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Session 3: Free movement of goods

Congratulations!

Congratulations!

Your imports or exports from/to another member-state cleared customs.

No duties/tariffs to pay! (see session 2)

But is there anything else to worry about?


Free Movement of Goods in the EU internal market

Free Movement of Goods in the EU internal market

Can customs officials surprise you with any obstacles to your business or personal import/export of goods activity?

Can the state limit the amount of goods you are importing or exporting in the EU internal market?


Topic outline

Topic outline

What is the internal market?

Treaty provisions prohibiting member-states to impose quantitative restrictions and charges having equivalent effect as barriers to trade.

Uses and abuses of the prohibition.

Examples of national trade measures not allowed.

Examples when member-states are allowed to restrict or prohibit the free movement of goods.


What is the internal market?

What is the internal market?

A Common Market was established in 1957 between member states.

Internal market is a term adopted in 1986 to signal the deeper and more intensive nature of trade and economic integration between the member states.

In other words: the national markets of the member states are integrated in ONE internal market for all of them.


Internal market: treaty definition

Internal market: treaty definition

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.

In this session we will examine the free movement of goods.


Free Movement of Goods in the EU internal market

Free Movement of Goods in the EU internal market

PROHIBITION OF QUANTITATIVE RESTRICTIONS (QRs) and OF MEASURES HAVING EQUIVALENT EFFECT (MHEE to QR) ON TRADE BETWEEN MEMBER STATES Art. 34, 35, 36 TFEU (see notespage)

Notes

These rules together with prohibition of customs duties (CDs) and discriminatory taxes (DTs), are the key strategy to free up trade from state intervention to protect national producers.

CDs mean pecuniary charges on goods; Key word Money! see week 3.

This lecture examines Treaty provisions about QR & MHEEtoQR. Key word : Quantity.

Prohibition is qualified by the right of member states to impose limited restrictions on trade, if they can justify them under the criteria in Art.30 or the rule in the Cassis case. Balance between market freedom, genuine competition and protecting essential public interests. National exceptions are being reduced by harmonisation of national standards of consumer and environment protection. ECJ has ruled extensively when national measures infringe the free movement rules or fall within the permitted derogations.

These rules together with prohibition of customs duties (CDs) and discriminatory taxes (DTs), are the key strategy to free up trade from state intervention to protect national producers.

CDs mean pecuniary charges on goods; Key word Money! see week 3.

This lecture examines Treaty provisions about QR & MHEEtoQR. Key word: Quantity.

Prohibition is qualified by the right of member states to impose limited restrictions on trade, if they can justify them under the criteria in Art.30 or the rule in the Cassis case. Balance between market freedom, genuine competition and protecting essential public interests. National exceptions are being reduced by harmonisation of national standards of consumer and environment protection. ECJ has ruled extensively when national measures infringe the free movement rules or fall within the permitted derogations.


QR & MHEE to QR on imports & exports are prohibited

QR & MHEE to QR on imports & exports are prohibited

Quantitative restrictions on imports and measures having equivalent effect shall be prohibited between member-states.

Quantitative restrictions on exports and all measures having equivalent effect, shall be prohibited between member states. (Articles Art. 34 & Art. 35 TFEU)

Apply to goods from member states and to goods in free circulation (art.24 ECT).

Question: Who may impose such quantitative restrictions?

Notes

As a rule, states. However, the ECJ has ruled that the prohibition of restrictions applies also to EU institutions (not only states) if they adopt legislation imposing a disproportionate burden on free movement of goods for instance in requiring information from importers and exporters. Rene Kiffer & Romain Thill, Case C-114/96.


What is a quantitative restriction (QR) then?

What is a quantitative restriction (QR) then?

State measures which amount to a total or partial restraint of imports, exports or goods in transit: Quotas.

State restricts quantity; easy to identify:

an outright ban, such as French ban on UK beef.

restriction of numbers of cars exported from Spain to Germany.

UK prohibition of imports of pornographic materials from Holland.

