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BRITISH CENTRE FOR ENGLISH AND EUROPEAN LEGAL STUDIES

At Warsaw University, Faculty of Law and Administration

Sponsored by
Clifford Chance

Central and East European Moot Court


Competition 2009

1st 4th May 2009

hosted by

Kyiv-Mohyla Academy
KYIV

Competition rules, problem


Collected cases and materials available to participants

Warsaw 2009
Central and Eastern European Moot Court Competition Kyiv 2009

TABLE OF CONTENTS

A. PRELIMINARIA PAGE NO.


1 Index 1-2
2 Moot Question 3-8
3 Competition Rules 9-11
4 Mooting Tips for Teams 12-14
5 Preliminary Information on the ECJ 15
6 Provisional Competition Programme 16
7 Acknowledgements 17

B. LEGISLATION
8 EC Treaty (as amended): Articles 2, 10, 14, 28, 30, 49, 50, 55, 95, 151, 153, 157, 18-21
234 and 295
9 European Convention for the Protection of Human Rights and Fundamental 22
Freedoms: Article 10 and 49
10 Council Directive 89/552/EEC on the coordination of certain provisions concerning 23-25
the pursuit of television broadcasting activities, as amended by Directive 97/36/EC
(Extracts)
11 Directive 98/84/EC of the European Parliament and of the Council of 20 November 26-29
1998 on the legal protection of services based on, or consisting of, conditional
access (the "Conditional Access Directive"):

C. BACKGROUND READING
12 J Steiner, L Woods and C Twigg-Flesner, EU Law (9th ed), OUP 2006, Chapter 5 30-44
(Extracts): Principles of direct applicability and direct effects
13 S. Weatherill, Cases & Materials on EU Law (8th ed), OUP, 2007, (Extracts): The 45-63
Direct Effect of Directives
14 J Steiner, L Woods and C Twigg-Flesner, EU Law (9th ed), OUP 2006, Chapter 9 64-75
(Extracts):The preliminary rulings procedure
15 Guidance Notes for preliminary references to ECJ 76-77
16 S. Weatherill, Cases & Materials on EU Law (8th ed), OUP, 2007, (Extracts): 78-83
Proportionality
17 C.Barnard, Substantive law of EC (2nd Edition) Extracts from Chapter 6: 84-96
Measures having equivalent effect to quantitative restrictions under Article 28
18 C.Barnard, Substantive law of EC (2nd Edition) Extracts from Chapter 9: 97-103
Intellectual property and the free movement of goods
19 S. Weatherill, Cases & Materials on EU Law (8th ed), OUP, 2007, Chapter 11: 104-115
Physical and Technical Barriers to Trade Articles 28-30 (extracts)
20 Macgowan and Quinn, Could Article 30 impose obligations on individuals (Extracts 116-124
from ELR 1987 Article)
21 C.Barnard, Substantive law of EC (2nd Edition) Extracts from Chapter 14: 125-139
Freedom to provide and receive services
22 S. Weatherill, Cases & Materials on EU Law (8th ed), OUP, 2007, (Chapter 14 140-144
Extracts): Freedom of Establishment and the Free Movement of Services: Articles 43
and 49

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23 J Steiner, L Woods and C Twigg-Flesner, EU Law (9th ed), OUP 2006, Chapter 31 145-151
(Extracts): Intellectual property rights and the internal market
24 Commission Green Paper on the Legal Protection of Encrypted services in the 152-161
Internal Market (Extracts)

D. JURISPRUDENCE

ECJ Jurisprudence
25 C-210/06: Cartesio Oktat s Szolgltat bt judgment 162-167
26 C-210/06: Cartesio Oktat s Szolgltat bt AG opinion ECR 1-10805 168-171
27 C- 62/79: SA Compagnie gnrale pour la diffusion de la tlvision, Coditel, and 172-175
others v Cin Vog Films and others [1980] ECR 81 (Coditel I).
28 C- 262/81: Coditel SA, Compagnie gnrale pour la diffusion de la tlvision, and 176-179
others v Cin-Vog Films SA and others [1982] ECR 3381 (Coditel II).
29 C-58/80: Dansk Supermarked A/S v A/S Imerco [1981] ECR 181 180-183
30 C341/87: EMI Electrola GmbH v Patricia Im- und Export and others [1989] ECR 79 184-186
31 C-200/96: Metronome Musik GmbH v Music Point Hokamp GmbH. [1998] ECR 1- 187-191
1953
32 C-55-7/80: Musik-Vertrieb membran GmbH et K-tel International v GEMA - 192-196
Gesellschaft fr musikalische Auffhrungs- und mechanische
Vervielfltigungsrechte (Joined cases) [1981] ECR 147
33 C- 155/73: Giuseppe Sacchi [1974] ECR 409 197-201
34 C--275/92: Her Majesty's Customs and Excise v Gerhart Schindler and Jrg 202-206
Schindler [1994] ECR 1-1039
35 C-34/95: Konsumentombudsmannen (KO) v De Agostini (Svenska) Frlag AB 207-212
[1997] ECR 613
36 C-104/75: Adriaan de Peijper, Managing Director of Centrafarm BV [1976] ECR 213-215
37 C- 338/04: Criminal proceedings against Massimiliano Placanica [2007] ECR 1- 216-220
393
38 C- 193/94: Criminal proceedings against Sofia Skanavi and Konstantin 221-223
Chryssanthakopoulos [1996] ECR 1-929
39 C-459/99: Mouvement contre le racisme, l'antismitisme et la xnophobie ASBL 224-226
(MRAX) v Belgian State [2002] ECR 1-5691
40 C-194/94: CIA Security International SA v Signalson SA and Securitel SPRL 227-231
[1996] ECR 1-2201
41 Reference for a preliminary ruling from High Court of Justice (Chancery Division) 232-233
(United Kingdom) made on 17 September 2008: Football Association Premier
League Ltd, NetMed Hellas SA, Multichoice Hellas SA v QC Leisure,

National court jurisprudence


42 Football Association Premier League Ltd, NetMed Hellas SA, Multichoice Hellas 234-254
SA v QC Leisure [2008] EWHC 1411 (Ch)

Although the rules prevent competitors from citing authorities other than those in this bundle, should further background
information be sought to prepare the case the following websites may be useful:
http://curia.europa.eu
http://www.amicuria.org/service/cx3-en.htm

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Central and Eastern European Moot Court Competition 2009


Timsnart TV and Louf Entertainment SIA,
(Appellants)
v
Rafoot Broadcasting Agency and Rafoot Ice Hockey League
(Respondents)

1. For almost a hundred years ice hockey has been the national sport in the State of Rafoot, a Member State of
the European Union. Rafoots are such avid followers of the sport that public life practically stops whenever more
important games are played in the Rafoot Ice Hockey League (the RIHL), and certainly for international games. On
these occasions, Rafoots particularly enjoy meeting up in bars and watching the games live, cheering on their favourite
sides, while consuming large quantities of the very good local beer.

2. The RIHL forms part of the Rafoot Broadcasting Agency (RBA). It is the practice of the State of Rafoot to
delegate certain regulatory or supervisory functions to private entities under the terms of enabling state legislation. The
Broadcasting Act 2000 has designated the RBA, which is a private company, as the supervisory and regulatory body
for all aspects of television broadcasting in the State of Rafoot; among its obligations is the duty to both propose and/ or
draft broadcasting legislation which is then formally implemented by the State in the form of delegated legislation. The
RBA is also the primary enforcement body of such delegated legislation.
The RBA's funding is provided through two main sources: (1) mandatory Rafoot TV licence fees, payable by all those
people who own a television, which forms 25% of its income; and (2) income received through its commercial activities.
The majority of this income is derived from the RIHL. RIHL's biggest source of revenue is the sale of the television
broadcast rights for league games, which are popular not only in Rafoot but also in other countries throughout the
world. For years, the exclusive rights to broadcast the games live have been sold at auctions to the highest bidder,
usually to pay-TV satellite broadcasters which charge their customers for the decoding equipment (which includes
satellite dish, decoders and decoder cards) which allow them to watch games.

3. The rights packages are divided territorially and on three-year terms. The system of contracts includes a
covenant of exclusivity that RIHL will appoint only one broadcaster within any particular territory. To protect this
territorial exclusivity, each broadcaster undertakes in its licence agreement with RIHL to encrypt its satellite-delivered
signal, and accepts various restrictions against the circulation of the decoding equipment it then produces to de-encrypt
this signal outside the territory of each licensee. The price paid for the broadcast license for any one territory varies
widely, depending on how popular ice hockey is in the territory in question and how many viewers the games are
consequently likely to attract.

4. The broadcast rights for the territory of Rafoot for the 2008 to 2011 seasons have been bought for more than
200 million euros by Heaven, an international pay-TV satellite broadcaster established in Rafoot.

5. In Etilletas, another Member State of the European Union, the licensee which bought the broadcast rights for
the same period is Timsnart TV, a national Etilletas pay-TV satellite broadcaster. Etilletas is a country where most
people have never seen ice or snow and hardly anybody watches ice hockey games. Timsnart TV was, as a
consequence, able to purchase its licence from RIHL for as little as 40,000 euros. Timsnart TV's licence prohibited it by
way of a contractual stipulation from supplying its decoding equipment outside Etilletas.

6. In technical terms, each game throughout the season is filmed by RIHL accredited camera crews. An outside
production facility at the game selects which camera's output is to be used at any moment for the live broadcast. This is
transmitted to a production facility where logos, video sequences, on-screen graphics, music and commentary are
added. The resulting signal is referred to as "the World Feed". The World Feed is then compressed and encrypted and
transmitted by satellite to the various licensed broadcasters. These broadcasters then decrypt and decompress the
World Feed, so that they can add their own logo and possibly some commentary. The signal is then compressed and
encrypted again, and transmitted via satellite to the broadcasters' subscribers. Subscribers receive the signal using a
small satellite dish. The signal is decrypted and decompressed in a decoder, which requires for its operation a decoder
card. The relevant satellite dishes, decoders and decoder cards are produced by the relevant licensed broadcasters in

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each territory, such as Heaven and Timsnart TV. The whole process of transmission of the live signal from the ice rink
to the subscriber takes approximately 5 seconds.

7. It has come to the attention of Heaven and RIHL that a large and increasing number of Timsnart TV's decoder
cards are being used in Rafoot to watch RIHL games. This is technically possible because, although Timsnart TV and
Heaven use different satellites to broadcast their programmes, both satellites cover most of Europe and there is no way
of limiting the area to which either satellite broadcasts to a smaller territory. Anybody with a Timsnart TV decoder card,
decoder and a satellite dish can thus watch Timsnart TV's programmes almost anywhere in Europe, in the same way
that Heaven's programmes can in principle be watched anywhere in Europe with a Heaven satellite dish, decoder and
decoder card.

8. Initially, it was just a few Etilletas migrant workers working in Rafoot who used Timsnart TV decoder cards so
that they could watch television in their mother tongue. It however soon became notorious among Rafoots that RIHL
games were broadcast live on Timsnart TV and that obtaining Timsnart TV decoding equipment was the cheapest way
of watching these games: while an annual Premium Package with Heaven, including all RIHL games, costs over 600
euros for individuals and between 10,000 and 30,000 euros for business subscribers, a basic Timsnart TV subscription,
which also includes all RIHL games, is merely 60 euros a year. The fact that all the live commentary on Timsnart TV is
in the Etilletas language does not bother Rafoots, who will usually turn off the volume on their television sets and listen
to live radio commentary on normal Rafoot radio while watching the games on Timsnart TV.

9. Recognising this commercial opportunity, a number of companies have set themselves up to market Timsnart
TV decoding equipment in the region. These companies are also granted a license by Timsnart TV to supply and
maintain their satellite dishes and decoders. Louf Entertainment SIA (a company set up and based in Etilletas which
carries out the majority of its sales over the Internet) is the biggest of such companies. Louf have put together a
standard package for sale to the public in which they include the decoder, decoder card a satellite dish and an annual
maintenance contract. It is not clear whether or not Timsnart TV itself actively encourages the sale of its decoding
equipment in Rafoot, but there is a widely held suspicion in the industry that Timsnart TV knows full well that certain
particularly large quantities of the decoding equipment ordered by some of its wholesalers (including Louf) are not
destined for the Etilletas market. Nevertheless, Timsnart TV does not impose any geographical conditions or
restrictions on its supplies to any of its wholesalers.

