The internal market: principles of
free movement
28 April 2014
Prof. Marquis
Outline
• Today:
• I. Introduction
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• II.A. Non-tariff barriers (NTBs) to trade between
Member States: The legal framework
• Tomorrow:
• II.B. NTBs to trade between MS: The classical
case law
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• III. The outer limits of Art. 34
I. Introduction
• Free movement of:
– Goods
– Services
– (Freedom of) Establishment
– Persons
– Capital
• Case study: free movement of goods
• 1. ‘Positive’ integration
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– EU legislator adopts legislation (often on the
basis of Art. 114 TFEU)
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– that provides (typically) for a minimum of
harmonization to alleviate or remove
barriers to trade between Member States
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• Such barriers may result simply from the
fact that regulatory rules can vary from MS
to MS
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– MS can go further if they so choose
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• Poi …
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• 2. Negative integration: case-by-case removal or
“disapplication” of trade barriers
– Here the courts are the primary actors,
presiding over litigation
– Individual plaintiffs or the European
Commission can initiate legal actions against
the MS
– The courts then invalidate (where they have
that power) or “disapply” national rules that are
contrary to the rules on free movement
Free trade as envisaged by the Treaty
• The Treaty sets out the following tasks for the Union:
To prohibit, as between MS,
– 1. Customs duties (i.e., duties on imports or
exports);
– 2. Charges having an equivalent effect i.e.,
equivalent to customs duties);
– 3. Quantitative restrictions (i.e., quotas or bans on
imports or exports); and
– 4. Measures having an equivalent effect to
quantitative restrictions)
• Some exceptions apply, as we’ll see
II. Non-tariff barriers to trade
between Member States
A. The legal framework; and
B. Introduction to the classical case law
A. The legal framework
• Article 34 TFEU provides:
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– “Quantitative restrictions on imports and all
measures having equivalent effect shall be
prohibited between Member States”
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• Art. 35 lays down a parallel rule in the case of
quantitative restrictions on exports and
measures of equivalent effect
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• Arts 34 and 35 thus aim at the most important
source of NTBs: State measures that form or
produce barriers to cross-border trade
BUT
NTBs are not per se illegal
• MS can mantain QRs & MEQRs where this is
justified by the public interest
• Art. 36 TFEU: restrictions justified on grounds of:
– Public morality / Public policy / Public
security
– Protection of industrial and commercial
property
– Protection of health and life of humans, etc.
• (Case law exands the possible justifications
under certain conditions)
• So there are two types of derogations
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– Art. 36
– mandatory requirements
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• But these are exceptions to a fundamental rule
• Consequently, they are to be interpreted
strictly
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• Four important consequences …
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• 1. Burden of proof on the MS to show that a
derogation applies
• 2. If the measure is ‘distinctly applicable’, only the
justifications listed in Art. 36 can be invoked
– … Other goals, like environmental protection or
consumer protection, are excluded in that case
– may only be invoked as ‘mandatory
requirements’
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• 3. In all cases, purely economic justifications are
rejected
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• 4. Proportionality test always applies
Principles of free movement:
II.B. (Non-tariff) Barriers to trade between MS:
Introduction to the classical case law
29 April 2014
Prof. Marquis
Today’s subject: alcohol
1. Whiskey
2. Liqueurs
3. Beer (and coffee)
Dassonville (1974)
• The Dassonvilles imported whisky from France into
Belgium without a certificate of origin from the UK
customs authorities
• Belgian P.M. brought criminal charges. Defense based
on Art. 34
• Did the Belgian rule on certificates of origin apply to
all traders, foreign and domestic?
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– Yes: all importers, including Belgian importers, had
to have a Certificate if they wanted to re-sell
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– so: it was not directly discriminatory (not ‘distinctly
applicable’)
• Was it discriminatory in an indirect sense?
• One might take the view that there was not a strong
argument that the rule was even indirectly
discriminatory
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• But the ECJ did not hesitate to conclude that the
Belgian rule was within the scope of Art. 34…
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• The Court held that:
– All rules enacted by MS which are capable of
hindering, directly or indirectly, actually or
potentially, trade between MS, are to be
considered measures with effects equivalent to
quantitative restrictions
The next step was the Court’s judgment in
Cassis de Dijon (1979)
Here the Court does two things
1. Introduced the concept of mutual
recognition
But also 2. introduced the concept of
mandatory requirements
Cassis de Dijon (1979)
• Contested measure was a German rule regulating
fruit liqueurs
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• Minimum alcohol content: 25%
– Not discriminatory on its face (‘indistinctly
applicable’)
• The problem: French Cassis de Dijon only contained
15-20% alcohol
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• This regulatory diversity had the effect of a de facto
ban on Cassis, a French product
• ECJ held:
– Absent EU rules, obstacles to movement in the
Community resulting from disparities between
national rules on the marketing of products
must be accepted if those provisions are
necessary to satisfy mandatory requirements
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– such as public health, commercial fairness or the
defence of the consumer, etc.