QR abolished between member states.

New member states are granted transition periods.

Notes

Pornographic materials R v Hen & Darby Case 34/79: was a ban of the import a measure? Yes, although in the end the ECJ accepted that the ban was justified under Art.30.


What are Measures Having Equivalent Effect to QR (MHEEtoQRs)

What are Measures Having Equivalent Effect to QR (MHEEtoQRs)

Mr. Dassonville imported Scotch whisky from France into Belgium.

Belgian law requires a certificate of origin to prove the authenticity of the Scotch whisky.

This certificate can only be obtained in Scotland.

Questions:

Is Mr. Dassonville breaking the law?

What do you think?


Is Mr. Dassonville breaking the law?

Is Mr. Dassonville breaking the law?

On the face of it, yes.

But he bought the whisky in France and imported it into Belgium = legitimate free movement of goods between Britain – France – Belgium.

France did not require a certificate.

Should Mr. Dassonville go all the way to Scotland to try and get the certificate before moving the whisky to Belgium?

And if the certificate is no longer available in Scotland?


So, the European Court of Justice ruled

So, the European Court of Justice ruled

All trading rules enacted by member states which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are Measures having Equivalent Effect to Quantitative Restrictions.

Criterion: effect of trading rule.

Discriminatory intent not required.

Very broad definition by ECJ.


What constitutes a state measure prohibited under Art. 34 & 35 TFEU?

What constitutes a state measure prohibited under Art. 34 & 35 TFEU?

Are ‘buy national products’ campaigns a prohibited MHEE?

NO, if campaign conducted by private bodies.

YES, if campaign conducted by the state.

What exactly is the state?

The Irish Goods Council?

The Apple and Pear Development Council?

The Pharmaceutical Society?

YES, because of statutory (by law) link to the state. (see details in notespage).

Notes

Case 249/81 Commission v. Ireland

Case 222/82 Apple & Pear Development Council v. K.J. Lewis

Case 266 & 267/87 R. v Pharmaceutical Society


So, how do we know what constitutes QR and MHEE to QR?

So, how do we know what constitutes QR and MHEE to QR?

Directive 70/50/EEC

Guidance as to what constitutes QR and MHEEtoQRS of value in identifying prohibited acts or conduct; non-exhaustive list of MEQRs

ECJ developed the concepts of:

Distinctly applicable measures.

Indistinctly applicable measures.


Distinctly applicable measures (discriminatory) are NOT allowed

Distinctly applicable measures (discriminatory) are NOT allowed

Easy to spot!

Measures which distinguish between domestic goods and imports /exports.

Apply only on non-national goods.

They discriminate on non-national goods.

State’s failure to act: French farmers targeting fruit & veg…Commission v France C-265/95.

Promotion of domestic goods.

Price fixing measures.

State may be liable to compensate affected traders.

Notes

Commisision v Ireland case 249/81 Buy Irish; did it matter that the campaign was not successful? Possibility of effect is enough!!

Commission v Ireland Case 113/80 indication of country of origin or foreign on jewellery depicting Irish characteristics but not made in Ireland.


Indistinctly applicable measures

Indistinctly applicable measures

These are tricky to identify!

They appear lawful because they do not distinguish / discriminate between national and imported goods.

They apply to both

BUT

have a harsher effect on imported goods.


Examples of indistinctly applicable (non-discriminatory) measures

Examples of indistinctly applicable (non-discriminatory) measures

Origin marking (UK).

National quality standard (Irish water pipes case)

Administrative practices (approval of postal franking machines)

Price-fixing (selling below minimum proce required by law)

See notespage for details.

Notes

Origin marking : C-207/83 Commission v UK: origin marking not a necessary consumer protection measure; encourages national prejudices.

National quality standard Case 45/87 Commission v Ireland; the Dundalk water supply contract; pipes had to meet the Irish standards.

Administrative practices: Case 21/84 Commission v France delays in approving postal franking machines from the UK.

