation, key cases and secondary legislation. Embedded within this document at relevant points I direct you to essential reading from the recommended text, with reference to the exact pages to cover. This should assist you to break down the reading into manageable amounts. It will however mean you will be dipping in and out of the chapter at different points. I do this based on 30 years of experience, which has taught me that a student is likely to better understand the topic if it is delivered in a certain order. At the end, there is information on what to expect in the examination, and a sample exam question. 2. Once you have completed working through this outline and essential reading, you will find a summary on the DLE of how the law operates to assist you in applying it in the form of an aide memoire to use as a guide to tackling and structuring your answer to a problem question. 3. Also available on the DLE will be an independent study Workshop with a series of miniscenarios to attempt, using the aide memoire. I will post the answers/ key points to the Workshop, so you can check your answers. 4. I will also provide some quiz questions as we have used in our pop quizzes that you can also tackle to test your understanding. 5. You are welcome to send a test essay answer to the sample question at any point over the Easter vacation or when term starts again and I will return it within 3 working days. ESSENTIAL READING: Fairhurst, Chapter 12 as set out within this lecture outline Also available on the DLE is a pdf file Commission ‘Guide to the application of Treaty provisions governing the free movement of goods’. Published in 2009, this is a little out of date re the secondary legislation and goes beyond our syllabus so I’d suggest going up to around page 30 – it is though a readable explanation that you may find useful. ADDITIONAL READING Muylle, K., ‘Angry Farmers and Passive Policemen: private conduct and the free movement of goods’ (1998) Vol. 23(5) ELRev Wenneras and Boe Moen, ‘Selling Arrangements, Keeping Keck’ (2010) Vol. 35 ELRev 387 1

ABBREVIATIONS MEQR measure equivalent to a quantitative restriction (or MEE measures having equivalent effect) TEU Treaty on European Union TFEU Treaty on the Functioning of the European Union QR quantitative restriction INTRODUCTION – the ‘internal market’    

Under Article 3/TEU, creating an ‘internal (single) market’ is a main EU objective. This entails free movement for persons1, services, capital and goods To ensure an ‘internal market’, there needs to be the elimination of all restrictions and barriers impeding the free movement of goods The essential aim is for goods to move as freely between each MS of the EU as they can within each MS. The benefits of this are basically twofold: 1. It opens up new markets, which producers can access; and 2. It promotes wider product choice and lower prices, which benefits consumers

INTRODUCTION – the essential EU provisions 

EU Law seeks to prohibit two key types of barrier to the free movement of goods:

1. Financial barriers - customs duties and protectionist internal taxation on goods moving Thus, Articles 28 and 30/TFEU prohibit customs duties and all charges having equivalent effect on imports and exports and Article 110/TFEU prohibits discriminatory internal taxation AND 2. Non-financial (non-monetary) barriers - restrictions on the quantity of goods moving We will focus on this type of barrier to the free movement of goods. Article 34/TFEU “Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States” Article 35/TFEU Contains the same prohibition but in respect of exports Article 36/TFEU Provides exceptions permitting the MS to restrict free movement (i.e. exceptions to the rule) The law applies to both goods produced in the EU/ by MSs AND goods that are from outside the EU (third countries), once they are in ‘free circulation’ 2. Note: Much of the case law, reflecting the actions by MS, concentrates on the prohibition in Article 34 and trying to justify such action. This is essentially because MSs are more likely to act in a way that tries to protect their domestic markets against imports; they are less likely to act in a way that impedes their exports freely moving to other MSs.

