Free Movement of Goods

10.1

The free movement of goods between the Member States is one of the four fundamental freedoms established by the Treaty of Rome. The original 1957 Treaty spoke of creating ‘a common market’, but in the Single European Act of 1986, the term ‘internal market’ was substituted. This term is defined in what is now Article 26 TFEU, as ‘an area without internal frontiers’:

“The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties...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 these Treaties.” Article 26 TFEU (ex Article 14 EC)

It is not correct to think that the law of free movement of goods will only applicable where there was inter-state trade. In Case C-293/02 Jersey Produce Marketing Organisation Ltd v States of Jersey [2005] ECR I-9543, the Court of Justice took a reference from the Royal Court of Jersey (Jersey is one of the Channel Islands and part of the United Kingdom), and held that there was a breach of Articles 28 and 35 TFEU (ex Articles 25 and 29 EC) in respect of legal requirements imposed on exporters of potatoes from the Channel Islands to the United Kingdom. Jersey potatoes are a special type of ‘new’ potato which are distinctive and command high prices. Jersey producers were prohibited from exporting their potatoes to the United Kingdom market unless they had registered with a body such as the Jersey Potato Export Marketing Board and entered into a marketing agreement with them. Further, the rules prohibited all marketing organisations from exporting produce unless they had entered into restrictive agreements with the same body concerning which potato sellers they bought their produce from. There were penalties for non-compliance with these requirements. The Court of Justice held that these measures were a breach of Article 35 TFEU. Additionally, the requirement for all potato producers to pay a contribution to the Jersey Potato Export Marketing Board was a breach of Article 30 TFEU.

The idea, then, is not simply that goods should be able to cross the borders between states without having to pay duties or face any other kind of obstacle, but those very borders should cease to exist as far as the movement of goods is concerned and give the right to impoter or exporter to import and export. There were two main aspects to achieving the aim of an integrated European Community (as it was then called) market.

a)      Negative integration

b)      Positive integration

10.2

Negative integration:

To establish a sigle market some time the member state requires to remove quotas in imported goods which may be considered under Articles 34–36 TFEU, or to remove the existing monetary (or tariff) barriers (i.e. those that concern some form of financial charge, is also known as customes duty) which fall under Articles 28–30 TFEU, and discriminatory taxation under Article 110 TFEU, is known as negative integration. This is because integration of the market results from the removal or abolition of existing rules.

10.2.1.1

Customes duties:

For trade between Member States of the EU, the basic rule is laid down in Article 30 TFEU (ex Article 25 EC) that:

“Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature.”

It was held in case 26/62 Van Gend en Loos [1963] ECR 1 that this could be relied on by individuals in the national courts.

Customs duties as such were successfully abolished early in the history of the European Community. However, it was not originally clear what was covered by the concept of ‘a charge having equivalent effect’ (CEE). The Commission brought a number of cases against Member States in the 1960s and the Court of Justice took the opportunity to give a very wide meaning to this phrase. One such case, 24/68 Commission v Italy (‘Statistical Levy’) [1969] ECR 193, [1971] CMLR 611, involved an Italian levy on imports and exports across its borders. The levy was a very small sum and it was used to pay for the gathering and publication of statistics on trade patterns. The Court of Justice emphasised that it is the effect, not the purpose, of the levy that

matters: extra fees and charges are likely to put imported goods at a disadvantage compared with domestically produced goods. It also dismissed the Italian government’s argument that the statistical data was a ‘service’ to traders which they should pay for. The Court of Justice ruled:

Any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier... constitutes a charge having equivalent effect… (Statistical Levy Case 24/68)

Even if the money is used for a ‘social’ aim, the prohibition, which is absolute, applies. See Joined Cases 2 and 3/69 Social Fond voor de Diamantarbeiders v Brackfield [1969] ECR 211. The key part of this definition or test is whether the sum of money has become payable because goods have crossed a frontier within the EU.

The Court of Justice has held that the prohibition on ‘charges of equivalent effect’ also applies to goods imported directly from third countries: Case 37, 38/73 Diamantarbeiders v Indiamex [1973] ECR 1609. This means that the CCT duty can be levied on such goods, but no other charges can be added by the Member States.

10.2.1.2

Exception/ Justification/ Defence

The EU Treaty does not contain any exceptions or defences to Article 30 TFEU, the prohibition is strict and absolute. However there are some situations that fall outside the prohibition because they do not fulfil the above test. These are:

a)      Proportionate payment for a service received

b)      Charge for inspection where the inspection is mandatory under European Union law

c)      Payment due under the importing state’s internal tax system (‘internal tax’).

Proportionate payment for a service received:

There must be a specific benefit individually conferred on the importer/exporter. If it is simply a benefit in the ‘general interest of all exporters’, or a general benefit to the public at large, it will not qualify: Case 24/68 Commission v Italy (Statistical levy) [1969] ECR 193. Even if inspections of goods on import or export are usually for public health reasons, or to ensure quality will also be illegal: 63/74 W. Cadsky SpA v Instituto nazionale per il Commercio Estero [1975] ECR 281.