10. RIHL and Heaven are particularly worried about the use of Timsnart TV decoder cards by Rafoot businesses,
who have subscribed to Timsnart packages. These businesses include bar owners who have been publicly screening
RIHL games and fast food shops which screen RIHL games whilst serving their customers.

11. In a quest to put a stop to the large scale use of Timsnart TV decoding equipment in Rafoot, RIHL has raised
the matter with the legal department of the RBA which has advised them that in Rafoot the Broadcasting Regulation
320/2002 (the "Broadcasting Regulation"), drafted by RBA and then enacted by the State under the auspices of the
Broadcasting Act 2000, was intended to implement the terms of Directive 98/84/EC, known as the Conditional Access
Directive (the "CA Directive"). The Regulation sets out the basic scheme of legal protection given to copyright owners
and broadcasters by Rafoot national law, and grants companies such as RIHL remedies against any person or body
unlawfully copying or dealing with their broadcasts within the territory of Rafoot. It adopts all the definitions of the CA
Directive but notably also contains the following provisions:

1. For the purposes of this Broadcasting Regulation:[]


(m) "commercial purpose" shall include all the activities of profit-making commercial entities;[]
10 A person or undertaking who-
(1) charges for the reception of programmes included in a broadcasting service provided from a place in Rafoot or any other EU
member State,(to also include undertakings who contribute encrypted content to be used in any such broadcasting service); or
(2) provides conditional access services from a place in Rafoot or any other EU member State
shall, for the purposes of this Regulation, be deemed to be providing a protected service.
35. A person who -
(1) for commercial purposes manufactures, imports, distributes, sells, rents or possesses, or installs, maintains or replaces,
illicit devices, or
(2) uses commercial communications (including all forms of advertising, direct marketing, sponsorship, sales promotion and
public relations) to promote illicit devices,

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is guilty of an offence.[]
36. A person guilty of an offence under 35 shall be liable on summary conviction to a fine not exceeding 2,000 euros or to
imprisonment for a term not exceeding 12 months, or to both.
37. The provider of protected services whose interests are adversely affected by a person engaging in, or having engaged in,
an infringing activity may bring an action for damages and/or obtain an injunction restraining such person from engaging in the
infringing activity. In an action for damages, the court may award such damages as, having regard to all the circumstances of the
case, it considers just.

12. While accepting that the situation was very complicated, RBA's lawyers advised RIHL that it could immediately
refuse to supply Timsnart TV with the World Feed and terminate its licence. Furthermore, they advised that a claim
should be brought against Louf Entertainment SIA and its Rafoot business customers, under 37 of the Broadcasting
Regulation. Accordingly, RIHL formally terminates the exclusive licence held with Timsnart TV and begins proceedings
in the Rafoot High Court against Timsnart TV and Louf, as well as a selection of Louf's business customers, seeking
both
an injunction to restrain Louf from supplying any decoders equipment to customers resident in Rafoot ; and
punitive damages against Timsnart TV and Louf.

The High Court gives summary judgment in favour of RIHL against all the defendants including granting the requested
injunction against Louf, enabling the local Rafoot police to seize the decoding equipment held by Rafoot business
customers on the basis they were possessed for commercial purposes, contrary to 35 of the Broadcasting Regulation.
The High Court judge also states that, in addition to financial penalties, he is considering the imposition of a prison
sentence against the Directors of Timsnart and Louf and so, in accordance with the Rafoot rules of criminal procedure,
proceedings are adjourned to await the necessary social reports.

13. Timsnart TV and Louf (which has agreed to defend the interests of all of its customers) immediately appeal against
the High Court judgment to the Rafoot Court of Appeal. At this stage the RBA also requests leave to intervene in the
proceedings and upon there being no objection from the parties in the case, it is formally joined as a defendant to the
appeal proceedings. The appellants cite the following as their grounds of appeal:-:-

(1) That the combined actions of RIHL and RBA in, firstly, enacting the Broadcasting Regulation and, secondly,
entering into exclusive licence contracts to supply the "World Feed" are contrary to the principles of free movement of
goods and/or services contained in Articles 28 and 49 TEC. These actions represent unlawful restrictions on these
freedoms and constitute an abuse of rights conferred by national law upon RIHL and RBA which aim to prevent parallel
imports from other Member States. Reliance is placed in this respect on the Musik-Vertrieb Membran and Dansk
Supermarked (cases.

(2) That these actions are not capable of justification under the industrial and commercial property derogation set
out in Article 30 TEC and/or the jurisprudence of the European Court of Justice, since they amount to disguised
restrictions on trade which are both disproportionate and discriminatory.

(3) That the Broadcasting Regulation improperly implements the CA Directive, in that it (a) purports to extend the
terms of the Directive outside its intended ambit of regulating only pirate devices, (b) widens the definition of service
provider to include a body that does not broadcast to the public (here RIHL) and (c) extends the definition of
commercial purposes far beyond the terms of the CA Directive, as a result the regulation should be disapplied by the
Court.

(4) In the event that the Regulation is disapplied by the Court, then the CA Directive will not have been
implemented in Rafoot and as the Directive is not capable of being relied upon directly against the appellants before a
national court, in the absence of such implementation, then it can have no effect in Rafoot.

(5) That even if the CA Directive were capable of direct effect, it would not provide rights to RIHL as a service
provider, nor would it regulate devices such as the TimsnartTV decoding equipment or decoder card, nor the actions of
Louf or its business customers.

(6) That the sanction of imprisonment set out both in the CA Directive and the Broadcasting Regulation is

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disproportionate and excessive.

TimsnartTV and Louf also lodge a complaint with the Rafoot competition authorities, arguing that both RBA and RIHL
are acting contrary to EU competition law. This investigation is continuing but the initial impression is that the Rafoot
competition authorities do not plan to take any action.

14. RBA and RIHL respond that the practice of licensing sports broadcast rights on a territorial basis is both justifiable
and well established. However, the practice of territorial licensing of sports broadcasting rights is seriously threatened
by the activities of those who deal in foreign decoder cards, or use them to watch programmes. RIHL further argues
that if it were not able to sell different broadcast rights packages for different territories, it would have to stop selling
broadcast rights to territories where its games are not very popular and try to recoup the lost revenue by increasing the
price of rights in its core territories. Consumer interests would thus manifestly be harmed: consumers in the core
territories would end up paying more, whilst consumers in minor territories would not be able to watch games
altogether.

In response to the grounds pleaded by the Appellants the Defendants specifically contend:-

(1) That Article 28 is not capable of being relied upon in this case, since it relates solely to measures adopted by
Member States and not to those of private individuals or companies which fall within the areas of competition law and
so should solely be a matter for the competition authorities and not form part of this case.

(2) That performance rights, such as copyright in broadcasts, may be validly licensed and enforced within the EU
on national territorial lines because of the specific subject-matter and essential function of such copyright protection.
Accordingly, even in the event that there was found to be a breach of Article 28 or Article 49 TEC, this would be
capable of justification either:-

a) in accordance with the terms of the CA Directive, which in its preamble makes specific provision for national
provisions protecting intellectual property rights and/ or

b) in accordance with the jurisprudence of the ECJ (particular reliance is placed on the Metronome Musik, Coditel
I and Coditel II cases and upon the industrial and commercial property derogation contained in Article 30 TEC.

(3) That, even in the event that doubts arose as to the legality of the Broadcasting Regulation, the position of
RIHL and RBA would still be protected as they would be able to rely directly upon the provisions of the CA Directive
before a national court.

(4) That, given the extent of harm caused by large-scale abuses of IP rights, it is entirely appropriate and
proportionate for national law to permit a sentence which includes large fines and even imprisonment.

15. In 2006, a new government of Rafoot was elected. The "Law and Justice Party" had, while in opposition,
criticised the competence and standards of the judiciary in Rafoot (particularly in the lower courts) and immediately
implemented a series of reforms aimed at improving standards among newly recruited judges. Following widespread
academic criticism of the quality and comprehensibility of Article 234 preliminary ruling requests made by the judiciary
in the lower courts, the Rafoot government created the "Article 234 Preliminary Rulings Commission" (the 'PRC') in
order to review the manner in which the lower courts drafted Article 234 referrals.

16. The composition and functioning of the PRC are contained in the Preliminary Rulings Act 2007 which was
described by the Rafoot Minister of Justice as being "the only short-term way of ensuring that the lower courts
judiciary no longer bring our country into disrepute by sending Article 234 referrals to the ECJ that are poorly drafted
and fail clearly to highlight the issue of Community law that the national court seeks guidance on."

17. The PRC is composed of representatives from each of the senior courts, plus representatives from the legal
profession, academia and a Parliamentary draftsman.

The relevant sections of the PR Act 2007 state:

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Where a court, other than the Supreme Court of Rafoot, wishes to request a preliminary reference ruling from the
European Court of Justice, pursuant to Article 234 of the EC Treaty, it shall firstly submit a suggested draft of the
questions upon which it seeks guidance to the PRC.
The PRC shall be obliged to assess the draft submitted by the first instance court to ensure that the questions for
referral to the European Court of Justice demonstrate the following criteria:
(a) comprehensible and clear drafting;
(b) logical and apparent structure of the legal issues upon which the first instance court seeks guidance;
(c) knowledge and appreciation of existing European cases and legislation in the relevant legal areas.
In the event that the PRC considers that the submitted draft fails to adequately meet these criteria, the PRC shall be
entitled to re-draft the questions so as to ensure their compatibility with the stated criteria.

The PRC shall, within one month of receiving the original draft, return an approved version of the questions to the first
instance court. The first instance court shall retain absolute discretion as to whether or not to lodge some/all of these
questions for consideration by the European Court of Justice, pursuant to the Article 234 procedure. Nevertheless,
should the first instance court decide to do so, it shall be bound to refer the question in the form as contained in the
PRC's approved version.

22. When the issues are heard before the Court of Appeal, the judges are somewhat confused by all the arguments,
but gratefully accept the contention of the parties' lawyers that it would be appropriate to refer a number of issues to the
Court of Justice of the European Communities pursuant to Article 234 EC. The provisional reference questions are
drafted, but when referred to PRC an amendment is proposed to Question 4 a) in the terms shown marked with a [*] in
the final reference. Although the Appeal judges do not agree with this amendment they do include it while also adding a
question of their own motion concerning the compatibility of these provisions of the PR Act 2007 with Community law.

Question 1: Applicable law


To what extent should the actions undertaken by
a) RIHL against TimsnartTV; and
b) RIHL against Louf
on the aforementioned facts be regulated by:- (1) Article 28 TEC; and/or (2) Article 49 TEC, Directive 89/552 ("the TV
Without Frontiers Directive") and Directive 98/84 ("the Conditional Access Directive) and/or (3) national law?

In the event of any conflicts between these various sources of law, which should prevail?

Question 2: Direct Effect of certain Articles of Directive 98/84 EC (the CA Directive)


Are the provisions of Articles 2, 3, 4 and 5 of the Conditional Access Directive capable of giving rise to directly effective
rights which citizens and/or legal persons established in the Union can invoke before national courts or tribunals?

Question 3: Treaty Articles


1) Should Article 28 TEC be interpreted as precluding any of the following activities as measures having equivalent
effects:-
a) A Member State delegating to a body such as the RBA the sole power to draft broadcasting regulations such
as the Broadcasting Regulation?
b) The imposition of an injunction against a body such as Louf on the basis of such regulations?
c) The power to impose criminal sanctions upon such bodies as TimsnartTV, Louf or their customers?

2) If the answer to Question 1 a) or b) or to Question 3 a), b) or c) indicates that these actions fall within the scope of
Articles 28/49 TEC, would such actions be capable of justification in reliance on Article 30 or Article 129A TEC and/or
the jurisprudence of this court, by virtue of the fact that such actions are intended to protect consumers or industrial and
intellectual property?

Question 4: Interpretational Issues Concerning Directive 98/84 EC (the CA Directive)


a) Where a conditional access device is made by or with the consent of a service provider (here Timsnart) whose
broadcast consists partly of material it receives under the terms of an exclusive license granted by another body (here
RIHL) does that device become an 'illicit device' within the meaning of Article 2(e) of Directive 98/84 if it is used to give
access to that protected service in a place or in a manner or by a person outside that territory (here in another Member

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State),[* or is the term 'illicit device' intended to refer solely to so called pirate devices which are per se unlawful (words
added by PRC)]? Whose broadcast consists partly of material it receives under the terms of an exclusive license
granted by another (here RIHL)

b) If the answer to question 4a) is in the affirmative does it include within the definition of a service provider a
body (RIHL in this case) which broadcasts that content onwards to the public indirectly through the broadcast of
another service provider (here Timsnart) either because both of these undertakings are providing a 'protected service
of television broadcasting' or that it is the provision of conditional access to such [services and so] considered as a
service in its own right' within the meaning of Article 2(a) of Directive 98/84?

c) Does 'possession for commercial purposes' in Article 4(a) of the Directive relate only to possession for the
purposes of commercial dealings in (for example, sales of) illicit devices, or does it also extend to the possession of a
device by an end user in the course of a business of any kind?