Price-fixing: Case 82/77 Sale of spirits for less than the minimum price fixed by law.


And here is what happened…

And here is what happened…

German company imports Cassis de Dijon, a liqueur, from France.

Cassis de Dijon has a lower alcohol content than German liqueur.

German customs concerned that public health is at risk because consumers may consume too much.

They prohibit the import.

The Court gave a landmark ruling.


Landmark case: Cassis de Dijon (see notespage for Court extract)

Landmark case: Cassis de Dijon (see notespage for Court extract)

The Court ruled that there was no valid reason that a product lawfully marketed in one member state should not be introduced in another member state.

Principle of mutual recognition.

Result: wide opening of the gates for intra-Community trade.

Notes

Case 120/78 Rewe-Zentrale AG v Bundesmonopolverwwaltug fuer Branntwein.

“he concept of measures having an effect equivalent to quantitative restrictions on imports contained in article 30 [now 34 TFEU (former article 28 EC)] of the EEC treaty is to be understood to mean that the fixing of a minimum alcohol content for alcoholic beverages intended for human consumption by the legislation of a member state also falls within the prohibition laid down in that provision where the importation of alcoholic beverages lawfully produced and marketed in another member state is concerned.”


Dual burden measures

Dual burden measures

Cassis is example of dual-burden rules:

rules apply to both domestic and imported goods but affect imported goods because manufacturer would have to comply with rules of state of origin AND rules of import state

Two sets of rules = dual burden.

Another example:

Belgian law that margarine be packed in cube shaped containers so consumers do not confuse it with butter. (Walter Rau Lebensmittelwerke v De Smedt PVBA Case 261/81)

Notes

Walter Rau Lebensmittelwerke v De Smedt PVBA Case 261/81


Can states ever restrict import/export of goods from/to other member-states?

Can states ever restrict import/export of goods from/to other member-states?

Two possibilities

1. Treaty provides limited exceptions from the rule of prohibiting QR and MHEE to QR.

2. The Court provided additional exceptions in the case-law.


1. Treaty exceptions (derogations) from the prohibition)

1. Treaty exceptions (derogations) from the prohibition)

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.


2. Court exceptions to the prohibition

2. Court exceptions to the prohibition

ECJ has ruled that four mandatory requirements might be accepted as necessary for restricting trading in addition to the fixed derogations of Article 36 TFEU.

1. “…the effectiveness of fiscal supervision,

2. the protection of public health,

3. the fairness of commercial transactions,

4. the defence of the consumer.”

5. Protection of the environment was added later.


But note…

But note…

State must provide evidence (burden of proof) that there is genuine justification to allow prohibitions or restrictions of the import or export of goods etc. (see Article 36 TFEU).

Otherwise there may be hidden protectionism.

Individuals may challenge state action in the national courts.


Conclusion on QR & MHEE to QR

Conclusion on QR & MHEE to QR

Treaty prohibits member states from imposing QR and MHEE to QR on goods from other member-states.

Prohibition is reinforced by Court judgments.

States may prohibit free movement of goods on limited grounds.

States can be challenged in court for breaking the rules on free movement of goods.

Freedom of states to control imports and exports has virtually disappeared.

And that’s not all!


Prohibiting QR & MHEE to QR is complemented by provisions on

Prohibiting QR & MHEE to QR is complemented by provisions on

state monopolies (Art. 37 TFEU).

competition rules addressed to companies. (Art. 101 – 106 TFEU)

state aids Art. (107- 109 TFEU).

secondary legislation on public procurement.

Notes

In this unit we will examine competition rules and state aids.

We will not discuss state monopolies, as these are not prevalent in the EU today.

New member-states may have to negotiate a transition period, should they have state monopolies.

Sweden, for example, has a negotiated arrangement about state alcohol monopoly.

We will not discuss public procurement, as this is a very specialised area.


What are all these provisions about?

What are all these provisions about?

No obstacles to trade.

Non discrimination on grounds of nationality.

Effective functioning of the internal market.