A charge for a service will be lawful where the benefit paid for is a service actually rendered to the importer, probably at his request AND the cost charged for the service is based on the actual cost of providing it. See Case 132/82 Commission v Belgium [1983] ECR 1649 (public warehouses – storage charges).

Charge for inspection where the inspection is mandatory under European Union law:

It is lawful for a Member State to charge a fee for an inspection where the inspection is required under a European Union Directive, rather than by national law, and the Directive does not specify who should pay for it. See: Case 46/76 Bauhuis v Netherlands [1977] ECR 5.

Payment due under the importing state’s internal tax system:

If a charge applies equally and in the same way to both domestic and imported goods, it may be legal as an internal ‘tax’. There has been some harmonisation of indirect taxes such as VAT, and the setting of minimum excise duties on alcohol and tobacco but Member States are still largely free to decide their own level of taxes, for example, on tobacco, cars, petrol, alcohol etc. provided these ‘internal taxes’ are ‘origin-neutral’. As long as there is strict equivalence in the treatment of domestic and imported products, it is lawful to impose domestic taxes on imported goods. Such taxes, however, fall under Article 110 TFEU and not under Article 30 TFEU. It should be noted that the two Articles are mutually exclusive. If a product is taxed when it crosses a border, such tax will be subject to Article 30 TFEU.

Problem arise when taxing on imports where there is no equivalent domestic product. For example tobacco is not commercially grown in the UK. Does this mean that a tax on tobacco is unlawful because it will only apply, in practice, to imported tobacco? The problem have been solved in Case 193/85 Cooperativa Cofrutta Srl [1987] ECR 2085. The court held that when there is no identical or similar domestic product, does not constitute [an illegal] charge but internal taxation within the meaning of Article 110 TFEU.

10.2.2.1

Quantitative restrictions:

Article 34 TFEU prohibits quantitative restrictions (quotas, bans, import licences) on imports and all measures having equivalent effect (MEQRs). Article 35 TFEU  contains the same prohibition in relation to exports:

Article 34 TFEU: Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.

Article 35 TFEU: Quantitative restrictions on exports, and all measures of equivalent effect, shall be prohibited between Member States.

Quantitative restrictions (QR) are ‘quotas’ or limits on the number of goods which can be imported from one country into another, so a hypothetical rule stating that only 100,000 watches can be imported from Russia into the United Kingdom each year would be a QR. Such quotas are prohibited between Member States by Article 34 TFEU. The Court of Justice has defined quantitative restrictions as ‘measures which amount to a total or partial restraint of... imports, exports or goods in transit’ (see Case 2/73 Geddo v Ente Nazionale Risi [1973] 865).

An example of a quantitative restriction is the Spanish provision at issue in Case C-47/90 Établissements Delhaize Frères et Compagnie Le Lion SA v Promalvin SA and AGE Bodegas Unidas SA [1992] ECR I-3669. Spanish law set quotas on the bulk export of its wine while placing no restrictions on domestic sales. When Delhaize from Belgium, ordered 3,000 hectolitres of the wine, the export was not permitted under the Spanish rules. The law was held to be a QR on exports and illegal under Article 35 TFEU (ex Article 29) EC.

The meaning of ‘Measures having equivalent effect to a quantitative restriction’ (MEQRs) is not given by the Treaty but the Commission attempted to fill this gap by adopting Directive 70/50. The main focus of the Directive (see Article 2) is on discriminatory measures. These are sometimes called ‘distinctly applicable measures’ as they only apply to imported goods; they ‘make importation more difficult or costly than the disposal of domestic production’.

In Article 3, the Directive says that Article 34 TFEU (ex Article 28 EC) also covers:

measures governing the marketing of products which deal, in particular, with shape, size, weight, composition, presentation, identification or putting up and which are equally applicable to domestic and imported products, where the restrictive effect… exceeds the effects intrinsic to trade rules. [emphasis added]

This is the kind of measure referred to as ‘indistinctly applicable’. The Commission, in Directive 70/50, appeared to accept that ‘indistinctly applicable measures’ will generally be acceptable unless they are ‘out of proportion to their purpose’ and ‘the same objective can be attained by other means which are less of a hindrance to trade’ – that is, they should be subject to a proportionality test.

The Directive is no longer in force but has been influential on the case law of the Court. The Court of Justice has extended the reach of Article 34 TFEU to catch measures which are not discriminatory in law but which do have a discriminatory effect in fact. In this respect the Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837 is important one. Dassonville was prosecuted in Belgium for selling Scotch whisky without a certificate of origin required by Belgian law. He had imported the whisky from France where such a certificate was not required. He argued that the Belgian rule prevented the free movement of whisky from France to Belgium. The Court of Justice agreed, and said that Article 34 TFEU (ex Article 28 EC) covers:

“all trading rules enacted by Member States which are capable of hindering, actually or potentially, directly or indirectly, intra-Community trade.”