Question 5: Sanctions
5. Is a national provision which allows for criminal sanctions such as those contained in 36 of Broadcasting
Regulation N 320/2002 compatible with the enforcement measures allowed under Article 5(1) of Directive 98/84 in
being "effective, dissuasive and proportionate to the potential impact of the infringing activity"?

Question 6: Preliminary Rulings Procedure


Are the provisions of the Preliminary Rulings Requests Act 2007, in making a reference for a preliminary ruling to the
ECJ subject to the condition that the form of the referred questions must firstly be approved by the PRC, compatible
with Community law?

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COMPETITION RULES 2009

1. Competition

This is the fifteenth year of this annual competition, this year to be held in Kiev (Kyiv), Ukraine.
This competition was originally designed to assist countries from the region which were associated with or trading with
the European Union, to better understand its law and structure. In recognition of the enlargements in 2004 and 2007
the competition has widened its eligibility requirements. It will continue to include those countries who have joined the
EU in 2004 and 2007 as well as those that remain associated in the region of Central and Eastern Europe, but will be
extended to allow interested teams from Malta, Cyprus and Turkey to compete.
.
IMPORTANT: To be eligible to participate written registration and acknowledgement is required by e-mail to the British
Centre on or before the 1st March 2009 and written pleadings are to be submitted by e-mail attachment on or before
the 1st April 2009 (address and contact details at end)

A moot is an argument (and not a debate) between students acting as advocates representing different parties in a
legal action (a case). The facts and history together with supporting material and authorities are given in advance to the
students. The aim is to reproduce, as closely as possible, the discussion and argument of a genuine hearing in the
European Court of Justice. The case is based upon an area of European Community Law and has been prepared by a
writing committee of the organisers and external experts.

The organisers are aware that access of the competing teams to European Community law materials will vary greatly.
Therefore a full bundle of supporting materials and authorities is included and encompasses all the authorities which
teams are permitted to refer to in this case, to ensure that no unfair advantage is gained from those with less facilities.

2. Language
This official language of this competition shall be English

3. Participation
The competition is open to all students, nationals of Central and East European states including southern states who
have applied for entry or have just entered the EU (specifically Turkey, Cyprus and Malta) , who are enrolled on a
course at a participating University and are:
not older than 30 years
not practising as a lawyer and
have not previously participated in the competition.

Any university (with participants who are nationals from the regions mentioned) may enter no more than one team of 3
to 4 members who may be accompanied by one academic/coach. In case of doubt, please e-mail the organizers
directly at the address below.

4. The Case
This will be a problem based upon an area of European Community substantive and/or procedural law, containing a
referral to the European Court of Justice from a Member State national court under Article 234 TEC. Both written and
oral pleadings on the part of applicant and respondent will be required from each competing team.

5. Scoring
The competition will be held over three rounds.

First Round
In this round all teams will be invited to argue both the sides of the case. This will require members from the team to
represent the appellant's case against another team arguing on behalf of the respondent and then represent the
respondent's case against a different team arguing on behalf of the appellant. It is required that all members of the

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team speak as either respondent or applicant but it is not required that all members speak both as respondent and
applicant during the first round. During this part of the competition, the courts will hear arguments on questions 1-3 of
the referred under Article 234 by the fictitious EC Member State for a ruling by the ECJ. Scores will be allocated at the
conclusion of this round on the basis of both the written and oral pleadings.

The following scoring criteria will be applied throughout by the judges:-

Criteria Maximum Points Awarded


Form and content of written pleadings (only in first round) 20
Style and quality of presentation in oral arguments 30
Effective and accurate use of provided materials 30
Team-work 10
Effectiveness of reply/rejoinder 20
Ability to respond effectively to judges' questions. 10

Second Round (Semi-Finals)


In this round, the best teams from the first round will again be invited to plead both sides of the case against other
teams. This round will focus on the remaining questions referred by the fictitious EC Member State national court for
ruling by the ECJ (an additional question may be added from the earlier set in the judges' discretion to be advised at
the announcement of the semi final teams). Marks will be awarded for the same criteria as apply to the first round, with
the exception that marks from written pleadings are no longer counted. During this round, it is necessary for all
members of the team to speak both as applicant and respondent in the semi-finals.

Third Round (Final)


In the third round (final) each team will represent one side of the case (to be chosen by lot) and the judges will indicate
which questions they wish to hear. Each member of the team is expected to speak in the final and so the team must be
prepared to re-allocate those questions covered to ensure that each team member speaks. It is of course permissible
for one member of the team to do the reply or rejoinder at this stage. The time allowed for the main argument of each
party will be a maximum of 45 minutes and will not be extendable. Teams are expected at this stage to have the
experience to ensure that their main arguments are fitted into the time allowed.

Three judges will sit in the first and second round. A plenary court will be convened for the final.

The decision of the judges will be conclusive in selecting the semi-finalists, finalists and eventual winning team and best
speaker. A special prize of a short stage in the ECJ at Luxembourg will be awarded to the individual deemed to be the
best speaker from the semi-finalists or finalists.

Written and oral pleadings


The competition will consist of a written and oral part;

Written pleadings
ALL participating teams must prepare written pleadings for both applicant and defendant. This should be an outline of
your case for both applicant and defendant, not exceeding 10 typed sides of argument on A4 paper each for the
applicant and respondent respectively (no specific requirements for font or spacing are prescribed and an attached list
of authorities is not included in the 10 pages allowance). You should set out your argument in numbered paragraphs,
which should be supported and cross-referenced to a separate list of the authorities on which you intend to rely.

One copy of each of your written pleadings for the respondent and applicant must be received on or before the 1st April
2009 by e-mail attachment sent to d.ashmore@uw.edu.pl and due receipt of this will be confirmed when the mail has
been acknowledge by the organizers. No printed copies of the pleadings will be required. The pleadings should be
accompanied by a completed copy of the team registration form.
ONLY teams lodging these pleadings in due time will be invited to participate in the oral rounds of the competition.
In the event that more than one team sends written pleadings from one university, the team to participate will be that
submitting the best written pleadings.

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Central and Eastern European Moot Court Competition Kyiv 2009

A prize for the best written pleadings will be awarded (which is presented by our main sponsors Clifford Chance).

Oral Argument
This argument need not be limited to the scope of the participant's written pleadings, but strict time limitations are to be
maintained. Teams will be advised of the schedule of courts at registration on arrival in Kyiv.

The main argument of each party shall be presented within 20 minutes (in the final this will be 45 minutes)

The applicant then has 5 minutes to reply, but is limited in this reply to the matters raised in the defendant's oral
pleadings.

The defendant then has 5 minutes to reply in rejoinder and is also limited to matters raised in the applicant's reply.

Permission must be sought of the President of the Court, if any time limit is to be exceeded. Only a further 5 minutes
can be allowed at his/ her discretion.

6. Roles
Each team may have up to four members. Teams should be in a position to argue both sides and can divide in which
manner they wish to achieve that either as a full group or by dividing their teams, however the judges will expect to
have heard from each member of the team individually at least once during the first round of the competition.

This will change in the second and third rounds of the competition where the judges will expect to hear from each
member of the team during their presentation for both applicant and respondent.

7. Fees
Each participating team is responsible for their return travel and any administrative or visa charges to Kyiv (at the
present time it is not believed that any team will need a visa to enter Ukraine for the competition but teams should
check this directly with their Ukrainian embassy representative in their country) and any additional costs incurred due to
earlier arrival or later departures. In addition a registration fee is payable for participation in the oral rounds in Kyiv. This
fee will allow the participation of a one team to include their accommodation and basic subsistence costs during the
competition dates (a team will include 3/4 team members and one accompanying coach).This fee may be paid by bank
transfer in which case it must be received by the organizers and confirmation of payment sent by e-mail no later than
the 15th April 2009 (the original copy of the payment confirmation is to be produced at registration). The fee may also be
paid by cash payment on the 1st May at the registration of the team in Kyiv. The participation fee for this year is 6,250
hrivna (presently this will amount to five hundred pounds sterling), the final currency exchange rate will be confirmed on
1st March 2009.

PLEASE NOTE THAT ALL FEES DUE OR EXTRA MONIES PAYABLE MUST BE RECEIVED NO LATER THAN
CLOSURE OF REGISTRATION ON 1st May 2009.

8. Bank Details
Account name: Juris Angliae Scientia
Bank name and address: Bank Handlowe w Warszawie S.A., Citibank,
VII Oddzial w Warszawie, Ul Chalubinskiego 8,
00-950 Warsawa (Skr poczt 129)
CITIPLPX
Account number: PL 38103016540000000031691000 (GBP sterling currency)

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MOOTING TIPS FOR TEAMS

Mooting is an acquired skill which improves with practice and you should expect your performance to improve
throughout the competition. Nevertheless, for those with little or no mooting practice, there are still a number of helpful
tips which may be adopted to ensure that your first attempt is consistent with the behaviour the judges will expect from
the advocates before them.

1. Opening speeches

The advocate opening the case on behalf of the appellant should, as a matter of courtesy, introduce himself/herself, his
fellow team-mates ("My Learned Friends...") and the advocates for the respondent to the court. Check that you know
the full names of the other team before the case begins.

The first advocate to speak should also ask the court if they require the facts of the case to be read out. If the court
asks you to read out the facts, it is best to have prepared a brief summary of your own rather than simply reading the
facts as they are contained in the bundle. You cannot change or depart from the facts in the bundle, although you are
free to interpret them in the manner most favourable to your side.

2. Main arguments

Your main speech should begin by telling the judge which points of law you will be arguing and how the case will be
divided between yourself and your team-mates. You cannot hope to convince the court of your answer unless they
know which point you are addressing and what your main arguments will be before you begin discussing them in detail.

Your submissions should be logically structured and presented confidently and clearly. Although time is limited, it is
better to take your arguments slowly to ensure the court understands them, rather than rushing them and having too
deal with the resulting questions which the court asks to clarify your position. You should try to avoid reading a
prepared speech, since the court will almost inevitably ask you questions which draw you away from your text and it will
then be very difficult to rejoin your speech after such questioning. It is a better compromise to use 'prompt-cards' which
you refer to occasionally to remind you of all the points you wished to make.

You should ensure, wherever possible, that you use legal authority to back-up your arguments. Be prepared to fully cite
the details of the case (name, year etc.) and to provide the court with a brief rsum of the facts if the judges so
request. Where such authority is not available, you should indicate why, for policy reasons, your proposed solution is to
be preferred to alternative solutions. Remember that the only authorities that are to be cited before the court are those
contained in this bundle: all others will be ignored by the judges.

You should conclude your submissions by reiterating the main points and asking the court whether you may be of any
further assistance. If not, you may sit down and pass over to your team-mate or to the advocates for the opposition.

3. Questions

As mentioned earlier, you can expect to face questions from the judges. Listen carefully and make sure you have
properly understood the question before attempting to give an answer: it is far better to ask for clarification than to begin
providing information on a question which the court has not actually raised.

The advocate to whom the question is addressed should attempt to answer the questions but may, if necessary,
consult with other members of the team before responding. A second member of the team may seek permission to
address the court in response to its question to conclude the answer thereafter.

Watch for 'leads' from the questions asked by the court: they can sometimes help you to assess the courts willingness
to accept your proposals and allow you to amend your arguments accordingly or use questions asked of your
opponents to criticise their submissions.

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4. Reply/Rejoinder

The secret of success of a good advocate is to be able to respond to the issues raised by your opponents, not simply to
repeat the pre-prepared arguments in favour of your client whilst ignoring other issues or arguments raised by the
opposition. Although it is only the respondents who have the opportunity to address many of these issues in their main
speech, both teams have the 5 minute reply/rejoinder to comment on the arguments of the opposition. You should not
avoid issues raised by the opposition, since this gives the court the impression that you are unable to deal with them
and this will clearly weaken the strength of your case.

