Free Movement of Goods (FMG)
Definition of the Single Market
The free movement of goods has been described as the "cornerstone" of the internal market. The advantages and disadvantages of FMG are as follows:
- Removal of all obstacles to trade between MS
- Common policy towards 3rd countries
- Free movement of goods, persons, services and capital (the "four freedoms")
The free movement of goods has been described as the "cornerstone" of the internal market. The advantages and disadvantages of FMG are as follows:
Advantages
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Disadvantages
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Obstacles to FMG
Goods are defined anything that is capable of monetary valuation - Commission v Italy
Article 26 TFEU - aims for a single market on the basis of the freedoms
Article 34 TFEU - QRs and MEQRS shall be prohibited between MS. Has direct effect (both horizontal and vertical as it is a Treaty Article)
Article 35 TFEU - Similar prohibition as Art 34, on exports
Article 36 TFEU - Justifications for Article 34 and 35
Article 37 TFEU - State monopolies must be compatible with free movement of goods
Article 30 TFEU - prohibits custom duties on imports
Article 28(1) TFEU - common customs tariff
Article 110 TFEU - discriminatory taxation is prohibited
The types of potential restrictions are as follows:
Article 26 TFEU - aims for a single market on the basis of the freedoms
Article 34 TFEU - QRs and MEQRS shall be prohibited between MS. Has direct effect (both horizontal and vertical as it is a Treaty Article)
Article 35 TFEU - Similar prohibition as Art 34, on exports
Article 36 TFEU - Justifications for Article 34 and 35
Article 37 TFEU - State monopolies must be compatible with free movement of goods
Article 30 TFEU - prohibits custom duties on imports
Article 28(1) TFEU - common customs tariff
Article 110 TFEU - discriminatory taxation is prohibited
The types of potential restrictions are as follows:
Financial
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Physical
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Two types of restrictions are banned by Article 34:
1. Quantitative restrictions (QRs)
2. Measures Equivalent to QRs (MEQRs)
There are two types of MEQRs:
1. Distinctly applicable (DAs) - the measures apply solely to imports
2. Indistinctly applicable (IDAs) - the measure applies to both imports and domestic goods but affect imports more
Whose actions are caught by Article 34?
What types of act are caught by Article 34?
"Measures" include;
Article 36 TFEU contains the justifications for restrictions:
The list is exhaustive and the exceptions have been held by the ECJ to be strictly construed. In addition, there must be a genuine concern and the measure must be proportionate - in other words, don't use a sledge hammer to crack a nut. The measure must be the least restrictive method of combatting the concern. An IDA is more likely to be proportionate.
CIRCUMSTANCES IN WHICH ARTICLE 34 DOES NOT APPLY
Member States may be allowed to maintain their national barriers to the free movement of goods in certain circumstances:
Justifying Distinctly Applicable Measures
A Member State may only use Article 36 to justify the DA. This is because DAs are direct discrimination.
Justifying Indistinctly Applicable Measures
A Member State can justify under Article 36 or under the "mandatory requirements" from the case of Cassis De Dijon.
1. Quantitative restrictions (QRs)
2. Measures Equivalent to QRs (MEQRs)
There are two types of MEQRs:
1. Distinctly applicable (DAs) - the measures apply solely to imports
2. Indistinctly applicable (IDAs) - the measure applies to both imports and domestic goods but affect imports more
Whose actions are caught by Article 34?
- The institutions
- Public bodies - "measures taken by MS" has been interpreted in the widest sense
- No HDE - but may be enforced indirectly by imposing positive obligations on MS - Commission v France (Re Angry Farmers); "all necessary and appropriate measures" held to include private blockades.
What types of act are caught by Article 34?
"Measures" include;
- National legislation
- Administrative acts - Franking Machine case
- Advertising - "Buy Irish" campaign case
- Omissions - Angry Farmers case
Article 36 TFEU contains the justifications for restrictions:
- Public morality
- Public policy
- Public security
- Protection of the health and life of humans, animals and plants
- Protection of national treasures
- Protection of intellectual property
The list is exhaustive and the exceptions have been held by the ECJ to be strictly construed. In addition, there must be a genuine concern and the measure must be proportionate - in other words, don't use a sledge hammer to crack a nut. The measure must be the least restrictive method of combatting the concern. An IDA is more likely to be proportionate.
CIRCUMSTANCES IN WHICH ARTICLE 34 DOES NOT APPLY
Member States may be allowed to maintain their national barriers to the free movement of goods in certain circumstances:
Justifying Distinctly Applicable Measures
A Member State may only use Article 36 to justify the DA. This is because DAs are direct discrimination.
Justifying Indistinctly Applicable Measures
A Member State can justify under Article 36 or under the "mandatory requirements" from the case of Cassis De Dijon.