This definition focuses on ‘hindrance’ rather than discrimination. Because the certificate was less easily obtainable for an indirect importer (than for a Belgian distributor buying direct from the manufacturer), the Belgian requirement was a MEQR in breach of Article 34 TFEU (ex Article 28 EC). The Court acknowledged that Member States might need to have reasonable measures to protect consumers, but these should not be more difficult for some importers than others to comply with.

Another important step was taken in Case 249/81 Commission v Ireland (Buy Irish) [1982] ECR 4005. The Irish Goods Council’s publicity campaign to persuade Irish consumers to buy Irish goods in preference to imported ones was held to be a MEQR. It had been argued that a ‘measure’ meant a legally binding measure, but the Court held that even non-binding measures could have the effect of hindering imports just as much as laws and rules. There was not even a need to prove that imports had fallen – under the Dassonville formula, a potential effect is enough.

However, the definiton of MEQR was extended by Cassis de dijon case where an “indistinctly applicable” measure might be caught by Article 34 of TFEU. In that case, the rule at issue was the German requirement that fruit liqueurs must have an alcohol strength of 25 per cent. The French blackcurrant liqueur, Cassis, had a strength of 15–20 per cent and therefore could not be sold in Germany. The German rule, although apparently non-discriminatory, in fact made it impossible for French manufacturers to export Cassis to Germany. To change the strength would be uneconomic. The German rule effectively amounted to an import ban. This is because German fruit liqueurs have been manufactured by complying with the rules applicable in their home state; French fruit liqueurs meet the standards set in their home state but now also have to comply with the rules of the Germany. Thus, French has to satisfy two sets of rules, those of the home state and those of the Germany, whereas goods sold on the domestic market have only to comply with one set of rules, those of the home state i.e Germany. This indistinctly applicable rules are sometimes referred to as ‘dual burden’ rules because of the double regulatory burden that results for imported goods. As a result of these burden, German measure has been treated an MEQR.

However, the very wide definition of a MEQR in Dassonville, combined with its extension in Cassis to catch indistinctly applicable measures, generated a huge number of challenges to national rules based on Article 34 TFEU. Rules would be challenged and then justified under an ever-growing list of mandatory requirements. It could be argued, as Advocate General Slynn did in Cinéthèque, that some of these rules were not intended to restrict imports and did not in any way make things more difficult for the importer than the domestic producer and should not be caught by Article 34 TFEU at all.

This issue came to a head in the ‘Sunday trading’ cases, see Case 145/88 Torfaen Borough Council v B&Q plc [1989] ECR 3851. A national law restricting what kinds of goods could be sold on Sunday restricted the sale of imported goods to exactly the same extent as the sale of domestically produced goods (it imposed an ‘equal burden’), yet the Court of Justice still required such a rule to be justified.

Finally, in Joined Cases C-267 and C-268/91 Criminal Proceedings against Keck and Mithouard [1993] ECR I-6097, [1995] 1 CMLR 101, the Court accepted the argument that a clear limit should be placed on the types of measure caught by Article 34 TFE. The Court of Justice declared that ‘contrary to what has previously been decided’, Article 34 TFEU would not apply to:

certain selling arrangements... provided that [they] apply to all relevant traders in the national territory... and affect in the same way, in law and in fact, the marketing of domestic products and those from other Member States [paragraph 16].

The judgment creates two categories of trading rules: those which lay down ‘product requirements’, affecting in some way the goods themselves, and ‘selling arrangements’ which do not require any change to the product itself but only restrict the way it is marketed. ‘Product requirements’ are still governed by the existing rules on discriminatory and dual burden measures. ‘Selling arrangements’ fall outside the scope of Article 34 TFEU and are legal. They do not have to be justified or proportionate under European Union law.

A rule of thumb for distinguishing between a ‘product requirement’ and a ‘selling arrangement’ is to ask yourself whether, in order to comply with this rule, the importer has to make any physical alteration to the product, for example, change the ingredients, packaging, labelling. If so, it is a ‘product requirement’. If not, it is a ‘selling arrangement’. ‘Selling arrangements’ concern where, when and how goods are to be sold.

The Court of Justice in Keck did not state which earlier cases were overruled, but it is likely, for example, that the rules in the following cases would now be regarded as ‘selling arrangements’: Case 60, 61/84 Cinéthèque [1985] ECR 2605 (timing of sales of videos); and Case 328/87 Buet v Ministère Public [1989] ECR 1235 (doorstep selling of educational materials).

Since Keck, the Court has reaffirmed the continued importance of the Cassis principle in relation to obstacles to trade caused by disparities between national laws governing product presentation and composition (i.e. where the Keck test has not been fulfilled).