Your reply/rejoinder should aim to avoid simply repeating arguments that you have put before the court and should
instead be used as an opportunity to clarify any points of confusion which may have been left after your main speech
and the questions posed to you by the court. You should also use the reply/rejoinder to highlight problems with the
submissions made by the opposition.

5. Addressing the Court

When addressing a judge the following courtesies should be observed. You must investigate the title of the judge and
qualification. If a Lord, he must be formally addressed as "My Lord" or "Sir". A more general term is "Your Excellency".
If addressing a judge other than a Lord, you may use the general term "Your Honour".

Be polite to the judges. Listen carefully to their questions and try to ensure you follow their statements. Answer the
questions they put and not those you wish they had asked or those to which you know the answer. Never argue with
the judge and never talk whilst the judge is speaking, if you want to win your case. The same point could always be put
politely and just as effectively. (e.g. "With respect Your Honour...")

Always address your arguments to the court rather than to the opposition: this is a moot not a debate. Also remember
that, as the advocate, it is your role to answer questions posed by the judges, not to ask questions to the judges or the
opponents.

Always try to stick to time-limits and do not automatically assume that the court will give you additional time to complete
your submissions. Be prepared to adapt them and summarise some issues if you appear to be running out of time.

6. Organisation and Preparation

Although much of the skill in mooting lies in responding 'on your feet' to judges questions or the arguments of your
opponents, even the best advocates do not rely solely on their quick-wits and instincts to deal with such problems. The
presentation of the case in court is the culmination of many hours of careful preparation, rehearsal of the arguments to
be made, study of the legal authority and policy arguments behind your submissions and anticipation of the arguments
of your opponents. The more time you spend in organising and preparing your case the easier it will be to act 'on your
feet' and yet it will look more impressive.

7. Conclusion

Although, this is a competition, we also want you to have fun. Preparing for a moot takes a lot of time and effort and you
should try your best to enjoy the opportunity to show the judges how much law you have managed to learn during this
preparation. Also, the more relaxed you are, the likelier it is that you will be able to provide a confident presentation
style to the judges.

Good luck to all and we look forward to welcoming you in Kyiv!

ORGANISING COMMITTEE
Denise Ashmore and Steve Terrett

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CONTACT NUMBERS AND POSTAL ADDRESS FOR PLEADINGS.

Tel/Fax until April 2009: +48-22-831-8634

Tel during competition: +44-788-522-3999

E-mail: da208@cam.ac.uk or d.ashmore@uw.edu.pl

Postal Address: British Centre for English and European Legal Studies (Moot competition)
ul Rajcw 2, apt 1
00-220 Warszawa
Poland.

KYIV CONTACTS

Yuri Kushnir: (yuri.kushnir@kypartners.com )

Tanya Georgievskaya (tanyagn@gmail.com)

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PRELIMINARY INFORMATION ON THE ECJ

The following is a short introductory guide to the role of the ECJ within the European Communities system and its
relationship with the national courts of the Member States.

The ECJ's function is to rule upon the interpretation and application of the Treaties and on the interpretation,
application and validity of secondary EC law. It is the supreme court on such issues, with no appeal to any
higher judicial body.

Cases may be brought directly before the ECJ on behalf of an EC institution (i.e. Commission, Council,
European Parliament), by a Member State or by a national of a Member State.

The Commission's power to bring actions against a Member State it suspects to be in breach of Community
law stems from Article 226. The power of one Member State to bring an action against another Member State
comes from Article 227 but such cases are rare. Institutions or Member States may also challenge secondary
legislation adopted by institutions of the TEC on the basis that it exceeds the competences granted under the
treaties or fails to comply with procedural requirements thereof.

Where an individual wishes the ECJ to rule upon a certain issue of European law, it is most common for such
a case to begin in that person's national courts and for the national court to make an Article 234 reference to
the ECJ asking for guidance on the interpretation, application or validity of an EC measure.

The ECJ is assisted by Advocate-Generals, who produce reasoned opinions on a case before the ECJ rules
on it. These opinions will discuss the applicable law and will recommend how the court should decide the
case. Often these opinions are more detailed than the eventual judgment of the court. They are not binding on
the ECJ but they are very influential and are often followed in practice.

The ECJ is not bound by its own jurisprudence (case-law) and may depart from an earlier decision if it wishes.
Although any court attempts to follow its earlier jurisprudence wherever possible, the ECJ has already been
seen to have reversed its own jurisprudence on a number of occasions.

National courts are bound to follow the ECJ's rulings on Community law but it is for the national court to apply
that Community law to the facts of the case in front of it.

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PROVISIONAL COMPETITION TIMETABLE*


[*NB. A final version of the timetable will be provided at the competition itself]

FRIDAY 1st May 2009


16.00-19.00 Registration of teams
19.00 Welcome Reception and Opening Ceremony

SATURDAY 2nd May 2009


9.00 Opening words by Organising Committee and Judges

Round 1 of Competition
9.30 - 11.00 Group 1
11.15 - 12.45 Group 2

13.00 - 14.30 LUNCH

14.30-16.00 Group 3
16.00-17.30 Group 4

20.00 DINNER
(Announcement of semi-finalists)

SUNDAY 3rd May 2009


Round 2 of Competition

9.00 - 11.00 First semi-finals


11.15-13.15 Second semi-finals

13.30 LUNCH BREAK


(Announcement of finalists)

Round 3 of Competition
15.00 FINAL

20.00 Celebration dinner


23.00 Party

MONDAY 4th May 2009


Departure of teams and time for sightseeing.

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ACKNOWLEDGMENTS

The Organising Committee wish to thank the following for their invaluable help:

- Catherine Barnard, Trinity College, Cambridge

- Carsten Zatschler, ECJ (referendaire)

- The University of Cambridge, Lord Slynn of Hadley and the Court of Justice of the European Community (in particular
Eleanor Sharpston A.G) for their continuing support of the Moot Court Competition

The Organisers would particularly like to thank Professors Steiner, Weatherill and Barnard for agreeing to the
reproduction of extracts from their textbooks to assist the students preparing for the competition.

The Organising Committee would also like to offer special thanks to the Central and East European branches of Clifford
Chance, the main financial sponsors of the moot court competition.

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EXTRACTED ARTICLES FROM THE TREATY OF EUROPEAN COMMUNITY AS AMENDED

Article 2
The Community shall have as its task, by establishing a common market and an economic and monetary union and by
implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the Community a
harmonious, balanced and sustainable development of economic activities, a high level of employment and of social
protection, equality between men and women, sustainable and non-inflationary growth, a high degree of
competitiveness and convergence of economic performance, a high level of protection and improvement of the quality
of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and
solidarity among Member States.

Article 10
Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations
arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the
achievement of the Community's tasks. They shall abstain from any measure which could jeopardise the attainment of
the objectives of this Treaty.

Article 14
1. The Community shall adopt measures with the aim of progressively establishing the internal market over a period
expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 15, 26, 47(2), 49, 80, 93
and 95 and without prejudice to the other provisions of this Treaty.
2. 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 this Treaty.
3. The Council, acting by a qualified majority on a proposal from the Commission, shall determine the guidelines and
conditions necessary to ensure balanced progress in all the sectors concerned.

Article 28
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member
States.

Article 30
The provisions of Articles 28 and 29 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.

Article 49
Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community
shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than
that of the person for whom the services are intended. The Council may, acting by a qualified majority on a proposal
from the Commission, extend the provisions of the Chapter to nationals of a third country who provide services and who
are established within the Community.

Article 50
Services shall be considered to be "services" within the meaning of this Treaty where they are normally provided for
remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital
and persons. "Services" shall in particular include:
(a) activities of an industrial character;
(b) activities of a commercial character;
(c) activities of craftsmen;
(d) activities of the professions.
Without prejudice to the provisions of the chapter relating to the right of establishment, the person providing a service
may, in order to do so, temporarily pursue his activity in the State where the service is provided, under the same
conditions as are imposed by that State on its own nationals.

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Article 55
The provisions of Articles 45 to 48 shall apply to the matters covered by this chapter.

Article 95
1. By way of derogation from Article 94 and save where otherwise provided in this Treaty, the following provisions
shall apply for the achievement of the objectives set out in Article 14. The Council shall, acting in accordance with the
procedure referred to in Article 251 and after consulting the Economic and Social Committee, adopt the measures for
the approximation of the provisions laid down by law, regulation or administrative action in Member States which have
as their object the establishment and functioning of the internal market.
2. Paragraph 1 shall not apply to fiscal provisions, to those relating to the free movement of persons nor to those
relating to the rights and interests of employed persons.
3. The Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and
consumer protection, will take as a base a high level of protection, taking account in particular of any new development
based on scientific facts. Within their respective powers, the European Parliament and the Council will also seek to
achieve this objective.
4. If, after the adoption by the Council or by the Commission of a harmonisation measure, a Member State deems it
necessary to maintain national provisions on grounds of major needs referred to in Article 30, or relating to the
protection of the environment or the working environment, it shall notify the Commission of these provisions as well as
the grounds for maintaining them.
5. Moreover, without prejudice to paragraph 4, if, after the adoption by the Council or by the Commission of a
harmonisation measure, a Member State deems it necessary to introduce national provisions based on new scientific
evidence relating to the protection of the environment or the working environment on grounds of a problem specific to
that Member State arising after the adoption of the harmonisation measure, it shall notify the Commission of the
envisaged provisions as well as the grounds for introducing them.
6. The Commission shall, within six months of the notifications as referred to in paragraphs 4 and 5, approve or reject
the national provisions involved after having verified whether or not they are a means of arbitrary discrimination or a
disguised restriction on trade between Member States and whether or not they shall constitute an obstacle to the
functioning of the internal market. In the absence of a decision by the Commission within this period the national
provisions referred to in paragraphs 4 and 5 shall be deemed to have been approved. When justified by the complexity
of the matter and in the absence of danger for human health, the Commission may notify the Member State concerned
that the period referred to in this paragraph may be extended for a further period of up to six months.
7. When, pursuant to paragraph 6, a Member State is authorised to maintain or introduce national provisions
derogating from a harmonisation measure, the Commission shall immediately examine whether to propose an
adaptation to that measure.
8. When a Member State raises a specific problem on public health in a field which has been the subject of prior
harmonisation measures, it shall bring it to the attention of the Commission which shall immediately examine whether to
propose appropriate measures to the Council.
9. By way of derogation from the procedure laid down in Articles 226 and 227, the Commission and any Member State
may bring the matter directly before the Court of Justice if it considers that another Member State is making improper
use of the powers provided for in this Article.
10. The harmonisation measures referred to above shall, in appropriate cases, include a safeguard clause authorising
the Member States to take, for one or more of the non-economic reasons referred to in Article 30, provisional measures
subject to a Community control procedure.

CULTURE
Article 151
1. The Community shall contribute to the flowering of the cultures of the Member States, while respecting their
national and regional diversity and at the same time bringing the common cultural heritage to the fore.
2. Action by the Community shall be aimed at encouraging cooperation between Member States and, if necessary,
supporting and supplementing their action in the following areas:
- improvement of the knowledge and dissemination of the culture and history of the European peoples,
- conservation and safeguarding of cultural heritage of European significance,
- non-commercial cultural exchanges,
- artistic and literary creation, including in the audiovisual sector.

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3. The Community and the Member States shall foster cooperation with third countries and the competent
international organisations in the sphere of culture, in particular the Council of Europe.
4. The Community shall take cultural aspects into account in its action under other provisions of this Treaty, in
particular in order to respect and to promote the diversity of its cultures.
5. In order to contribute to the achievement of the objectives referred to in this Article, the Council:
- acting in accordance with the procedure referred to in Article 251 and after consulting the Committee
of the Regions, shall adopt incentive measures, excluding any harmonisation of the laws and regulations of the Member
States. The Council shall act unanimously throughout the procedure referred to in Article 251,
- acting unanimously on a proposal from the Commission, shall adopt recommendations.

CONSUMER PROTECTION
Article 153
1. In order to promote the interests of consumers and to ensure a high level of consumer protection, the Community
shall contribute to protecting the health, safety and economic interests of consumers, as well as to promoting their right
to information, education and to organise themselves in order to safeguard their interests.
2. Consumer protection requirements shall be taken into account in defining and implementing other Community
policies and activities.
3. The Community shall contribute to the attainment of the objectives referred to in paragraph 1 through:
(a) measures adopted pursuant to Article 95 in the context of the completion of the internal market;
(b) measures which support, supplement and monitor the policy pursued by the Member States.
4. The Council, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic
and Social Committee, shall adopt the measures referred to in paragraph 3(b).
5. Measures adopted pursuant to paragraph 4 shall not prevent any Member State from maintaining or introducing
more stringent protective measures. Such measures must be compatible with this Treaty. The Commission shall be
notified of them.