ESSENTIAL READING: now read Fairhurst Chapter 12 pages 496-499 to consolidate your knowledge and understanding of these introductory points 1 See Topic 3 EU Citizenship and Free Movement of Workers 2 i.e. paid all duties and complied with all import formalities Article 29/TFEU 2

DEFINING ‘GOODS’ 

The definition is wide/ broad

KEY CASE Case 7/68 Commission v Italy (Art Treasures Case) [1968] ECR 423 “…products which can be valued in money and are capable of forming the subject of commercial transactions” KEY CASE Cases 60 and 61/84 Cinéthèque [1986] ECR 2605 “manufactured material objects” 

It is so wide it includes livestock, plants, fruit and vegetables and electricity

DEFINING the ‘STATE’ 

The prohibition set out in Articles 34 and 35/TFEU is placed on the Member State

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To ensure the provisions are effective, they have vertical direct effect (i.e. they create rights natural and legal persons can enforce in their national legal system against the State)

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As we saw when we studied direct effect3, the ‘State’ is broadly defined so in addition to measures taken by the government, and decentralised government and administrative bodies the prohibition also extends to measures taken by emanations/ organs of the State

KEY CASE Case 249/81 Commission v Ireland [1982] ECR 4005 Re Buy Irish4 Facts: In an effort to encourage Irish consumers to purchase products manufactured in Ireland, the Irish Government adopted a 3-year programme of various measures. One was to create the ‘Irish Goods Council’ to lead a campaign. Council members were government appointed, and most of its funding came from the government. Judgment: in a direct action bought by the Commission, the Court concluded the involvement of the Irish Government in the Council was sufficient to consider it an organ of the State and therefore the measures taken were those of the State. (We will come back to this case later in this lecture outline.) Cases 266-7/87 Royal Pharmaceutical Society of GB ex parte Api [1989] ECR 1295 In this case, whilst the Royal Pharmaceutical Society, a professional body, was technically independent, it received State support and had ‘statutory underpinning’. It therefore was an organ of the State for the purposes of EU Law on the free movement of goods. 

If a private company undertakes action impacting on the free movement of goods, Articles 3435/TFEU cannot be used – instead their actions may breach of EU competition law5

ESSENTIAL READING: now read Fairhurst Chapter 12 pages 522-525 (scope of goods and scope of state measures)

EXTENDING the prohibition to ‘failure to act’ 3 See Topic 2 4 See also Case 222/82 Apple and Pear Development Council v KJ Lewis Ltd [1983] ECR 4083 where because the Council had a statutory duty to collect levies from fruit growers it was a State body 5 Aspects of which we will cover as the final two topics on our syllabus 3

 

The wording of the Treaty provisions implies that measures have to be taken by the State i.e. that the State has in some way taken positive action However, they have been interpreted to also extend to where the State has FAILED to act

KEY CASE Case C-265/95 Commission v France (Angry Farmers Case) [1997] ECR I-6959 Facts: For over a decade, French farmers had targeted imports of fruit and vegetables, trying to impede their entry into the country through, for example, road and tunnel blockades. The French authorities had done nothing to prevent this, despite in some cases receiving advance notice. Judgment: in a direct action bought by the Commission, the Court concluded that a MS could breach the Treaty when it abstains from taking appropriate and adequate measures to deal with action that may hinder the free movement of goods: “by failing to adopt all necessary measures in order to prevent the free movement of fruit and vegetables from being obstructed by action of private individuals, [France] has failed to fulfil its obligations”6

SUMMARY    

The Treaty contains provisions designed to prohibit non-monetary barriers to the free movement of goods i.e. Articles 34 and 35/TFEU The definition of goods is broad The definition of the State is broad, and includes emanations of the State The prohibition extends to the State failing to act

6 In contrast, in Case C-112/00 Schmidberger v Austria [2003] ECR I-5659 there was one demonstration. The authorities were informed and the demonstration was of short duration. The authorities imposed measures to minimise disruption and it was peaceful with no serious incidents. Parties had advance notice and advised of alternative routes. It was therefore concluded there was no breach of Article 34/TFEU. 4

PART 1

DEFINING QUANTITATIVE RESTRICTIONS (QRs)

Definition KEY CASE Case 2/73 Geddo v Ente Nazionale Risi [1973] ECR 865 A measure that amounts to a “total or partial restraint of…imports, exports or goods in transit”

Top Tip – there are key words to look out for that will help you identify a QR. For example, 1. TOTAL restraint = ban, embargo, bar, veto 2. PARTIAL restraint = quota, portion, allocation, specific amount The only way a MS can justify imposing a QR is to rely on Article 36/TFEU (discussed below)