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• But: proportionality and less restrictive means
• a contrario, where mandatory requirements do
not need to be protected:
– if a product is lawfully produced/marketed in
one MS, it must also be free to circulate in all
MS
• This is the “country of origin” principle, or the
principle of “mutual recognition”
– A de-regulatory rule; and controversial
– But again: only where the M.R. doctrine fails
• How was Cassis resolved? Germany made two
arguments. First, the rule protected public health
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• It prevented a proliferation of weak alcoholic
drinks on the national market
– Germany: weak drinks are more liable to induce
tolerance
– ECJ rejected this for lack of consistency
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• Germany also argued that the minimum alcohol
rule protected consumers against unfair
commercial practices …
• Consumers buying Cassis would think they’re getting
the same alcohol content at a lower price
• Meanwhile, German producers would be
disadvantaged because alcohol is a costly input
compared to the other ingredients, due its high tax
rate
• This argument failed the “least restrictive alternative”
test
– If Germany really wanted to protect consumers who
might be confused about alcohol levels, it could do
this by imposing label requirements
Expansion of possible mandatory requirements
• Protection of the effectiveness of financial supervision
• Protection of the environment
• Protection adequate working conditions (e.g., prohibition
on night-time work in the baking industry)
• Protection of cinema as cultural expression
• Maintenance of press diversity
• Protection against the risk of a serious financial
imbalance jeopardizing the social security system
• Protection of fundamental rights (freedom of speech,
assembly, etc.)
• Et cetera…. open-ended category….
Breve riassunto
of Dassonville and Cassis de Dijon
3 points
• 1. General rules
• a. The prohibition of MS measures that restrict the
FMG casts a wide net
• All rules capable of hindering (directly or indirectly,
actually or potentially) trade between MS are MEQRs
under Art. 34
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• b. Mutual recognition
– If a good is marketed within the country of export in
conformity with the regulations of that country, then
in principle the country of import may not prevent
importation of the product merely on the ground
that its own rules and regulations are different or
more stringent
• 2. Derogations are available
• First, Art. 34 does not apply to measures
justified by mandatory requirements
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• Second, Art. 36 provides an explicit derogation
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• But both types of derogations are limited:
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– Must be proportional. Restriction must in
fact advance the relevant public interest
objective; and there must be no less
restrictive alternatives
III. The outer limits of Article 34
• After Dassonville and Cassis de Dijon, there was a
large wave of litigation
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• A prominent objection to the case law was that
common restrictions on the time, place and manner
of sales were under attack
– Example: if Italian rule says parucchieri cannot
operate on Mondays, this may limit the sales of
French shampoo in those shops
– Would Dassonville apply? Yes: “All trading rules…”
– But is that the purpose of Art. 34, or is that too
radical?
• So how did the ECJ respond?
–A rather dramatic adjustment in Keck
and Mithouard (1993)
Keck and Mithuouard (1993)
• Keck and Mithouard sold coffee and beer in
France at a retail price below the wholesale
price
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• French law prohibited re-sale at a loss
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• So: French authorities brought criminal
charges against K & M …
• Defendants invoked Art. 34 …
• ECJ:
– In view of the increasing tendency of traders to
invoke Art. 34 as a means of challenging any rules
whose effect is to limit their commercial freedom,
even where such rules are not aimed at products
from other MS, it is necessary to re-examine the
Court’s case law on this matter
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• Did not entirely overturn Dassonville and Cassis, but
it introduced a new distinction between rules
concerning “product requirements” and what it
called “certain selling arrangements” (modalités de
vente)
• 1. Product requirements
– e.g., form, size, weight, composition,
presentation, labeling, or packaging
– With regard to product requirements, nothing
changes: the prior case law applies just as
before
• 2. Certain selling arrangements
– ECJ: Contrary to what has previously been
decided, national rules that do not regulate
trade but restrict certain selling arrangements
do not hinder trade between MS within the
meaning of Dassonville if two conditions are
satisfied…
• a. the national provisions must apply to all
affected traders operating in the territory;
and
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• b. the provisions must be non-discriminatory
in law and in fact
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• ECJ: if those conditions are satisfied, then
the restrictions do not impede market access
for foreign goods any more than they do for
domestic goods
• … and Commission v Italy: Non-discriminatory ban
on mopeds, motorcycles, etc. towing a trailer on
Italy roads
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• ECJ:
– Measures which have the object or effect of
treating products from other MS less favorably
are MEQRs within the meaning of Article 28
– Any other measure which hinders access of
products originating in other MS is also covered
by that concept