INDUSTRY
Article 157
1. The Community and the Member States shall ensure that the conditions necessary for the competitiveness of the
Community's industry exist.
For that purpose, in accordance with a system of open and competitive markets, their action shall be aimed at:
- speeding up the adjustment of industry to structural changes,
- encouraging an environment favourable to initiative and to the development of undertakings
throughout the Community, particularly small and medium-sized undertakings,
- encouraging an environment favourable to cooperation between undertakings,
- fostering better exploitation of the industrial potential of policies of innovation, research and
technological development.
2. The Member States shall consult each other in liaison with the Commission and, where necessary, shall coordinate
their action. The Commission may take any useful initiative to promote such coordination.
3. The Community shall contribute to the achievement of the objectives set out in paragraph 1 through the policies and
activities it pursues under other provisions of this Treaty. The Council, acting in accordance with the procedure referred
to in Article 251 and after consulting the Economic and Social Committee, may decide on specific measures in support
of action taken in the Member States to achieve the objectives set out in paragraph 1.
This title shall not provide a basis for the introduction by the Community of any measure which could lead to a distortion
of competition or contains tax provisions or provisions relating to the rights and interests of employed persons.

Article 234
The Court of Justice shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of this Treaty;
(b) the validity and interpretation of acts of the institutions of the Community and of the ECB;
(c) the interpretation of the statutes of bodies established by an act of the Council, where those statutes
so provide.
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it
considers that a decision on the question is necessary to enable it to give judgment, request the Court of Justice to give

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a ruling thereon.
Where any such question is raised in a case pending before a court or tribunal of a Member State against whose
decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court of
Justice.

PART SIX: GENERAL AND FINAL PROVISIONS

Article 295
This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership.

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EXTRACTS FROM THE EU CHARTER OF HUMAN RIGHTS

Art 10. Freedom of Expression

1. Everyone has the right to freedom of expression. this right shall include freedom to hold opinions and to receive and
impart information and ideas without interference by public authority and regardless of frontiers. This article shall not
prevent States from requiring the licensing of broadcasting, television or cinema enterprises.

2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities,
conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests
of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of
health or morals, for the protection of the reputation or the rights of others, for preventing the disclosure of information
received in confidence, or for maintaining the authority and impartiality of the judiciary.

Art 49. Principles of legality and proportionality of criminal offences and penalties

Definition
1. No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a
criminal offence under national law or international law at the time when it was committed. Nor shall a heavier penalty
be imposed than that which was applicable at the time the criminal offence was committed. If, subsequent to the
commission of a criminal offence, the law provides for a lighter penalty, that penalty shall be applicable.
2. This Article shall not prejudice the trial and punishment of any person for any act or omission which, at the time when
it was committed, was criminal according to the general principles recognised by the community of nations.
3. The severity of penalties must not be disproportionate to the criminal offence

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Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid
down by Law, Regulation or Administrative Action in Member States concerning the pursuit of
television broadcasting activities (Extracts)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community, and in particular Articles 57
(2) and 66 thereof,
Whereas the objectives of the Community as laid down in the Treaty include establishing an even closer
union among the peoples of Europe, fostering closer relations between the States belonging to the
Community, ensuring the economic and social progress of its countries by common action to eliminate the
barriers which divide Europe, encouraging the constant improvement of the living conditions of its peoples
as well as ensuring the preservation and strengthening of peace and liberty;
Whereas broadcasts transmitted across frontiers by means of various technologies are one of the ways of
pursuing the objectives of the Community; whereas measures should be adopted to permit and ensure the
transition from national markets to a common programme production and distribution market and to
establish conditions of fair competition without prejudice to the public interest role to be discharged by the
television broadcasting services;
Whereas the Treaty provides for the issuing of directives for the coordination of provisions to facilitate the
taking up of activities as self-employed persons;
Whereas television broadcasting constitutes, in normal circumstances, a service within the meaning of the
Treaty;
Whereas the Treaty provides for free movement of all services normally provided against payment, without
exclusion on grounds of their cultural or other content and without restriction of nationals of Member States
established in a Community country other than that of the person for whom the services are intended;
Whereas this right as applied to the broadcasting and distribution of television services is also a specific
manifestation in Community law of a more general principle, namely the freedom of expression as
enshrined in Article 10 (1) of the Convention for the Protection of Human Rights and Fundamental
Freedoms ratified by all Member States; whereas for this reason the issuing of directives on the
broadcasting and distribution of television programmes must ensure their free movement in the light of the
said Article and subject only to the limits set by paragraph 2 of that Article and by Article 56 (1) of the
Treaty;
Whereas the laws, regulations and administrative measures in Member States concerning the pursuit of
activities as television broadcasters and cable operators contain disparities, some of which may impede the
free movement of broadcasts within the Community and may distort competition within the common
market;
Whereas all such restrictions on freedom to provide broadcasting services within the Community must be
abolished under the Treaty;
Whereas such abolition must go hand in hand with coordination of the applicable laws; whereas this
coordination must be aimed at facilitating the pursuit of the professional activities concerned and, more
generally, the free movement of information and ideas within the Community;
Whereas it is consequently necessary and sufficient that all broadcasts comply with the law of Member
State from which they emanate;
Whereas this Directive lays down the minimum rules needed to guarantee freedom of transmission in
broadcasting; whereas, therefore, it does not affect the responsibility of the Member States and their
authorities with regard to the organization - including the systems of licensing, administrative authorization
or taxation - financing and the content of programmes; whereas the independence of cultural
developments in the Member States and the preservation of cultural diversity in the Community therefore
remain unaffected;
Whereas it is necessary, in the common market, that all broadcasts emanating from and intended for
reception within the Community and in particular those intended for reception in another Member State,
should respect the law of the originating Member State applicable to broadcasts intended for reception by

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the public in that Member State and the provisions of this Directive;
Whereas the requirement that the originating Member State should verify that broadcasts comply with
national law as coordinated by this Directive is sufficient under Community law to ensure free movement of
broadcasts without secondary control on the same grounds in the receiving Member States; whereas,
however, the receiving Member State may, exceptionally and under specific conditions provisionally
suspend the retransmission of televised broadcasts;
Whereas it is essential for the Member States to ensure the prevention of any acts which may prove
detrimental to freedom of movement and trade in television programmes or which may promote the
creation of dominant positions which would lead to restrictions on pluralism and freedom of televised
information and of the information sector as a whole;
Whereas this Directive, being confined specifically to television broadcasting rules, is without prejudice to
existing or future Community acts of harmonization, in particular to satisfy mandatory requirements
concerning the protection of consumers and the fairness of commercial transactions and competition;
Whereas in order to allow for an active policy in favour of a specific language, Member States remain free
to lay down more detailed or stricter rules in particular on the basis of language criteria, as long as these
rules are in conformity with Community law, and in particular are not applicable to the retransmission of
broadcasts originating in other Member States;
HAS ADOPTED THIS DIRECTIVE:
CHAPTER I: Definitions
Article 1:
For the purpose of this Directive:
(a) 'television broadcasting' means the initial transmission by wire or over the air, including that by satellite,
in unencoded or encoded form, of television programmes intended for reception by the public. It includes
the communication of programmes between undertakings with a view to their being relayed to the public.
It does not include communication services providing items of information or other messages on individual
demand such as telecopying, electronic data banks and other similar services;
(b) 'television advertising' means any form of announcement broadcast in return for payment or for similar
consideration by a public or private undertaking in connection with a trade, business, craft or profession in
order to promote the supply of goods or services, including immovable property, or rights and obligations,
in return for payment.
Except for the purposes of Article 18, this does not include direct offers to the public for the sale, purchase
or rental of products or for the provision of services in return for payment;
(c) 'surreptitious advertising' means the representation in words or pictures of goods, services, the name,
the trade mark or the activities of a producer of goods or a provider of services in programmes when such
representation is intended by the broadcaster to serve advertising and might mislead the public as to its
nature. Such representation is considered to be intentional in particular if it is done in return for payment or
for similar consideration;
(d) 'sponsorship' means any contribution made by a public or private undertaking not engaged in television
broadcasting activities or in the production of audio-visual works, to the financing of television programmes
with a view to promoting its name, its trade mark, its image, its activities or its products.

THIS DIRECTIVE WAS AMENDED BY:


Directive 97/36/EC of the European Parliament and of the Council of 30 June 1997 amending
Council Directive 89/552/EEC on the coordination of certain provisions laid down by law,
regulation or administrative action in Member States concerning the pursuit of television
broadcasting activities

The relevant extracts from this Directive are set out below:-

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....
(10) Whereas the application of Directive 89/552/EEC has revealed the need to clarify the concept of
jurisdiction as applied specifically to the audiovisual sector; whereas, in view of the case law of the Court of
Justice of the European Communities, the establishment criterion should be made the principal criterion
determining the jurisdiction of a particular Member State;
(11) Whereas the concept of establishment, according to the criteria laid down by the Court of Justice in its
judgment of 25 July 1991 in the Factortame case (5), involves the actual pursuit of an economic activity
through a fixed establishment for an indefinite period;
(12) Whereas the establishment of a television broadcasting organization may be determined by a series of
practical criteria such as the location of the head office of the provider of services, the place where
decisions on programming policy are usually taken, the place where the programme to be broadcast to the
public is finally mixed and processed, and the place where a significant proportion of the workforce
required for the pursuit of the television broadcasting activity is located;
(13) Whereas the fixing of a series of practical criteria is designed to determine by an exhaustive procedure
that one Member State and one only has jurisdiction over a broadcaster in connection with the provision of
the services which this Directive addresses; nevertheless, taking into account the case law of the Court of
Justice and so as to avoid cases where there is a vacuum of jurisdiction it is appropriate to refer to the
criterion of establishment within the meaning of Articles 52 and following of the Treaty establishing the
European Community as the final criterion determining the jurisdiction of a Member State;
(14) Whereas the Court of Justice has constantly held (6) that a Member State retains the right to take
measures against a television broadcasting organization that is established in another Member State but
directs all or most of its activity to the territory of the first Member State if the choice of establishment was
made with a view to evading the legislation that would have applied to the organization had it been
established on the territory of the first Member State;
........................
HAVE ADOPTED THIS DIRECTIVE:
Article 1
Directive 89/552/EEC is hereby amended as follows:
1. in Article 1:
(a) the following new point (b) shall be inserted:
'(b) "broadcaster" means the natural or legal person who has editorial responsibility for the composition of
schedules of television programmes within the meaning of (a) and who transmits them or has them
transmitted by third parties;`
(b) the former point (b) shall become point (c) and shall read as follows:
'(c) "television advertising" means any form of announcement broadcast whether in return for payment or
for similar consideration or broadcast for self-promotional purposes by a public or private undertaking in
connection with a trade, business, craft or profession in order to promote the supply of goods or services,
including immovable property, rights and obligations, in return for payment;`
(c) the former points (c) and (d) shall become points (d) and (e);
(d) the following point shall be added:
'(f) "teleshopping" means direct offers broadcast to the public with a view to the supply of goods or
services, including immovable property, rights and obligations, in return for payment.`;

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DIRECTIVE 98/84/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 November


1998 on the legal protection of services based on, or consisting of, conditional access (The
Conditional Access Directive)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,


