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The free movement of goods

Previous: Overview of the internal market

The first element to free movement within art 26(2) TFEU is the free movement of goods. Goods should be able to be traded freely, giving the consumer the widest choice and and eliminating restrictions on that free movement imposed by Member States.

The system of free movement of goods has 4 elements. Firstly, a customs union must established, removing taxes at borders between member States. Secondly, a common customs tariff be created to impose taxes on goods from non-EU countries. Thirdly, internal taxes in Member States must be abolished where they prevent cross-border trade. Finally, Member State imposed restrictions on imports and exports between Member States must be abolished.

Establishment of a customs union

Van Gend En Loos (1963) established that Member States cannot impose taxes at their borders between them and other Member States. Art 28 TFEU now confirms that this is the case.

Establishment of a common customs tariff

Art 28 TFEU also provides for this part of the process in facilitating the free movement of goods. This tariff harmonises the cost of importing goods into the EU from a non-EU state and exporting from the EU to non-EU states. As a result of this common tariff, in Commission v Italy (Art Treatures) [1968], Italy were prohibited from imposing an unusual tax on the export of treasure (treasure was classed as goods given its commercial value). Similarly, in Bresciani [1976], a very low inspection fee charged on exports of raw cowhides was prohibited, given that it had an equivalent effect to an export tax to non-EU states. If an inspection is required by EU law, as in the Live Animal Imports case [1988], a fee may be validly charged.

Elimination of financial restrictions (internal taxes)

Where a Member State imposes financial restrictions on the import or export of goods between member States, those restrictions will be prohibited under Art 30 TFEU. This, according to Fink-Frucht [1968] ensures that ‘normal’ conditions of competition exist.

However, a Member State may also impose internal taxation which discriminates against products originating on other Member States. This internal taxation is prohibited by Art 110 TFEU, irrespective of whether it discriminates against foreign products which are similar (Art 110(1)), or foreign products which are different (Art 110(2)).

An assessment under Art 110 requires an effects based test, and there is no scope for a rule being classed as exempt from Art 110. Internal taxation measures may directly discriminate, as in Hansen [1978], where tax relief for small businesses manufacturing spirits did not also apply to similar foreign providers, or it may be indirect, as in Humblot [1985] where a flat rate road tax was charged for vehicles over a certain power rating. Incidentally, this flat rate road tax only applied to imported cars, as no nationally manufactured car was powerful enough, making the rule discriminatory. A similar case to Humblot: Commission v Greece (Car Tax) [1990] used a non-effects based test to find that a similar flat rate of road tax was intended to protect the environment. It is submitted that this case should not be followed.

Art 110(2) requires a two stage assessment. It must firstly be established that goods are competing (not similar),then it must be established that there is a discriminatory effect prejudicing foreign products. In Commission v France (tax on spirits) [1980], two different products were said to be similar due to their comparable use. This prevented the tax measure from being prohibited under Art 110(2). In Commission v UK (wine and beer) [1980], it was found that beer and wine compete with each other, and so it must not be more expensive to sell wine from other Member States than it is to sell beer brewed and sold in the destination Member State.

Elimination of quantitative restrictions

Where financial restrictions are imposed on imports or exports between Member States, those restrictions will usually be caught by Art 30 or Art 110 TFEU, as explained above. However, a Member State may also impose restrictions which are not financial in nature and affect imports and exports.

Art 34 TFEU prohibits quantitative restrictions (QRs) and measures having equivalent effect to quantitative restrictions (MEQRs) on imports between Member States. Art 35 TFEU is identical, but applicable to exports. Unlike financial restrictions, Art 36 TFEU provides the scope for QRs and MEQRs to be exempt from the prohibitions in Art 34 and 35 by way of justification. This will be discussed below.

The scope of articles 34 and 35 TFEU

Goods

Articles 34 and 35 only apply to goods. A wide interpretation has been given to the definition of goods, as illustrated by Belgian Waste [1992], where waste had commercial value so was classed as goods as it could (theoretically) be traded between Member States. When applied to an indirect restriction, the interpretation is even broader, as illustrated by Bluhme [1998] where a restriction on (rare) brown bees to prevent cross-breeding was found to be in the scope of Art 34 as it could ultimately affect honey or bee imports.