PART 2

DEFINING MEASURES EQUIVALENT TO QRs (MEQRs)

Definition KEY CASE Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837 Facts: Belgian law required sellers of certain alcoholic spirits to have a Certificate of Origin from the country of manufacture. Dassonville imported whisky from Scotland via France and had no Certificate. He was prosecuted for breaching Belgian law, and in defence argued the requirement for the Certificate was a breach of Article 34/TFEU because it acted to make it more difficult to import goods other from their country of origin, thus impacting on the quantity of goods moving. CJ: In a preliminary reference, the Court offered a definition of a MEQR, often referred to as the Dassonville formula as: “All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-[Union] trade” KEY points of the Dassonville formula:  no actual effect is needed; potential effect is sufficient to breach the Treaty  proving any intent on the part of the MS is not necessary7  there is no threshold level of amount of goods that need to be affected by the measure  the Treaty rules only apply to goods moving within the Union/ between MS (not goods moving within an individual MS)8 ESSENTIAL READING: now read Fairhurst Chapter 12 page 526, the Dassonville formula

Types of MEQR (or MEEs, measures of equivalent effect) Directive 70/50 provided examples of MEQRs (it only formally applied for a limited period and is now guidance). It, and CJ case law, identifies that there are two types of MEQR 1. Distinctly applicable (or discriminatory) MEQRs; and 2. Indistinctly applicable (or non-discriminatory) MEQRs

7 See below page 6 for an example of these first two points is the case Re Buy Irish 8 Case 98/86 Ministere Public v Arthur Mathot [1987] ECR 809 5

PART 3

Distinctly applicable (discriminatory) MEQRs

Definition Distinctly applicable (or discriminatory) MEQRs in breach of Article 34/TFEU will either:  

Apply only to the IMPORTED good/ product; OR Promote the DOMESTIC good/ product to the detriment of the imported one

Examples 1. Import restrictions9 a. Import licences10 e.g. Cases 51-54/71 International Fruit Company (No 2) [1971] ECR 1107 If this is required before being able to import goods, it will fall within the Dassonville formula and be a distinctly applicable MEQR i.e. it makes it more difficult, directly or indirectly actually or potentially for imported goods to freely move. This is because until the application for the licence is processed and accepted, the goods cannot move at all (so effectively there is a temporary ban); and time and money may need to be spent making the application (potentially making the goods more costly or difficult to import) b. Data requirements e.g. Case 154/85 Commission v Italy [1987] ECR 2717 Imposing requirements for additional data on imported goods makes their importation more difficult and costly so they fall within the Dassonville formula and are distinctly applied MEQRs c. Tests and inspections e.g. Case 4/75 Rewe [1975] ECR 843 Tests or inspections of a good will potentially make it more difficult and costly to move that good, thus such measures may fall within the Dassonville formula, and if applied only to the imported good, are distinctly applied MEQRs NB in the Angry Farmers Case (discussed above), the failure of a MS to act to remove physical restrictions affecting the free movement of imported goods was a distinctly applicable MEQR 2. Promoting domestic goods a. National campaigns KEY CASE Case 249/81 Commission v Ireland [1982] ECR 4005 Re Buy Irish Facts: as explained above, the Irish Government wanted to promote the purchase of Irish produced goods. The campaign involved inter alia a ‘Buy Irish’ symbol for domestically manufactured products. The Irish Government argued that the campaign had not intended to impede the movement of imported goods, and that it had not resulted in any actual increase in the sale of Irish goods. CJ: The Court held in this direct action that it was irrelevant what the intention of the State had been, or indeed what actual effect had occurred. The potential of the national campaign was to promote domestic goods to the detriment of imported goods, which brought it within the Dassonville formula, as a distinctly applicable MEQR. We can contrast Re Buy Irish with Case 222/82 Apple and Pear Development Council v KJ Lewis Ltd. In this case, the Court concluded it was permissible for a MS to promote particular qualities of a good (in this case varieties and characteristics of UK apples and pears) but this must be done in a way that does not discourage the purchase of equivalent imported goods. 9 Export restrictions of a similar type to these would breach Article 35/TFEU 10 And also an export licence – which would breach A35/TFEU 6