Having regard to the Treaty establishing the European Community, and in particular Articles 57(2), 66 and
100a thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the Economic and Social Committee (2),
Acting in accordance with the procedure laid down in Article 189b of the Treaty (3),
(1) Whereas the objectives of the Community as laid down in the Treaty include creating an ever closer
union among the peoples of Europe and ensuring economic and social progress, by eliminating the barriers
which divide them;
(2) Whereas the cross-border provision of broadcasting and information society services may contribute,
from the individual point of view, to the full effectiveness of freedom of expression as a fundamental right
and, from the collective point of view, to the achievement of the objectives laid down in the Treaty;
(3) Whereas the Treaty provides for the free movement of all services which are normally provided for
remuneration; whereas this right, as applied to broadcasting and information society services, is also a
specific manifestation in Community law of a more general principle, namely freedom of expression as
enshrined in Article 10 of the European Convention for the Protection of Human Rights and Fundamental
Freedoms; whereas that Article explicitly recognizes the right of citizens to receive and impart information
regardless of frontiers and whereas any restriction of that right must be based on due consideration of
other legitimate interests deserving of legal protection;
(4) Whereas the Commission undertook a wide-ranging consultation based on the Green Paper 'Legal
Protection of Encrypted Services in the Internal Market`; whereas the results of that consultation confirmed
the need for a Community legal instrument ensuring the legal protection of all those services whose
remuneration relies on conditional access;
(5) Whereas the European Parliament, in its Resolution of 13 May 1997 on the Green Paper (4), called on
the Commission to present a proposal for a Directive covering all encoded services in respect of which
encoding is used to ensure payment of a fee, and agreed that this should include information society
services provided at a distance by electronic means and at the individual request of a service receiver, as
well as broadcasting services;
(6) Whereas the opportunities offered by digital technologies provide the potential for increasing consumer
choice and contributing to cultural pluralism, by developing an even wider range of services within the
meaning of Articles 59 and 60 of the Treaty; whereas the viability of those services will often depend on
the use of conditional access in order to obtain the remuneration of the service provider; whereas,
accordingly, the legal protection of service providers against illicit devices which allow access to these
services free of charge seems necessary in order to ensure the economic viability of the services;
(7) Whereas the importance of this issue was recognized by the Commission Communication on 'A
European Initiative in Electronic Commerce`;
(8) Whereas, in accordance with Article 7a of the Treaty, the internal market is to comprise an area without
internal frontiers in which the free movement of services and goods is ensured; whereas Article 128(4) of
the Treaty requires the Community to take cultural aspects into account in its action under other provisions
of the Treaty; whereas by virtue of Article 130(3) of the Treaty, the Community must, through the policies
and activities it pursues, contribute to creating the conditions necessary for the competitiveness of its
industry;
(9) Whereas this Directive is without prejudice to possible future Community or national provisions meant
to ensure that a number of broadcasting services, recognized as being of public interest, are not based on
conditional access;
(10) Whereas this Directive is without prejudice to the cultural aspects of any further Community action
concerning new services;
(11) Whereas the disparity between national rules concerning the legal protection of services based on, or

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consisting of, conditional access is liable to create obstacles to the free movement of services and goods;
(12) Whereas the application of the Treaty is not sufficient to remove these internal market obstacles;
whereas those obstacles should therefore be removed by providing for an equivalent level of protection
between Member States; whereas this implies an approximation of the national rules relating to the
commercial activities which concern illicit devices;
(13) Whereas it seems necessary to ensure that Member States provide appropriate legal protection against
the placing on the market, for direct or indirect financial gain, of an illicit device which enables or facilitates
without authority the circumvention of any technological measures designed to protect the remuneration of
a legally provided service;
(14) Whereas those commercial activities which concern illicit devices include commercial communications
covering all forms of advertising, direct marketing, sponsorship, sales promotion and public relations
promoting such products and services;
(15) Whereas those commercial activities are detrimental to consumers who are misled about the origin of
illicit devices; whereas a high level of consumer protection is needed in order to fight against this kind of
consumer fraud; whereas Article 129a(1) of the Treaty provides that the Community should contribute to
the achievement of a high level of consumer protection by the measures it adopts pursuant to Article 100a
thereof;
(16) Whereas, therefore, the legal framework for the creation of a single audiovisual area laid down in
Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law,
regulation or administrative action in Member States concerning the pursuit of television broadcasting
activities (5) should be supplemented with reference to conditional access techniques as laid down in this
Directive, in order, not least, to ensure equal treatment of the suppliers of cross-border broadcasts,
regardless of their place of establishment;
(17) Whereas, in accordance with the Council Resolution of 29 June 1995 on the effective uniform
application of Community law and on the penalties applicable for breaches of Community law in the internal
market (6), Member States are required to take action to ensure that Community law is duly applied with
the same effectiveness and thoroughness as national law;
(18) Whereas, in accordance with Article 5 of the Treaty, Member States are required to take all
appropriate measures to guarantee the application and effectiveness of Community law, in particular by
ensuring that the sanctions chosen are effective, dissuasive and proportionate and the remedies
appropriate;
(19) Whereas the approximation of the laws, regulations and administrative provisions of the Member
States should be limited to what is needed in order to achieve the objectives of the internal market, in
accordance with the principle of proportionality as set out in the third paragraph of Article 3b of the Treaty;
(20) Whereas the distribution of illicit devices includes transfer by any means and putting such devices on
the market for circulation inside or outside the Community;
(21) Whereas this Directive is without prejudice to the application of any national provisions which may
prohibit the private possession of illicit devices, to the application of Community competition rules and to
the application of Community rules concerning intellectual property rights;
(22) Whereas national law concerning sanctions and remedies for infringing commercial activities may
provide that the activities have to be carried out in the knowledge or with reasonable grounds for knowing
that the devices in question were illicit;
(23) Whereas the sanctions and remedies provided for under this Directive are without prejudice to any
other sanction or remedy for which provision may be made under national law, such as preventive
measures in general or seizure of illicit devices; whereas Member States are not obliged to provide criminal
sanctions for infringing activities covered by this Directive; whereas Member States' provisions for actions
for damages are to be be in conformity with their national legislative and judicial systems;
(24) Whereas this Directive is without prejudice to the application of national rules which do not fall within
the field herein coordinated, such as those adopted for the protection of minors, including those in
compliance with Directive 89/552/EEC, or national provisions concerned with public policy or public
security,
HAVE ADOPTED THIS DIRECTIVE:

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Article 1 : Scope
The objective of this Directive is to approximate provisions in the Member States concerning measures
against illicit devices which give unauthorised access to protected services.

Article 2 : Definitions
For the purposes of this Directive:
(a) protected service shall mean any of the following services, where provided against remuneration and on
the basis of conditional access:
- television broadcasting, as defined in Article 1(a) of Directive 89/552/EEC,
- radio broadcasting, meaning any transmission by wire or over the air, including by satellite, of radio
programmes intended for reception by the public,
- information society services within the meaning of Article 1(2) of Directive 98/34/EC of the European
Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in
the field of technical standards and regulations and of rules on information society services (7),
or the provision of conditional access to the above services considered as a service in its own right;
(b) conditional access shall mean any technical measure and/or arrangement whereby access to the
protected service in an intelligible form is made conditional upon prior individual authorisation;
(c) conditional access device shall mean any equipment or software designed or adapted to give access to
a protected service in an intelligible form;
(d) associated service shall mean the installation, maintenance or replacement of conditional access
devices, as well as the provision of commercial communication services in relation to them or to protected
services;
(e) illicit device shall mean any equipment or software designed or adapted to give access to a protected
service in an intelligible form without the authorisation of the service provider;
(f) field coordinated by this Directive shall mean any provision relating to the infringing activities specified
in Article 4.

Article 3 : Internal market principles


1. Each Member State shall take the measures necessary to prohibit on its territory the activities listed in
Article 4, and to provide for the sanctions and remedies laid down in Article 5.
2. Without prejudice to paragraph 1, Member States may not:
(a) restrict the provision of protected services, or associated services, which originate in another Member
State; or
(b) restrict the free movement of conditional access devices;
for reasons falling within the field coordinated by this Directive.

Article 4 : Infringing activities


Member States shall prohibit on their territory all of the following activities:
(a) the manufacture, import, distribution, sale, rental or possession for commercial purposes of illicit
devices;
(b) the installation, maintenance or replacement for commercial purposes of an illicit device;
(c) the use of commercial communications to promote illicit devices.

Article 5 : Sanctions and remedies


1. The sanctions shall be effective, dissuasive and proportionate to the potential impact of the infringing
activity.
2. Member States shall take the necessary measures to ensure that providers of protected services whose
interests are affected by an infringing activity as specified in Article 4, carried out on their territory, have

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access to appropriate remedies, including bringing an action for damages and obtaining an injunction or
other preventive measure, and where appropriate, applying for disposal outside commercial channels of
illicit devices.

Article 6 : Implementation
1. Member States shall bring into force the laws, regulations and administrative provisions necessary to
comply with this Directive by 28 May 2000. They shall notify them to the Commission forthwith.
When Member States adopt such measures, they shall contain a reference to this Directive or shall be
accompanied by such reference at the time of their official publication. The methods of making such
reference shall be laid down by Member States.
2. Member States shall communicate to the Commission the text of the provisions of national law which
they adopt in the field coordinated by this Directive.

Article 7 : Reports
Not later than three years after the entry into force of this Directive, and every two years thereafter, the
Commission shall present a report to the European Parliament, the Council and the Economic and Social
Committee concerning the implementation of this Directive accompanied, where appropriate, by proposals,
in particular as regards the definitions under Article 2, for adapting it in light of technical and economic
developments and of the consultations carried out by the Commission.

Article 8 : Entry into force


This Directive shall enter into force on the day of its publication in the Official Journal of the European
Communities.

Article 9 : Addressees
This Directive is addressed to the Member States.

Done at Brussels, 20 November 1998.


For the European Parliament
The President
J. M. GIL-ROBLES
For the Council
The President
E. HOSTASCH
(1) OJ C 314, 16. 10. 1997, p. 7 and OJ C 203, 30. 6. 1998, p. 12.
(2) OJ C 129, 27. 4. 1998, p. 16.
(3) Opinion of the European Parliament of 30 April 1998 (OJ C 152, 18. 5. 1998, p. 59), Council Common
Position of 29 June 1998 (OJ C 262, 19. 8. 1998, p. 34) and Decision of the European Parliament of 8
October 1998 (OJ C 328, 26. 10. 1998). Council Decision of 9 November 1998.
(4) OJ C 167, 2. 6. 1997, p. 31.
(5) OJ L 298, 17. 10. 1989, p. 23. Directive as amended by Directive 97/36/EC of the European Parliament
and of the Council (OJ L 202, 30. 7. 1997, p. 60).
(6) OJ C 188, 22. 7. 1995, p. 1.
(7) OJ L 204, 21. 7. 1998, p. 37. Directive as amended by Directive 98/48/EC (OJ L 217, 5. 8. 1998, p. 18).

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EU Law (9th Edition)


Steiner, Woods and Twigg-Flesner
OUP 2006

5. Principles of direct applicability and direct effects (Extracts)

5.1 Introduction
It has already been seen that EC law is supreme to national law and that domestic courts are under an obligation
to give full effect to EC law (see Chapter 4). With this in mind, the question then arises to what extent
individuals can rely on EC law before the national courts, particularly where a Member State has failed to imple-
ment a particular measure, or where the implementation is in some way defective and does not provide the full
extent of the rights an individual should enjoy by virtue of the relevant EC measure. To deal with this question,
and very much in accordance with the principle of supremacy, the ECJ has developed three interrelated
doctrines: direct effect, indirect effect and state liability. Taken together, these seek to ensure that individuals are
given the greatest possible level of protection before their national courts. This chapter considers the scope of the
doctrines of direct and indirect effect, as well as identifying difficulties in the jurisprudence. One particular area
in which problems arise is that of ensuring the enforceability of directives. Chapter 8, dealing with remedies in
the national courts, will examine the jurisprudence in the field of state liability.
5.2 Doctrine of direct effects
5.2.1 Direct applicability
As was noted in Chapter 4, the European Community Treaties were incorporated into UK law by the European
Communities Act 1972. With the passing of this Act all Community law became, in the language of international
law, directly applicable, that is, applicable as part of the British internal legal system. Henceforth, 'Any rights or
obligations created by the Treaty are to be given legal effect in England without more ado' (per Lord Denning
MR in H.P. Bulmer Ltd v. Bollinger SA [1974] Ch 401). As directly applicable law, EC law thus became capable
of forming the basis of rights and obligations enforceable by individuals before their national courts.
Provisions of international law which are found to be capable of application by national courts at the suit of
individuals are also termed 'directly applicable'. This ambiguity (the same ambiguity is found in the alternative
expression 'self-executing') has given rise to much uncertainty in the context of EC law. For this reason it was
suggested by Winter that the term 'directly effective' be used to convey this secondary meaning. Although this
term has generally found favour amongst British academic writers, the ECJ as well as the British courts tend to
use the two concepts of direct applicability and direct effects interchangeably. However, for purposes of clarity it
is proposed to use the term 'directly effective' or 'capable of direct effects' in this secondary meaning, to denote
those provisions of EC law which give rise to rights or obligations which individuals may enforce before their
national courts.
Not all provisions of directly applicable international law are capable of direct effects. Some provisions are
regarded as binding on, and enforceable by States alone; others are too vague to form the basis of rights or
obligations for individuals; others are too incomplete and require further measures of implementation before they
can be fully effective in law. Whether a particular provision is directly effective is a matter of construction,
depending on its language and purpose as well as the terms on which the Treaty has been incorporated into
domestic law. Although most States apply similar criteria of clarity and completeness, specific rules and attitudes
inevitably differ, and since the application of the criteria often conceals an underlying policy decision, the results
are by no means uniform from State to State.
5.2.2 Relevance of direct effect in EC law
The question of the direct effects of Community law is of paramount concern to EC lawyers. If a provision of EC
law is directly effective, domestic courts must not only apply it, but, following the principle of primacy of EC
law (discussed in Chapter 4), must do so in priority over any conflicting provisions of national law. Since the
scope of the EC Treaty is wide, the more generous the approach to the question of direct effects, the greater the
potential for conflict.
Which provisions of EC law will then be capable of direct effect?