Quantitative Restrictions (QRs)
Definition
Riseria Luigi Geddo v Ente Nationale Risi (Geddo)
"Any measures which amount to a total or partial restraint of imports, exports or goods in transit"
i.e. numerical limit - outright bans and quotas
Case law
Commission v Italy (Re Ban On Pork Imports)
Includes bans
R v Henn
Includes quotas
Ditler Bluhnu
May be just a part of a MS's terriotory
Riseria Luigi Geddo v Ente Nationale Risi (Geddo)
"Any measures which amount to a total or partial restraint of imports, exports or goods in transit"
i.e. numerical limit - outright bans and quotas
Case law
Commission v Italy (Re Ban On Pork Imports)
Includes bans
R v Henn
Includes quotas
Ditler Bluhnu
May be just a part of a MS's terriotory
Measures Having Equivalent Effect (MEQRs)
Definition
Procureur du Roi v Dassonville (the Dassonville formula)
"All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having equivalent effect to quantitative restrictions".
This is a wide definition but it is limited the state measures. It doesn't have to have actual effect; could be pontential - along as it is capable of having such effect. Needs to have a cross-border element.
Facts: Belgian rules required a certificate of authenticity from country of origin. Belgium issued criminal proceedings against traders who imported Scotch whiskey without a certificate.
Case law
Re Origin Markings
Origin marking rules encourage consumers to by goods of national origin - IA.
Held: MEQR
Irish Souvenirs case
Souvenirs manufacturers elsewhere had to be stamped "foreign". Legislation did not apply to Irish souvenirs - DA.
Held: MEQR
Walter Rau
Belgian legislation required that margarine could only be sold in cube-shaped packaging - IA. Goods therefore had to be repackaged to be sold in Belgium.
Held: MEQR
Procureur du Roi v Dassonville (the Dassonville formula)
"All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having equivalent effect to quantitative restrictions".
This is a wide definition but it is limited the state measures. It doesn't have to have actual effect; could be pontential - along as it is capable of having such effect. Needs to have a cross-border element.
Facts: Belgian rules required a certificate of authenticity from country of origin. Belgium issued criminal proceedings against traders who imported Scotch whiskey without a certificate.
Case law
Re Origin Markings
Origin marking rules encourage consumers to by goods of national origin - IA.
Held: MEQR
Irish Souvenirs case
Souvenirs manufacturers elsewhere had to be stamped "foreign". Legislation did not apply to Irish souvenirs - DA.
Held: MEQR
Walter Rau
Belgian legislation required that margarine could only be sold in cube-shaped packaging - IA. Goods therefore had to be repackaged to be sold in Belgium.
Held: MEQR
Case Law on Article 36
Public morality
R v Henn and Darby: Defendants imported pornographic films from the Netherlands. Convicted of importing them contrary to UK legislation banning the importation of indecent or obscene articles. DA. Measure held to be genuinely for the proctection of public morality as the discrimination was not arbitrary.
Conegate Ltd v Customs and Excise Commissioners: Conegate imported life size dolls into the UK from Germany. Customs seized them on the grounds that they were indecent and obscene. Held to be arbitrary discrimination as the dolls could lawfully be manufactured in the UK. DA.
Public health
Commission v UK (Re UHT Milk): UK legislation stipulated the milk could only be imported with a licence and marketed only by licensed dealers who had packed the milk in a local dairy. UK argued this system was necessary to protect public health.
There is a need to prove a real health risk. The burden of proof is on the MS and scientific evidence is required. This case also failed on proportionality - a certificate from the milk's origin would have ben adequate.
Authority - MS will not succeed where the exporting state maintains equivalent standards and those standards are acceptable to meet the risk.
Public policy - strictly construed, rarely succeeds
Irish Souvenirs Case: The Irish government tried to justify the law on grounds of consumer protection. Held: MS may only use public policy if "there is a genuine and sufficiently serious threat to a fundamental interest of society" - Omega
R v Thompson: restriction on import of collector coins held to be one the the fundamental interests of the state. Justified.
Commission v UK (Re Imports of Poultry Meat): An import licence was required for poultry to prevent the spread of Newcastle disease. Not justified. Contrast to -
Commission v Ireland (Re Protection of Animal Health): The same licence was required to prevent the same disease. However, Ireland managed to justify the restriction as they had a higher standard of poultry. It seems it is difficult to predict when import licences will be justified.
Protection of national treasures
Hasn't been used successfully so far.
Leclerc: Doesn't include cultural diversity
Conclusion
The ECJ has held that any derogation from a treaty freedom must be interpreted narrowly.
R v Henn and Darby: Defendants imported pornographic films from the Netherlands. Convicted of importing them contrary to UK legislation banning the importation of indecent or obscene articles. DA. Measure held to be genuinely for the proctection of public morality as the discrimination was not arbitrary.