Member States

This term has also been interpreted widely. In Buy Irish [1982], the promotion of Irish goods over imported goods by a state appointed and funded quango was found to be within the scope of Art 34, and in CMA [2002]. a private company whose guidance came from the German government was found to be within the scope of Art 34.

State omissions

Where a state fails to act, and their inaction leads to an equivalent effect to a restriction on imports or exports, a state’s duty to act will fall within the scope of Art 34, as illustrated by Spanish Strawberries [1997]. According to Schmidberger [2003], where there will be an interruption to free movement, a Member State must warn the Commission in advance and take proportional steps to prevent the interruption.

Reverse discrimination

Where a restriction prejudices only domestic goods, it will not be caught by art 34. As such, in Mathot [1987], a butter labelling requirement applying only to butter produced and sold in the same Member State was not caught by Art 34.

Quantitative restrictions

Quantitative restrictions are usually relatively easy to spot. According to Geddo [1973], they place a total or partial restraint on the import, export or trade of goods. For example, an import quota would be a quantitative restriction.

Measures having equivalent effect to quantitative restrictions

MEQRs may be slightly more difficult to identify. They are, in the words of Dassonville [1974]:

“All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially [inter-state trade]”

Dassonville [1974] found that the test for MEQRs, just like financial restrictions, is an effects based test, which could prevent a French whisky certificate of origin rule from being enforced. This effects based assessment can account for future hinderances, as long as not merely hypothetical, according to Foie Gras [1998] (labelling restriction). According to AGM (lifting machines) [2007], a statement from a public official is capable of constituting a MEQR.

MEQRs can be categorised for convenience into distinctly applicable and indistinctly applicable rules; the former placing an unequal (discriminatory) burden on foreign products and the latter placing an equal burden on both domestic products and products for import or export (non-discriminatory).

Discriminatory restrictions

Examples of discriminatory restrictions in include:

  • The exclusive promotion of domestic products, as occurred in Buy Irish [1982] and Foie Gras [1998]
  • Marks of origin requirements, such as in Irish Souvenirs [1981]
  • Price fixing or additional requirements for imports

Non-discriminatory restrictions

Non-discriminatory restrictions include:

  • Product rules, such as in Cassis de Dijon [1978] (%age alcohol requirement, the case which confirmed that non-discriminatory restrictions can be MEQRs), Beer Purity [1987] and Rau [1982] (butter vs margarine container shapes)
  • Labelling requirements, such as in Clinique [1994] (no renaming required) and Dynamic Medien [2008] (justified DVD labelling)
  • Use restrictions, such as in Motorcycle Trailers [2009] and Micklesson and Roos [2009] (jet skis)
  • Export prevention, such as in Fragkopoulos [2011] (not internal Greece-Greece as creation of exportable currants)

Selling arrangements

The importance of the distinction between discriminatory and non-discriminatory MEQRs has been important since the case of Keck [1993], which added a ‘de minimis exception’ to non-discriminatory MEQRs. It has already been mentioned that, unlike financial restrictions, quanitiative restrictions can be permitted if they are justified (discussed below). However, if such restrictions fall into the Keck exception, they will automatically be excluded for the jurisdiction of Art 34 and 35 entirely.

Prompted by outrage of the EU’s prohibition on Sunday trading regulations (shops being prevented from trading on Sundays), Keck [1993] decided that selling arrangement rules would not be classed as MEQRs. Selling arrangements:

  • Apply to all traders equally; AND
  • Affect foreign and domestic products in the same manner

Keck [1993] involved a French restriction preventing the resale of goods at a loss. This was intentionally breached by Keck and others, who, in defence to criminal proceedings, claimed that the restriction breached Art 34. In developing and invoking the ‘selling arrangement’ exception, the restriction was permitted and Keck had no defence.