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The EC Treaty merely provides in Article 249 (ex 189) that regulations (but only regulations) are 'directly
applicable'. Since, as has been suggested, direct applicability is a necessary pre-condition for direct effects, this
would seem to imply that only regulations are capable of direct effects.
This has not proved to be the case. In a series of landmark decisions, the ECJ, principally in its jurisdiction under
Article 234 (ex 177) EC to give preliminary rulings on matters of interpretation of EC law on reference from
national courts, has extended the principle of direct effects to treaty articles, directives, decisions, and even to
provisions of international agreements to which the EC is a party.
5.2.3 Treaty Articles
5.2.3.1 The starting point: Van Gend en Loos
The question of the direct effect of a Treaty article was first raised in Van Gend en Loos v Nederlandse
Administratie der Belastingen (case 26/62). The Dutch administrative tribunal, in a reference under Article 234,
asked the ECJ:
Whether Article 12 of the EEC Treaty [now 25 EC] has an internal effect ... in other words, whether the nationals
of Member States may, on the basis of the Article in question, enforce rights which the judge should protect?
Article 25 (ex 12) EC prohibits States from:
introducing between themselves any new customs duties on imports or exports or any charges having equivalent
effect.
It was argued on behalf of the defendant customs authorities that the obligation in Article 25 was addressed to
States and was intended to govern rights and obligations between States. Such obligations were not normally
enforceable at the suit of individuals. Moreover the Treaty had expressly provided enforcement procedures under
what are now Articles 226 (ex 169) and 227 (ex 170) (see Chapter 10) at the suit of the Commission or Member
States, respectively. Advocate-General Roemer suggested that Article 25 was too complex to be enforced by
national courts; if such courts were to enforce Article 25 directly there would be no uniformity of application.
Despite these persuasive arguments the ECJ held that Article 25 was directly effective. The Court stated that:
this Treaty is more than an agreement creating only mutual obligations between the contracting parties .. .
Community law .. . not only imposes obligations on individuals but also confers on them legal rights.
These rights would arise:
not only when an explicit grant is made by the Treaty, but also through obligations imposed, in a clearly defined
manner, by the Treaty on individuals as well as on Member States and the Community institutions.
. . . The text of Article 12 [now 25] sets out a clear and unconditional prohibition, which is not a duty to act but a
duty not to act. This duty is imposed without any power in the States to subordinate its application to a positive
act of internal law. The prohibition is perfectly suited by its nature to produce direct effects in the legal relations
between the Member States and their citizens.
And further:
The vigilance of individuals interested in protecting their rights creates an effective control additional to that
entrusted by Articles 169 to 170 [now 226-227] to the diligence of the Commission and the Member States.
Apart from its desire to enable individuals to invoke the protection of EC law the Court clearly saw the principle
of direct effects as a valuable means of ensuring that EC law was enforced uniformly in all Member States, even
when States had not themselves complied with their obligations.
It was originally thought that, as the Court suggested in Van Gend, only prohibitions such as Article 25
('standstill' provisions) would qualify for direct effects; this was found in Alfons Lutticke GmbH v Hauptzollamt
Saarlouis (case 57/65) not to be so. The article under consideration in this case was Article 95(1) and (3) (now
90); this article contains a prohibition on States introducing discriminatory taxation; the then Article 95(3)
contained a positive obligation that:
Member States shall, not later than at the beginning of the second stage, repeal or amend any provisions existing
when this Treaty enters into force which conflict with the preceding rules.
The ECJ found that the then Article 95(1) was directly effective; what was Article 95(3), which was subject to
compliance within a specified time-limit, would, the Court implied, become directly effective once that time-

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limit had expired.


The Court has subsequently found a large number of Treaty provisions to be directly effective. All the basic
principles relating to free movement of goods and persons, competition law, discrimination on the grounds of sex
and nationality may now be invoked by individuals before their national courts.
5.2.3.3 Criteria for direct effect
In deciding whether a particular provision is directly effective certain criteria are applied: the provision must be
sufficiently clear and precise; it must be unconditional, and leave no room for the exercise of discretion in
implementation by Member States or Community institutions. The criteria are, however, applied generously,
with the result that many provisions which are not particularly clear or precise, especially with regard to their
scope and application, have been found to produce direct effects. Even where they are conditional and subject to
further implementation they have been held to be directly effective once the date for implementation is past. The
Court reasons that while there may be discretion as to the means of implementation, there is no discretion as to
ends.
5.2.3.4 Vertical and horizontal effect of Treaty provisions
In Van Gend the principle of direct effects operated to confer rights on Van Gend exercisable against the Dutch
customs authorities. Thus the obligation fell on an organ of the State, to whom Article 25 was addressed. (This is
known as a 'vertical' direct effect, reflecting the relationship between individual and State.) But Treaty
obligations, even when addressed to States, may fall on individuals too. May they be invoked by individuals
against individuals? (This is known as a 'horizontal effect', reflecting the relationship between individual and
individual.)
Van Gend implies so, and this was confirmed in Defrenne v Sabena (No. 2) (case 43/ 75). Ms Defrenne was an
air hostess employed by Sabena, a Belgian airline company. She brought an action against Sabena based on what
was then Article 119 of the EEC Treaty (now 141 EC). It provided that:
Each Member State shall during the first stage ensure and subsequently maintain the application of the principle
that men and women should receive equal pay for equal work.
Ms Defrenne claimed, inter alia, that in paying their male stewards more than their air hostesses, when they
performed identical tasks, Sabena was in breach of the then Article 119. The gist of the questions referred to the
ECJ was whether, and in what context, that provision was directly effective. Sabena argued that the Treaty
articles so far found directly effective, such as Article 25, concerned the relationship between the State and its
subjects, whereas former Article 119 was primarily concerned with relationships between individuals. It was thus
not suited to produce direct effects. The Court, following Advocate-General Trabucci, disagreed, holding that:
the prohibition on discrimination between men and women applies not only to the action of public authorities,
but also extends to all agreements which are intended to regulate paid labour collectively, as well as to contracts
between individuals.
This same principle was applied in Walrave v Association Union Cyclists Internationale (case 36/74) to Article
12 (ex 6, originally 7) EC which provides that:
Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein,
any discrimination on grounds of nationality shall be prohibited.
The claimants, Walrave and Koch, sought to invoke Article 12 in order to challenge the rules of the defendant
association which they claimed were discriminatory.
The ECJ held that the prohibition of any discrimination on grounds of nationality does not only apply to the
action of public authorities but extends likewise to rules of any other nature aimed at regulating in a collective
manner gainful employment and the provision of services.
To limit the prohibition in question to acts of a public authority would risk creating inequality in their
application.
As will become evident in the chapters of this book devoted to the substantive law of the Community, many
Treaty provisions have now been successfully invoked vertically and horizontally. The fact of their being
addressed to, and imposing obligations on, States has been no bar to their horizontal effect.
[]

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5.2.5 Directives
5.2.5.1 The problem of the direct effect of directives
A directive is (Article 249 EC):
binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the
national authorities the choice of form and methods.
Because directives are not described as 'directly applicable' it was originally thought that they could not produce
direct effects. Moreover the obligation in a directive is addressed to States, and gives the State some discretion as
to the form and method of implementation; its effect thus appeared to be conditional on the implementation by
the State.
5.2.5.2 The principle of direct effect of directives
This was not the conclusion reached by the ECJ, which found, in Grarf v Finanzamt Traunstein (case 9/70) that a
directive could be directly effective. The claimant in Grarf was a haulage company seeking to challenge a tax
levied by the German authorities which the claimant claimed was in breach of an EC directive and decision. The
directive required States to amend their VAT systems to comply with a common EC system and to apply this
new VAT system to, inter alia, freight transport from the date of the Directive's entry into force. The German
government argued that only regulations were directly applicable. Directives and decisions took effect internally
only via national implementing measures. As evidence they pointed out that only regulations were required to be
published in the Official Journal. The ECJ disagreed. The fact that only regulations were described as directly
applicable did not mean that other binding acts were incapable of such effects:
It would be incompatible with the binding effect attributed to Decisions by Article 189 [now 249] to exclude in
principle the possibility that persons affected may invoke the obligation imposed by a Decision . . . the
effectiveness of such a measure would be weakened if the nationals of that State could not invoke it in the courts
and the national courts could not take it into consideration as part of Community law.
Although expressed in terms of a decision, it was implied in the judgment that the same principle applied in the
case of directives. The direct effect of directives was established beyond doubt in a claim based on a free-
standing directive in Van Duyn v Home Office (case 41/74). Here the claimant sought to invoke Article 3 of
Directive 64/221 to challenge the Home Office's refusal to allow her to enter to take up work with the Church of
Scientology. Under EC law Member States are allowed to deny EC nationals rights of entry and residence only
on the grounds of public policy, public security and public health (see Chapter 23). Article 3 of Directive 64/221
provides that measures taken on the grounds of public policy must be based exclusively on the personal conduct
of the person concerned. Despite the lack of clarity as to the scope of the concept of 'persona! conduct' the ECJ
held that Mrs Van Duyn was entitled to invoke the directive directly before her national court. It suggested that
even if the provision in question was not clear the matter could be referred to the ECJ for interpretation under
Article 234 EC.
So both directives and decisions may be directly effective. Whether they will in fact be so will depend on
whether they satisfy the criteria for direct effects - they must be sufficiently clear and precise, unconditional,
leaving no room for discretion in implementation. These conditions were satisfied in Grad. Although the
directive was not unconditional in that it required action to be taken by the State, and gave a time-limit for
implementation, once the time-limit expired the obligation became absolute. At this stage there was no discretion
left. Van Duyn demonstrates that it is not necessary for a provision to be particularly precise for it to be deemed
'sufficiently' clear. Significantly, the ECJ held in Riksskatterverket v Soghra Gharehvemn (case C-441/99) that a
provision in a directive could be directly effective where it contained a discretionary element if the Member State
had already exercised that discretion. The reason for this was that it could then no longer be argued that the
Member State still had to take measures to implement the provision.
The reasoning in Grad was followed in Van Duyn and has been repeated on many occasions to justify the direct
effect of directives once the time limit for implementation has expired. A more recent formulation of the test for
direct effects, and one that is generally used, is that the provision in question should be 'sufficiently clear and
precise and unconditional'.
A directive cannot, however, be directly effective before the time-limit for implementation has expired. It was
tried unsuccessfully in the case of Pubblico Ministero v Ratti (case 148/78). Mr Ratti, a solvent manufacturer,
sought to invoke two EC harmonisation directives on the labelling of dangerous preparations to defend a
criminal charge based on his own labelling practices. These practices, he claimed, were not illegal according to