Conegate Ltd v Customs and Excise Commissioners: Conegate imported life size dolls into the UK from Germany. Customs seized them on the grounds that they were indecent and obscene. Held to be arbitrary discrimination as the dolls could lawfully be manufactured in the UK. DA.
Public health
Commission v UK (Re UHT Milk): UK legislation stipulated the milk could only be imported with a licence and marketed only by licensed dealers who had packed the milk in a local dairy. UK argued this system was necessary to protect public health.
There is a need to prove a real health risk. The burden of proof is on the MS and scientific evidence is required. This case also failed on proportionality - a certificate from the milk's origin would have ben adequate.
Authority - MS will not succeed where the exporting state maintains equivalent standards and those standards are acceptable to meet the risk.
Public policy - strictly construed, rarely succeeds
Irish Souvenirs Case: The Irish government tried to justify the law on grounds of consumer protection. Held: MS may only use public policy if "there is a genuine and sufficiently serious threat to a fundamental interest of society" - Omega
R v Thompson: restriction on import of collector coins held to be one the the fundamental interests of the state. Justified.
Commission v UK (Re Imports of Poultry Meat): An import licence was required for poultry to prevent the spread of Newcastle disease. Not justified. Contrast to -
Commission v Ireland (Re Protection of Animal Health): The same licence was required to prevent the same disease. However, Ireland managed to justify the restriction as they had a higher standard of poultry. It seems it is difficult to predict when import licences will be justified.
Protection of national treasures
Hasn't been used successfully so far.
Leclerc: Doesn't include cultural diversity
Conclusion
The ECJ has held that any derogation from a treaty freedom must be interpreted narrowly.
Proportionality
There are two elements to its application:
Case law - Walter Rau (least restrictive measure)
Note the final sentence in Article 36: no arbitrary discrimination or disguised restrictions (extra criterion). This means even if a legitimate purpose has been identified, the manner in which the rule is implemented should not benefit domestic producers.
- Necessary/appropriate/suitable to achieve the desired objective/aim of the measure
- It is the least restrictive measure
Case law - Walter Rau (least restrictive measure)
Note the final sentence in Article 36: no arbitrary discrimination or disguised restrictions (extra criterion). This means even if a legitimate purpose has been identified, the manner in which the rule is implemented should not benefit domestic producers.
Cassis De Dijon
Facts
German law banned weak liquors - they had to have a minimum of 25% alcohol content. The law also applied to domectic producers - IA measure. Cassis had 15-20% alcohol content - meaning it was effectively banned from being sold in Germany.
Germany tried to defend the measure using the following arguments:
ECJ
If a measure is a IA, it may be allowed under the "rule of reason" - which has become known as the Cassis 1st principle. The rule of reason recognises that a restriction may be necessary in order to satisfy mandatory requirements relating to:
This is a non-exhaustive list. The ECJ has since added the following:
It should be noted that the use of the rule of reason is still subject to proportionality - Rau
The ECJ also formulated the 2nd Cassis principle - mutual recognition. This creates the presumption that if goods are lawfully produced in one MS, there is no reason that they should be unlawful in another MS. This presumption may be rebutted (Article 36/Cassis 1st principle).
Commission v Germany (Re Beer Purity Levels)
Facts: Beverages could not be designated as "bier" unless they were made solely from barley, yeast, hops and water. Other beers could still be sold but not as "bier'. Also, beers containing additives could not be sold at all in Germany.
Rules on designation: Germany argued they were for the protection of the consumer. The ECJ said the rules go beyond what is necessary to protect the German consumer - could have been done via labelling. It was held that the rules amounted to a breach of Article 34 as consumers' conceptions and tastes evolve over time and the common market contributes to this. The designation rules would hinder this. "The legislation of a MS must not crystallise given consumer habits so as to consolidate an advantage acquired by national industries concerned to comply with them".
Ban on additives: Cannot be justified on public health grounds as the other MS strictly control and thoroughly test additives. Following the rule of mutual recognition from Cassis, they should be accepted unless Germany can prove a real health risk, which on the facts they could not.
German law banned weak liquors - they had to have a minimum of 25% alcohol content. The law also applied to domectic producers - IA measure. Cassis had 15-20% alcohol content - meaning it was effectively banned from being sold in Germany.
Germany tried to defend the measure using the following arguments:
- Public health - weaker drinks were said to increase alcohol tolerance
- Consumer protection - consumers may buy the drinks as they are cheaper without realising they are also weaker
ECJ
If a measure is a IA, it may be allowed under the "rule of reason" - which has become known as the Cassis 1st principle. The rule of reason recognises that a restriction may be necessary in order to satisfy mandatory requirements relating to:
- effectiveness of fiscal supervision
- public health
- fairness of commercial transactions
- consumer protection
This is a non-exhaustive list. The ECJ has since added the following:
- protection of culture - Cinetheque
- protection of the environment - Re Disposable Beer Cans
It should be noted that the use of the rule of reason is still subject to proportionality - Rau
The ECJ also formulated the 2nd Cassis principle - mutual recognition. This creates the presumption that if goods are lawfully produced in one MS, there is no reason that they should be unlawful in another MS. This presumption may be rebutted (Article 36/Cassis 1st principle).