Some cases have concerned marketing rules which nonetheless have an effect on the product itself. In Case 315/92 Clinique [1994] ECR I-317, a German law, which prohibited the use of the name ‘Clinique’ for cosmetics, because the consumer might be confused and think that the product had medicinal properties, was challenged under Article 34 TFEU. It was held by the Court of Justice to be disproportionate to satisfy the requirements of consumer protection and the health of humans.

Case 368/95 Familiapress v Heinrich Bauer Verlag [1997] ECR I-3689, [1997] 3 CMLR 1329 concerned Austria’s law on ‘unfair competition’ which forbade the offering of large cash prizes for competitions in magazines. Familiapress is a publisher of newspapers in Austria. German newspapers and magazines could be sold in Austria (also German speaking), and Familiapress brought proceedings against a German publisher of weekly magazines which were being sold in Austria and which offered large cash prizes for crossword competitions. This was held not to be a selling arrangement under Keck, because the law ‘bears on the actual content of the products... the competitions in question form an integral part of the magazine... Since it requires traders... to alter the contents of the periodicals…’ It is an MEQR. It was justified to protect press diversity (the aim was to protect the local press which could not offer high value prizes); it was for the national court to decide whether it was proportionate.

The Court has applied Keck in a formalistic way which has been criticised by many commentators, particularly in relation to advertising restrictions. In a highly influential Opinion in the case Leclerc-Siplec, Advocate General Jacobs identified potential problems with the Keck formula, pointing out that domestic products are probably already known to consumers, whereas products from other Member States are more dependent on advertising to penetrate new markets. In his conclusion in his Opinion in Leclerc-Siplec, Advocate General Jacobs applied the Keck formula and decided that the national rule fell outside Article 34 TFEU.

Now-a-days several cases started to follow the view of Advocate General Jacobs. An interesting case in which the Court held that a ‘selling arrangement’ discriminated against foreign traders in fact is:Case 254/98 Schutzverband gegen unlauteren Wettbewerb v TK Heimdienst GmbH [2000] ECR I-151. Under the Austrian Code of Business and Industry 1994, traders such as bakers, butchers and grocers were only permitted to offer for sale on rounds from locality to locality or from door-to-door goods which they also sold from a permanent establishment in the area or in an adjacent municipality. The Schutzverband, an association for the protection of the economic interests of undertakings, brought an action against TK-Heimdienst to restrain it from offering for sale on rounds groceries which it did not sell in permanent establishments in that municipality or any adjacent one. The Court of Justice held that the legislation in question related to ‘selling arrangements for certain goods’ but that it did not affect in the same manner the marketing of domestic products and that of products from other Member States. It did not apply equally in law and in fact. The rule ‘in fact impedes access to the market of the Member State of importation for products from other Member States more than it impedes access for domestic products’. Therefore the Austrian law did fall within the scope of Article 34 TFEU despite being described by the Court of Justice as a selling arrangement. An argument that the rule could be justified under Article 36 TFEU (ex Article 30 EC) as a measure to protect human health was rejected because the measure was held to be disproportionate.

A key case concerning a selling arrangement which did not apply equally in fact is:Case 405/98 Konsumentombudsmannen (KO) v Gourmet International Products (GIP) [2001] ECR I-1795. The case concerned an application for an injunction by the Swedish Ombudsman responsible for consumer protection preventing Gourmet International Products (GIP) from placing advertisements for alcoholic beverages in magazines. A Swedish law was effectively a total ban on advertising alcoholic beverages, prohibiting the advertising of such drinks on radio, television or in magazines and periodicals other than those sold at the point of sale. GIP published a magazine called Gourmet which contained advertisements for red wine and whisky.

The reference to the Court of Justice from the Swedish court asked whether Article 34 TFEU or Article 56 TFEU precluded legislation entailing a general prohibition on alcohol advertising, such as the one at issue and whether, if so, such a prohibition could be justified on the grounds of public health. The Consumer Ombudsman and the French, Danish, German and Austrian governments argued that such a law on advertising fell within Keck, and was therefore not within Article 34 TFEU. The Court of Justice rejected this argument. It pointed out that paragraph 17 of Keck states that national provisions prohibiting certain selling arrangements must not impede access to the market for products from another Member State or must not impede access more than they impede the access for domestic goods. The Court concluded that a prohibition on advertising such as the one at issue was liable to impede access to the market for products from other Member States more than for domestic products with which consumers are already familiar. Therefore the prohibition on advertising affected the marketing of products from other Member States more than the marketing of domestic products and was caught by Article 34 TFEU (ex Article 28 EC).

So the Court is recognising the importance of advertising as a way for new products to break into a market. Although the sales of wine and whisky, which are imported, were increasing faster than sales of domestically produced vodka, the Court of Justice held that the sales of these imported beverages might have grown even faster without the ban on advertising.