b. Origin-marking Case 12/74 Commission v Germany The Court found that rules requiring goods to be marked indicating their origin may not breach the Treaty if the origin-marking implied the goods were of  A particular quality; or/ and  Made from certain materials or via a particular form/type of manufacturing; or/and  Where the origin indicated a special place in the tradition of the region However, we must consider this in light of the Court’s decision in the following case: Case 113/80 Commission v Ireland (Re Irish Souvenirs) The Court held that where the State places a legal requirement/obligation on producers to mark the origin of a good when the origin is of no actual relevance to the qualities of the product, it has introduced a distinctly applicable MEQR (capable of promoting domestic products to the detriment of imported ones) in breach of Article 34/TFEU. (However, an individual manufacturer is free if it wishes to put an origin mark on its product/ goods.) c. Public procurement This is the acquisition of works, supplies and services by public bodies. It ranges from the purchase of routine supplies or services to formal tendering and placing contracts for large infrastructural projects e.g. building works KEY CASE Case 45/87 Commission v Ireland (Re Dundalk Water Supply) [1988] ECR 173 Facts: local government in Dundalk requested tenders to replace the water pipes in its local water supply system. All tenders were required to use a certain size of pipe. This was not the international standard size of water pipe, but a size manufactured in Ireland. CJ: The Court concluded this action resulted in the promotion of domestic goods, to the detriment of imported ones and therefore was a distinctly applied MEQR in breach of Article 34/TFEU ESSENTIAL READING: now read Fairhurst Chapter 12, pages 527-530

PART 4 

Justifying QRs and Distinctly Applicable MEQRs

The only grounds under which the State can justify QRs and DISTINCTLY APPLICABLE MEQRs are those set out in ARTICLE 36/TFEU

KEY points of Article 36/TFEU  It contains an exhaustive list of only 6 grounds  The Court has narrowly interpreted the grounds  Article 36/TFEU cannot be used if there is EU legislation on the matter11 - if this is the case, the MS is bound to comply with the EU legislation (EU Law is supreme over national law, so the MS loses its ability to act unilaterally)  The MS bears the burden of proof to provide the evidence to justify the measure12 and regardless of the ground relied on the Court will require: 1. No arbitrary discrimination or a disguised restriction between imported and domestic goods; and 2. The measure to be proportionate in that it does not restrict trade any more than is necessary 1. Public Morality  There is no definition of what this constitutes so it may vary between MSs 11 For example Case C-1/96 R v Ministry of Agriculture, Fisheries and Food, ex parte Compassion in World Farming Ltd [1998] ECR I-1251 12 It cannot just make a statement that a ground applies: Case C-265/06 Commission v Portugal [2008] ECR I-2245 7

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However, to use the ground the MS must prove that the measure is genuinely necessary

KEY CASE Case 121/85 Conegate Ltd v Commissioners of Customs & Excise [1987] ECR 1007 To identify whether the UK’s claim to protect morality was genuine, the Court considered whether it treated similar domestic products in an equivalent manner: “…a Member State may not rely on grounds of public morality to prohibit the importation of goods from other Member States when its legislation contains no prohibition on the manufacture or marketing of the same goods on its territory” 

In other words, if the MS permits domestic manufacture of the good, any claim to justify measures preventing/ restricting imports of such goods may not be considered genuine

2. Public Policy  There are very few examples of reliance on this ground. One example is Case 231/83 Cullet v Centre Leclerc [1985] ECR 305, where the French Government argued it extended to action designed to prevent riots and civil disturbance. The Court concluded this was too wide an interpretation of the ground. In addition, Article 4(3)/TEU obligates the State to remove any barriers to the attainment of EU law, so it was obligated to deal with the riots and civil disturbances, not use them as an excuse for non-compliance with EU law 3. Public Security  This is also a rarely used ground. One example of successful u...