Keck was successfully applied in Punto Case [1994] (Sunday trading rule) and Greek Milk [1995] (selling baby milk at pharmacies only). Product requirements, such as in Mars [1995] (10% packaging), Familiapress [1997] (no magazine competitions) and Schwarz [2005] (wrap chewing gum) will not be caught by the Keck exceptions. Keck also didn’t apply in the cases of De Agostini [1997] (children’s TV advertising), GIP [2001] (alcohol advertising ban) and DocMorris [2003] (online pharmaceuticals) as imported products would be prejudicially affected where foreign advertisers would find it more difficult to enter the Member States’ markets.

Motorcycle Trailers [2009] appears to question whether the Keck exception should exist, finding that there are no longer two tests for non-discriminatory MEQRs (product rules and selling arrangements); rather just 1 effects based test: are products from other Member States treated less favourably? Commentators have suggested that the case actually categorises prohibited restrictions into:

  • Those with an object or effect of creating less favourable conditions for foreign products
  • Those which require imported products to be adapted before sale
  • Those which create “any other hinderance”

Motorcycle trailers does not even mention Keck [1993] by name. Ker Optica [2010] attempts to reconcile Keck [1993] and Motorcycle Trailers [2009], suggesting that Keck still exists, but alongside, as opposed to exclusive from Motorcycle Trailers’ market access test.

Justification

On the assumption that a measure has been caught by, and has not been excluded from the scope of Art 34 or 35; it may still be valid if it is justifiable. Art 36 TFEU provides a list of justifications, which is exhaustive, according to Irish Souvenirs [1981].

Discriminatory rules can only be justified using the Art 36 exceptions. Non-discriminatory rules can be justified either with Art 36’s exceptions, or using an ORPI: an Overriding Reason of Public Interest. ORPIs are a non-exhaustive list of grounds for justification continually developed by the Court of Justice of the European Union.

And justifications must be proportionate to be allowed.

Justification under Article 36 TFEU

A number of examples can illustrate the effectiveness of Art 36 at justifying restrictions:

  • Public morality
    • R v Henn and Darby [1979] – banning pornography imports was justifiable as a public concern
    • Conegate [1986] – banning sex doll imports was not justifiable as similar products were legally manufactured in the Member State
    • Dynamic Medien [2008] – requiring film classification was jusitfiable
  • Public security
    • Campus Oil [1984] – a rule requiring 35% of imported oil to be purchased from an Irish oil refinery was justifiable for reasons of national security
  • Protection of human life/health
    • Poultry Meat [1982] – banning imports of meat due to Newcastle’s disease not justifiable in the run up to Christmas (turkey import season)
    • Sandoz [1983] – banning certain vitamins in muesli not justifiable as not enough evidence that harmful to health
    • Schwarz [2005] – requiring bubblegum to be sold in wrappers justifiable
  • Protection of animal life
    • Bluhme [2008] – justifiable to protect brown bees, an endangered species
  • Protection of industrial/commercial property
    • Donner [2012] – justifiable to prevent the distribution of copyrighted works, allowing criminal proceedings to be bought

Justifications under ORPIs

The list of ORPIs is ever expanding, however, here are a number of examples:

  • Cassis de Dijon [1978] – provided the original list of ORPIs: public health, consumer protection and fairness of consumer transactions, with the burden of proof on the Member State
  • Danish Bottles [1988] – environment added to the list of ORPIs; legitimate but disproportionate on other Member States  to require only recycled bottles to be used
  • DocMorris [2003] – social security added to the list of ORPIs, but public health not to be harmonised
  • Commission v Austria [2005] – one justifiable and one non-justifiable ban on road use for heavy lorries
  • Tinted Windows [2008] – public security added as an ORPI, but not justifiable to ban window tinting for the benefit of fighting crime
  • Motorcycle Trailers [2009] – road safety added to list of ORPIs
  • Cinetheque [1985] – Culture added to the list of ORPIs; French language film rule justifiable to preserve French culture

As a final point, it should be noted that Articles 34-36 only apply in areas of shared competence, such as the internal market. Where the EU has either exclusive competence or no competence, the Articles will not apply: restrictions will either be automatically permitted or void.

Next: The free movement persons

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