This case indicates that advertising bans which ‘prevent access to the market by products from another Member State or impede access more than they impede the access of domestic goods, despite being selling arrangements, will nonetheless be caught under Article 34 TFEU.

The Court of Justice accepted that the rule could be justified on the grounds of public health and stated that it was for the national court to determine whether it was proportionate. As to justification under Article 36 TFEU, on the grounds of public health, the Court of Justice accepted the justification for the rule. It stated that, as this required an analysis of the circumstances of law and of fact which characterised the situation in the Member State concerned, it was for the national court to determine:

a)      whether it was proportionate

b)      whether ‘the protection of public health against the harmful effects of alcohol can be ensured by measures having less effect on intra-Community trade’.

The Court of Justice has refined the Keck test so that it is no longer a question simply of asking whether a change to the product itself is required, but whether ‘access to the market’ is made more difficult for imported products. Case C-322/01 DocMorris [2003] ECR I-4887 discussed above.

10.2.2.2

Dfence/ Exception/ Justification

If the rule is distinctly applicable then the justificaiton will be under Article 36 only; whereas if he rule is indistinctly applicable then the justification will be under Article 36 and Cassis de dijon principle as the national measures are proportionate.

10.2.2.2.1

Article 36 TFEU

Unlike Article 30 TFEU in relation to financial charges, the prohibition of quantitative restrictions and MEQRs in Articles 34 and 35 TFEU is not absolute. Article 36 TFEU can be used to justify both distinctly applicable (discriminatory) and indistinctly applicable rules. The Treaty provides that such measures may be justified on one of six grounds listed in Article 36 TFEU.

Public morality

Case 34/79 R v Henn and Darby [1979] ECR 3795. Henn and Darby were prosecuted under English law for importing obscene films and magazines from the Netherlands into the UK. They raised a ‘eurodefence’: that this was contrary to the free movement of goods laid down by Article 34 TFEU. The case eventually reached the House of Lords and a preliminary reference was made to the Court of Justice as to whether the UK could rely on Article 36 TFEU to prevent these imports on public morality grounds. The Court of Justice accepted that Article 36 TFEU confers a discretion on the Member States to set their own standards in relation to public morality, provided that, as was the case, no lawful trade in such goods was allowed within the UK either:

In principle, it is for each Member State to determine in accordance with its own scale of values and in the form selected by it the requirements of public morality in its territory.

Contrast this case with Case 121/85 Conegate Ltd v HM Customs and Excise [1986] ECR 1007, which illustrates the rule that Article 36 TFEU grounds must not be used to support ‘arbitrary discrimination or disguised restrictions’. The UK ban on inflatable ‘love dolls’ from Germany would be disproportionate in a situation where, within the UK, sale of such products was not banned, although there were certain restrictions on how and where they could be sold.

Public policy

This ground has rarely been used successfully in the Court of Justice, which has made clear that it cannot be used for economic reasons (Case 95/81 Commission v Italy [1982] ECR 2187). It was, however, successfully pleaded in the House of Lords case R v Chief Constable of Sussex ex p. International Trader’s Ferry Ltd [1999] 1 CMLR 1320 HL. Animal rights protesters were blockading the port of Shoreham, trying to prevent the (lawful) export of veal calves to France. ITF challenged the Chief Constable’s decision that protection for the lorries could only be provided on two days a week because of limited police resources. The Divisional Court agreed that the decision was a restriction on exports, contrary to Article 35 TFEU, but this ruling was reversed, with the Court of Appeal and House of Lords accepting the public policy justification: the state’s responsibility for ensuring the free movement of goods had to be balanced with the right of residents to policing, and with the right of peaceful protest.

Public security

Case 72/83 Campus Oil [1984] ECR 2727. Importers of oil products into Ireland were obliged to buy 35 per cent of their requirements from the state oil refinery. Campus Oil argued that, as they could not import 100 per cent of their needs, this was a breach of Article 34 TFEU. The Court of Justice said that the maintenance of regular oil supplies, which were fundamental to the existence of the state, was a legitimate aspect of public security. However, the Court questioned whether the compulsory purchasing requirement, at a price above the world market price, was necessary to ensure the survival of the state oil refinery. If it reduced its prices to the world market price, would it not still get enough customers to survive? These issues of fact were left to the national court. The judgment shows clearly the Court’s approach to the Article 36 TFEU derogations: it is not enough for the Member State to invoke a legitimate objective covered by Article 36 TFEU. It has also to show that the measure in question is necessary for that purpose, and that it is proportionate. That means asking whether there is any other way of achieving the objective (in this case viability of the Irish state oil refinery) which would be less of a restriction on the free movement of goods.

The protection of health and life of humans, animals and plants

There are many cases where this ground has been pleaded. The following show the Court’s approach. The Court of Justice will consider whether the risk to health is genuine, or a disguised restriction on trade as was found in Case 40/82 Commission v UK (re Imports of Poultry Meat) [1982] ECR 2793, [1982] 3 CMLR 497.