Commission v Germany (Re Beer Purity Levels)
Facts: Beverages could not be designated as "bier" unless they were made solely from barley, yeast, hops and water. Other beers could still be sold but not as "bier'. Also, beers containing additives could not be sold at all in Germany.
Rules on designation: Germany argued they were for the protection of the consumer. The ECJ said the rules go beyond what is necessary to protect the German consumer - could have been done via labelling. It was held that the rules amounted to a breach of Article 34 as consumers' conceptions and tastes evolve over time and the common market contributes to this. The designation rules would hinder this. "The legislation of a MS must not crystallise given consumer habits so as to consolidate an advantage acquired by national industries concerned to comply with them".
Ban on additives: Cannot be justified on public health grounds as the other MS strictly control and thoroughly test additives. Following the rule of mutual recognition from Cassis, they should be accepted unless Germany can prove a real health risk, which on the facts they could not.
Overuse of Article 34 and Keck
Sunday Trading Cases - Shops Act 1950 banned trading on Sundays. ECJ held: this could be a MEQR. UK justified under Cassis which the ECJ allowed.
Keck
Facts: Concerned the legality under EU law of a French law prohibiting the resale of goods in an unaltered state to prevent predatory pricing.
Held: Selling arrangements are circumstances of sale (when, how, where) and are NOT MEQRs unless they; puts imports at disadvantage or the measure relates to characteristics of the product, in which case they are still a MEQR. Selling arrangements were distinguished from "requirements to be met" by goods, e.g. size, weight, composition, labelling. Requirements to be met were held to be MEQRs under Dassonville subject to the rule of reason in Cassis.
The proviso to Keck
Selling arrangements would not be in breach of Article 34 - not MEQRs only if they:
Measures relating to selling arrangements - not MEQRs
Ban on resale at a loss - Keck
Goods to be sold only at pharmacies (baby milk case) - Commission v Greece
Advertising restrictions - Hunermund
Restrictions on opening hours - Punto Casa v Capena
Measure relating to the characteristics of the product i.e. requires goods to modified
Clinique - brand name
German law prohibited the use of the name "Clinique for cosmetics as this suggested therapeutic properties which the product did not have. EL therefore had to use the name "Linique" in Germany, which required packaging changes.
Held: MEQR as relates to the intrinsic character of the product
Mars - wrapper
The +10% promotion on the wrapper actually took up more than 10% of the total surface area. This breached a German law prohibiting misleading information about goods.
Held: MEQR as relates to the intrinsic character of the product
*do free movement of goods flowchart here.
Keck
Facts: Concerned the legality under EU law of a French law prohibiting the resale of goods in an unaltered state to prevent predatory pricing.
Held: Selling arrangements are circumstances of sale (when, how, where) and are NOT MEQRs unless they; puts imports at disadvantage or the measure relates to characteristics of the product, in which case they are still a MEQR. Selling arrangements were distinguished from "requirements to be met" by goods, e.g. size, weight, composition, labelling. Requirements to be met were held to be MEQRs under Dassonville subject to the rule of reason in Cassis.
The proviso to Keck
Selling arrangements would not be in breach of Article 34 - not MEQRs only if they:
- apply to all affected traders within the terriotory and
- affect in the same manner in law and in fact the marketing of domestic products and imports from other MS
Measures relating to selling arrangements - not MEQRs
Ban on resale at a loss - Keck
Goods to be sold only at pharmacies (baby milk case) - Commission v Greece
Advertising restrictions - Hunermund
Restrictions on opening hours - Punto Casa v Capena
Measure relating to the characteristics of the product i.e. requires goods to modified
Clinique - brand name
German law prohibited the use of the name "Clinique for cosmetics as this suggested therapeutic properties which the product did not have. EL therefore had to use the name "Linique" in Germany, which required packaging changes.
Held: MEQR as relates to the intrinsic character of the product
Mars - wrapper
The +10% promotion on the wrapper actually took up more than 10% of the total surface area. This breached a German law prohibiting misleading information about goods.
Held: MEQR as relates to the intrinsic character of the product
*do free movement of goods flowchart here.
Understanding Selling Arrangements (Keck)
Free Movement of Goods Exam Structure
1. Identify Treaty Article
2. Secondary Legislation
3. Restriction
4. Clarify - IDA/DA?
5. Justifications
6. Proportionality
2. Secondary Legislation
3. Restriction
4. Clarify - IDA/DA?
5. Justifications
6. Proportionality