Public health inspections of imports from other Member States have also attracted close scrutiny. Any inspection is, in principle, an MEQR because, even if there is no charge for it, it causes delay and is a hindrance to importation. The importing state must take into account evidence of any tests already complied with in the exporting state, and only if it can show those are insufficient can it require additional tests: Case 124/81 Commission v United Kingdom [1983] ECR 203 (UHT milk).

Case C-170/04 Klas Rosengren and Others v Riksåklagaren [2007] ECR I-4071 was a challenge to the lawfulness of a Swedish measure prohibiting the import of alcoholic beverages by private individuals into Sweden; it was possible for individuals to ask the holder of the retail sale monopoly, on request, to supply and, if necessary, to import the alcoholic drinks in question. The Court found that the measure was unsuitable for attaining the objective of limiting alcohol consumption generally and not proportionate for attaining the objective of protecting young persons against the harmful effects of such consumption. Therefore, the measure was caught by Article 34 TFEU and not justified under Article 36 TFEU.

Case C-322/01 DocMorris [2003] ECR I-4887: a German law prohibiting the sale of medicines by mail order over the internet was held to be caught by Article 34 TFEU and to be discriminatory as ‘for pharmacies not established in Germany, the internet provides a… significant way to gain direct access to the German market’. The prohibition therefore had a greater impact on pharmacies established outside Germany and could impede access to the market for products from other Member States more than it impeded access for domestic products. The Court of Justice held that the rules were justified and proportionate in so far as they applied to medicines which could only be obtained with a prescription in German, but could not be justified in regard to medicines which did not need a prescription.

Case C-212/03 Commission of the European Communities v French Republic [2005] ECR I-4213. The import of medicinal products into France by private persons, not affected by personal transport, was prohibited by a rule which stated that prior authorisation was needed. Medicinal products caught by this rule included products licensed in France and the Member State of purchase, homeopathic products, and products licensed only in the Member State of purchase. Challenging this rule, the Commission argued that France had failed to fulfil its obligations under Article 34 TFEU. The Court found that the prior authorisation procedure for personal imports was disproportionate to the objectives of the rule and went beyond what was necessary to ensure the objectives.

The Court will take into account the attitude of other Member States and of international health bodies such as the World Health Organisation when assessing whether particular additives pose a real risk to health. In Case 178/84 Commission v Germany (Additives in Beer) [1987] ECR 1227, [1988] 1 CMLR 780, Germany prohibited a large number of additives to beer. These were permitted in other Member States. The Court of Justice was not swayed by the argument that they posed an increased danger to German consumers because so much beer was consumed in Germany!

Case C-67/97 Criminal Proceedings against Ditlev Bluhme [1998] ECR I-8033 concerned the protection of the life of animals under Article 36 TFEU. It was held that a ban on imported bees into the Danish island of Laeso to protect the native bee from more aggressive species was justified and proportionate.

The precautionary principle

Where the available scientific evidence on the health impact of particular substances is unclear, the Court said in Case 174/82 Sandoz [1983] ECR 2445, concerning vitamins added to Muesli bars, that Member States can decide what level of protection is appropriate, subject to the proportionality rule:

… in so far as there are uncertainties at the present state of scientific research it is for the Member States, in the absence of harmonisation, to decide what degree of protection of the health and life of humans they intend to assure, having regard however for the requirements of the free movement of goods within the Community (paragraph 15).

This principle has been defined in further cases on the sale of foods enriched with added vitamins and minerals.

In Case C-192/01 Commission v Denmark [2003] ECR I-9693, the Court confirmed that Member States can adopt their own precautions in situations where the precise risks to health are uncertain, but said that any such precautions must be necessary and proportionate. Denmark had argued that the normal Danish diet was sufficient in nutrients. The Court held that the Member State must show that the products posed a real risk to public health: it was not enough to show that the product did not meet a need among the Danish population.

The requirements in cases where there is controversy as to the health risks were summarised by the Court in case C-41/02 Commission v Netherlands [2004] ECR I-11375. Marketing of foods fortified with vitamins and minerals was subject to prior proof of a nutritional need in the Netherlands population. This was clearly an MEQR, but could it be justified on the basis of the precautionary principle?

The Court held (paragraphs 47–53) that the Member State must carry out a risk assessment to measure the probable harmful effects on human health and the seriousness of those potential effects. In doing so they may ‘take into consideration the cumulative effect of the presence on the market of several sources, natural or artificial, of a particular nutrient and of the possible existence in the future of additional sources which can reasonably be foreseen’.

The greater the uncertainty, in science and in practice, the greater the Member State’s discretion in applying the precautionary principle. It does not need to wait until the existence and extent of the risks are clearly established. The Court said that the proper application of the precautionary principle requires:

a)       the identification of the potentially negative consequences for health of the proposed addition of nutrients

b)      a comprehensive assessment of the risk for health based on the most reliable scientific data available and the most recent results of international research

c)      where data on the existence or extent of the alleged risk is insufficient, inconclusive or imprecise, ‘but the likelihood of real harm to public health persists should the risk materialise, the precautionary principle justifies the adoption of restrictive measures’ (paragraphs 53–54).

The burden of proving that a particular substance is harmful is on the Member State: it is not up to the importer to prove that it is safe. An example of a Member State failing to discharge this burden is C-420/01 Commission v Italy (Caffeine) [2003] ECR I-6445. The prohibition of sale of an energy drink with excess caffeine was a breach of Article 34 TFEU and could not be justified under Article 36 TFEU as it had not been shown that this was necessary for the protection of public health.

10.2.2.2.2

Cassis de dijon principle

If a rule is indistinctly applicable and if the following conditions are fulfilled then that measure fall outside the scope of Article 34 TFEU and are legal. Unlike the Article 36 TFEU grounds, mandatory requirements can only be used to justify indistinctly applicable rules: Commission v Ireland (souvenirs) below). The conditions are as follows:

a)      The rule in question applies equally to domestic products

b)      It is ‘proportionate’

c)      The rule is necessary to protect an essential public interest

There is not any problem regarding first two conditions. However further discussion is required as to when the test of “public interest” which is also known as “Mendatory requirement” will be satisfied? It is necessary to keep in mind that this is not a close group. The list given by the court in Cassis was by way of example and has since been added to – and no doubt will continue to be added to as new issues of public concern emerge. Therefore it provides for a more flexible response than Article 36 TFEU. Here are some examples of the Court’s approach:

Consumer protection

Case 261/81 Walter Rau [1982] ECR 3961 (Belgian margarine). Belgian rules stated that margarine sold in Belgium must be packaged in cube-shaped containers. Belgium based its case on the mandatory requirement of consumer protection: that the packaging rule was to prevent confusion with butter. The result of the rule was to make imports of margarine from countries where margarine is normally packaged in tubs or rectangular blocks more difficult or impossible. The Court held that the rule could not be imposed on imported margarine because it was disproportionate – clear labelling would be enough to prevent confusion with butter.

An Italian rule that only pasta made from durum wheat could be sold in Italy was struck down in Case 407/85 Drei Glocken GmbH v USL Centro Sud [1988] ECR 4233. Italy argued that Italian consumers would assume that all pasta on sale was made with this traditional ingredient. The result was that imported German pasta could not be sold. The Court was not prepared to endorse such a paternalistic approach to the consumer and said that a clear label as to the type of wheat used would be enough.

Public health

The Court of Justice has ruled that as Article 36 TFEU provides for derogation on this ground, the Treaty Article should be used in preference to the ‘mandatory requirements’: C-1/90 and 176/90 APESA v DSSC (Aragonesa) [1991] ECR l-4151.

Protection of the environment

Case C-112/00 Schmidberger shows the interpretation of the environment. Here Austria had put in place a ban on lorries of over 7.5 tonnes transporting certain goods (such as waste, stone, timber) using the A 12 highway for a distance of 46 kilometres. The road is the main transit route between the south of Germany and Italy. The Court of Justice accepted that this was justified under the mandatory requirement of ‘protection of the environment’ but held that it was not proportionate. The Austrian authorities had declared that they wanted a shift from road to rail transport for such heavy goods but had not ensured that there was adequate and sufficient rail transport available or alternative means of transporting the goods by road routes. They had not considered whether there were other ways of reducing the air pollution caused by the traffic that were less restrictive of the free movement of goods. The transitional period of two months between the adoption of the ban and its implementation ‘was clearly insufficient reasonably to allow the operators concerned to adapt to the new circumstances’. The Austrian measures were therefore caught by Articles 34 and 35 TFEU and were justified but not proportionate.

Protection of national or regional socio-cultural characteristics

See Case 145/88 Torfaen BC v B & Q plc [1989] ECR 3851.

Plurality of the press

See Case 368/95 Familiapress v Heinrich Bauer Verlag [1997] ECR I-3689, [1997] 3 CMLR 1329.

The protection of fundamental rights

Case 112/00 Schmidberger v Austria [2003] ECR 1-5659.

10.2.3

Discriminatory taxation

Generally Article 110 TFEU prohibits discriminatory taxation which favours domestic production over imports from other Member States. For example, charging a higher rate of tax on French wine than on English wine would amount to discriminatory taxation and be prohibited by Article 110 TFEU.

Although Article 110 TFEU does not mention exports, the Court of Justice has held that it could apply if goods to be sold on the domestic market had to pay less tax than those for export, as this might deter exports, contrary to the Treaty aim which is to encourage free movement of goods: Case C-234/99 Nygard [2002] ECR I-3657.

The first paragraph, Article 110(1) TFEU  prohibits any tax imposed on imported goods which is in excess of that imposed ‘directly or indirectly’ on ‘similar’ domestic products. The second paragraph, Article 110(2) TFEU, prohibits internal taxation which gives ‘indirect protection’ for domestic goods. The aim of the article is to achieve ‘fiscal neutrality’ between domestic and imported goods:

No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Further, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.

It can sometimes be difficult to decide whether products are ‘similar’. For example, is wine similar to beer? After much controversy and lengthy litigation, the Court of Justice ruled, in Case 170/78 Commission v UK (wine and beer) [1980] ECR 417, [1983] CMLR 2265 that they were not. Different raw materials were used, different production methods and the products had different characteristics. If not ‘similar’ for the purposes of Article 110(1) TFEU, could wine

and beer be regarded as ‘competing’, for the purposes of Article 110(2) TFEU? The test the Court of Justice uses to decide whether products are competing is whether customers regard those products as ‘fulfilling the same consumer need’. At the time of this case, the British were not great wine drinkers and tax on wine was higher than on beer. Despite this, the Court said that consumer attitudes should not be frozen in time: with the greater availability of imported products as a direct result of the free movement of goods in the EC, customers could try new things – and should not be deterred by high taxes from doing so! So light wines at the cheaper end of the market were held to be ‘competing’ with beer.

In Case C-302/00 Commission v France (Tobacco) [2002] ECR I-2055, France was imposing a higher rate of tax on light tobacco cigarettes than on dark ones. The Court of Justice decided that light and dark tobacco products were similar, despite the fact that they tended to be consumed by different age groups, because they were made from the same basic raw material (although different types), had similar properties and fulfilled the same consumer need. The finding was reinforced by the fact that European Union legislation on excise duties treated both types of cigarettes as the same. France was required to equalise the tax.

Consequences of a breach of Article 110 TFEU

This depends on whether the breach is of Article 110(1) TFEU or 110(2) TFEU. In the case of similar products under Article 110(1) TFEU, the remedy is that Member States are required to ensure strict equivalence in the tax, or if there is a sliding scale which is difficult to apply to imports, then the imports must be placed at the lowest point on the scale so there can be no possibility of them paying more tax than the domestic equivalent product: Case 127/75 Bobie Getränkevertrieb v Hauptzollamt Aachen-Nord [1976] ECR 1079.

If the products are not similar, but are competing, as in the UK wine and beer case above, it is not necessary that the rates of tax be identical. Rather, the Member State must ensure that the rates are such that there is no ‘protective effect’ for the competing domestic product. In Case 356/85 Commission v Belgium [1987] ECR 3299, [1988] 3 CMLR 277 (beer and wine), the Commission’s action failed on this point. The products were competing, but the effect of the tax differential was so small at the point of sale that it was unlikely to have any impact on consumer choice and so would not ‘protect’ the domestic product (beer).

This is not enough to achieve a single market for goods, however. Take, for example, a light bulb manufactured in the UK. It may be perfectly possible to export this to Greece without payment of duty or other entry restrictions, but will it fit into a Greek light socket? If not, there is clearly not a single market for light bulbs in the EU. For this reason another integration is introduced.

10.3

Positive integration:

The second aspect of achieving a single market, therefore, involves a process called ‘harmonisation’ of national rules, technical standards, safety requirements and so on. This is sometimes referred to as ‘positive integration’ because it requires positive steps to introduce new European Union-wide rules and standards so that, provided a particular product complies with these, it can truly be sold and used anywhere in the EU.

Article 114 TFEU (ex Article 95 EC) provides the legal basis, allowing measures to be adopted ‘which have as their object the establishment and functioning of the internal market’. In the original Treaty, unanimity was needed for the adoption of harmonisation measures and, as this was hard to achieve, progress was slow. In this context the Court’s establishment of the principle of mutual recognition in Cassis was particularly important, requiring Member States to accept each other’s products even in the absence of harmonised standards. Cassis also triggered a ‘new approach’ to harmonisation measures. The old approach was to lay down very detailed and comprehensive rules for particular products which would then apply in a uniform way throughout the European Union. After Cassis, the Commission realised that a uniform approach was no longer necessary – Member States would accept products lawfully produced and marketed in other Member States, and European Union rules only needed to ensure protection of essential public interests. The process of harmonisation was given a further boost in the Single European Act 1986 which abolished the need for unanimity, replacing it with the cooperation procedure and qualified majority voting in all but the most sensitive fields (taxation, free movement of persons, employment rights). Following Maastricht, the co-decision procedure now applies.

Since 1987, large numbers of harmonisation measures have been adopted with the aim of ‘completing’ the single market. As we saw in Section 10.4.6 above, harmonisation measures facilitate the free movement of goods specifically by reducing the scope for Member States to impose their own rules on Article 36 TFEU (ex Article 30 EC) or Cassis grounds.