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the directive. The ECJ held that since the time-limit for the implementation of one of the directives had not
expired it was not directly effective. He could, however, rely on the other directive for which the implementation
date had passed.
Even when a State has implemented a directive it may still be directly effective. The ECJ held this to be the case
in Verbond van Nederlandse Ondernemingen (VNO) v Inspecteur der Invoerrechten en Accijnzen (case 51/76),
thereby allowing the Federation of Dutch Manufacturers to invoke the Second VAT Directive despite imple-
mentation of the provision by the Dutch authorities. The grounds for the decision were that the useful effect of
the directive would be weakened if individuals could not invoke it before national courts. By allowing
individuals to invoke the directive the Community can ensure that national authorities have kept within the limits
of their discretion. Arguably, this principle could apply to enable an individual to invoke a 'parent' directive even
before the expiry of the time-limit, where domestic measures have been introduced for the purpose of complying
with the directive (see Offtcier van Justitie v Kolpinghnis Nijmegen (case 80/86) ). This view gains some support
from the case of Inter-Environment Wallonie ASBL v Region Wallonie (case C-129/96). Here the ECJ held that
even within the implementation period Member States are not entitled to take any measures which could
seriously compromise the result required by the directive. This applies irrespective of whether the domestic
measure which conflicts with a directive was adopted to implement that directive (case C-14/02 ATRAL). In
Mangold (case C-144/04; see further below), the ECJ strengthened this view. According to its ruling, the
obligation on a national court to set aside domestic law in conflict with a directive before its period for
implementation has expired appears to be even stronger where the directive in question merely aims to provide a
framework for ensuring compliance with a general principle of Community law, such as non-discrimination on
the grounds of age (see Chapter 25).
5.2.5.3 Member States' response
Initially national courts were reluctant to concede that directives could be directly effective. The Conseil d'Etat,
the supreme French administrative court, in Minister of the interior v Cohn-Bendit ([1980] 1 CMLR 543),
refused to follow Van Duyn v Home Office and allow the claimant to invoke Directive 64/221. The English Court
of Appeal in O'Brien v Sim-Chem Ltd ([1980] ICR 429) found the Equal Pay Directive (75/117) not to be
directly effective on the grounds that it had purportedly been implemented in the Equal Pay Act 1970 (as
amended 1975). VTVO was apparently not cited before the court. The German federal tax court, the
Bundesfinanzhof, in Re VAT Directives ([1982] 1 CMLR 527) took the same view on the direct effects of the
Sixth VAT Directive, despite the fact that the time-limit for implementation had expired and existing German
law appeared to run counter to the directive. The courts' reasoning in all these cases ran on similar lines. Article
249 expressly distinguishes regulations and directives; only regulations are described as 'directly applicable';
directives are intended to take effect within the national order via national implementing measures.
On a strict interpretation of Article 249 EC this is no doubt correct. On the other hand the reasoning advanced by
the ECJ is compelling. The obligation in a directive is 'binding "on Member States" as to the result to be
achieved'; the useful effects of directives would be weakened if States were free to ignore their obligations and
enforcement of EC law were left to direct action by the Commission or Member States under Article 226 or
Article 227. Moreover States are obliged under Article 10 to 'take all appropriate measures ... to ensure fulfilment
of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community'.
If they have failed in these obligations why should they not be answerable to individual litigants?
5.2.5.4 Vertical and horizontal direct effects: a necessary distinction The reasoning of the ECJ is persuasive
where an individual seeks to invoke a directive against the State on which the obligation to achieve the desired
results has been imposed. In cases such as VNO, Van Duyn, and Ratti, the claimant sought to invoke a directive
against a public body, an arm of the State. This is known as vertical direct effect, reflecting the relationship
between the individual and the State. Yet as with Treaty articles, there are a number of directives, impinging on
labour, company or consumer law for example, which a claimant may wish to invoke against a private person. Is
the Court's reasoning in favour of direct effects adequate as a basis for the enforcement of directives against
individuals? This is known as horizontal direct effect, reflecting the relationship between individuals.
The arguments for and against horizontal effects are finely balanced. Against horizontal effects is the fact of
uncertainty. Prior to the entry into force of the TEU, directives were not required to be published. More
compelling, the obligation in a directive is addressed to the State. In Becker v Finanzamt Miinster-Innenstadt
(case 8/81) the Court, following dicta in Pubblico Ministero v Ratti (case 148/78), had justified the direct
application of the Sixth VAT Directive against the German tax authorities on the grounds that the obligation to
implement the directive had been placed on the State. It followed that 'a Member State which has not adopted,

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within the specified time limit, the implementing measures prescribed in the Directive, cannot raise the
objection, as against individuals, that it has not fulfilled the obligations arising from the Directive'. This
reasoning is clearly inapplicable in the case of an action against a private person. In favour of horizontal effects
is the fact that directives have always in fact been published; that Treaty provisions addressed to, and imposing
obligations on, Member States have been held to be horizontally effective; that it would be anomalous, and
offend against the principles of equality, if an individual's rights to invoke a directive were to depend on the
status, public or private, of the party against whom he wished to invoke it; that the useful effect of Community
law would be weakened if individuals were not free to invoke the protection of Community law against all
parties.
Although a number of references were made in which the issue of the horizontal effects of directives was raised,
the ECJ for many years avoided the question, either by declaring that the claimant's action lay outside the scope
of the directive, as in Burton v British Railways Board (case 19/81) (Equal Treatment Directive 76/207) or by
falling back on a directly effective Treat}7 provision, as in Worringham v Lloyds Bank Ltd (case 69/80) in which
the then Article 119 (now 141) was applied instead of Directive 75/117, the Equal Pay Directive.
The nettle was finally grasped in Marshall v Southampton & South West Hampshire Area Health Authority
(Teaching) (case 152/84). Here Mrs Marshall was seeking to challenge the health authority's compulsory
retirement age of 65 for men and 60 for women as discriminatory, in breach of the Equal Treatment Directive
76/207. The difference in age was permissible under the Sex Discrimination Act 1975, which expressly excludes
'provisions relating to death or retirement' from its ambit. The Court of Appeal referred two questions to the ECJ:
(a) Was a different retirement age for men and women in breach of Directive 76/207?
(b) If so, was Directive 76/207 to be relied on by Mrs Marshall in the circumstances of the case?
The relevant circumstances were that the area health authority, though a 'public' body, was acting in its capacity
as employer.
The question of vertical and horizontal effects was fully argued. The Court, following a strong submission from
Advocate-General Slynn, held that the compulsory different retirement age was in breach of Directive 76/207
and could be invoked against a public body such as the health authority. Moreover:
where a person involved in legal proceedings is able to rely on a Directive as against the State he may do so
regardless of the capacity in which the latter is acting, whether employer or public authority.
On the other hand, following the reasoning of Becker, since a directive is, according to Article 249, binding only
on 'each Member State to which it is addressed':
It follows that a Directive may not of itself impose obligations on an individual and that a provision of a
Directive may not be relied upon as such against such a person.
If this distinction was arbitrary and unfair:
Such a distinction may easily be avoided if the Member State concerned has correctly implemented the Directive
in national law.
So, with Marshall v Southampton & South West Hampshire Area Health Authority (Teaching) the issue of the
horizontal effect of directives was, it seemed, finally laid to rest (albeit in an obiter statement, since the health
authority was arguably a public body at the time). By denying their horizontal effect on the basis of Article 249
the Court strengthened the case for their vertical effect. The decision undoubtedly served to gain acceptance for
the principle of vertical direct effects by national courts (see, e.g., R v London Boroughs Transport Committee,
ex parte Freight Transport Association Ltd [1990] 3 CMLR 495). But problems remain, both with respect to
vertical and horizontal direct effects.
5.2.5.5 Vertical direct effects: reliance against public body
First, the concept of a 'public' body, or an 'agency of the State', against whom a directive may be invoked, is
unclear. In Fratelli Costanzo SPA v Comune di Milano (case 103/88), in a claim against the Milan Comune
based on the Comune's alleged breach of Public Procurement Directive 71/305, the Court held that since the rea-
son for which an individual may rely on the provisions of a directive in proceedings before the national courts is
that the obligation is binding on all the authorities of the Member States, where the conditions for direct effect
were met, 'all organs of the administration, including decentralised authorities such as municipalities, are obliged
to apply these provisions'. The area health authority in Marshall was deemed a 'public' body, as was the Royal

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Ulster Constabulary in Johnston vRUC (case 222/84). But what of the status of publicly-owned or publicly-run
enterprises such as the former British Rail or British Coal? Or semi-public bodies? Are universities 'public'
bodies and what is the position of privatised utility companies?
These issues arose for consideration in Foster v British Gas pic (case C-l 88/89). In a claim against the British
Gas Corporation in respect of different retirement ages for men and women, based on Equal Treatment Directive
76/207, the English Court of Appeal had held that British Gas, a statutory corporation carrying out statutory
duties under the Gas Act 1972 at the relevant time, was not a public body against which the directive could be
enforced. On appeal the House of Lords sought clarification on this issue from the ECJ. That court refused to
accept British Gas's argument that there was a distinction between a nationalised undertaking and a State agency
and ruled (at para. 18) that a directive might be relied on against organisations or bodies which were 'subject to
the authority or control of the State or had special powers beyond those which result from the normal relations
between individuals'. Applying this principle to the specific facts of Foster v British Gas pic it ruled (at para. 20)
that a directive might be invoked against 'a body, whatever its legal form, which has been made responsible,
pursuant to a measure adopted by the State, for providing a public service under the control of the State and has
for that purpose special powers beyond those which result from the normal rules applicable in relations between
individuals'. On this interpretation a nationalised undertaking such as the then British Gas would be a 'public'
body against which a directive might be enforced, as the House of Lords subsequently decided in Foster v
British Gas pic ([1991] 2 AC 306).
It may be noted that the principle expressed in para. 18 is wider than that of para. 20, the criteria of 'control' and
'powers' being expressed as alternative, not cumulative; as such it is wide enough to embrace any nationalised
undertaking, and even bodies such as universities with a more tenuous public element, but which are subject to
some State authority or control. However, in Rolls-Royce pic v Doughty ([1992] ICR 538), the English Court of
Appeal, applying the 'formal ruling' of para. 20 of Foster, found that Rolls-Royce, a nationalised undertaking at
the relevant time, although 'under the control of the State', had not been 'made responsible pursuant to a measure
adopted by the State for providing a public service'. The public services which it provided, for example, in the
defence of the realm, were provided to the State and not to the public for the purposes of benefit to the State: nor
did the company possess or exercise any special powers of the type enjoyed by British Gas. Mustill LJ suggested
that the test provided in para. 18 was 'not an authoritative exposition of the way in which cases like Foster should
be approached': it simply represented a 'summary of the (Court's) jurisprudence to date'.
There is little evidence to support such a conclusion. The Court has never distinguished between its 'formal'
rulings (i.e., on the specific issue raised) and its more general statements of principle. Indeed such general
statements often provide a basis for future rulings in different factual situations. A restrictive approach to the
Court's rulings, as taken in Rolls Royce pic v Doughty, is inconsistent with the purpose of the ECJ, namely to
ensure the effective implementation of Community law and the protection of individuals' rights under that law by
giving the concept of a public body the widest possible scope. This was acknowledged by the Court of Appeal in
National Union of Teachers v Governing Body of St Mary's Church of England (Aided) Junior School ([1997] 3
CMLR 630) when it suggested that the concept of an emanation of the state should be a 'broad one'. The
definition provided in para. 20 of Foster should not be regarded as a statutory definition: it was, in the words of
para. 20, simply 'included among those bodies against which the provisions of a Directive can be applied'.
The British courts' approach to, and the outcome of the enquiry as to whether a particular body is an 'emanation
of the state' for the purpose of enforcement of EC directives is unpredictable. It is not altogether surprising that
they fail to take a generous view when the result would be to impose liability on bodies which are in no way
responsible for the non-implementation of directives, a factor which was undoubtedly influential in Rolls-Royce
pic v Doughty. But even if national courts were to adopt a generous approach, no matter how generously the
concept of a 'public' body is defined, as long as the public/private distinction exists there can be no uniformity in
the application of directives as between one State and another. Neither will it remove the anomaly as between
individuals. Where a State has failed to fulfil its obligations in regard to directives, whether by non-
implementation or inadequate implementation, an individual would, it appeared, following Marshall, be
powerless to invoke a directive in the context of a 'private' claim.
5.2.5.6 Horizontal direct effects
In 1993, in the case of Dori v Recreb Sri (case C-91/92), the Court was invited to change its mind on the issue of
horizontal direct effects in a claim based on EC Directive 85/577 on Door-step Selling, which had not at the time
been implemented by the Italian authorities, against a private party. Advocate-General Lenz urged the Court to
reconsider its position in Marshall and extend the principle of direct effects to allow for the enforcement of

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directives against all parties, public and private, in the interest of the uniform and effective application of
Community law. This departure from its previous case law was, he suggested, justified in the light of the
completion of the internal market and the entry into force of the Treaty on European Union, in order to meet the
legitimate expectations of citizens of the Union seeking to rely on Community law. In the interests of legal
certainty such a ruling should however not be retrospective in its effect (on the effect of Article 234 rulings, see
Chapter 9).
The Court, no doubt mindful of national courts' past resistance to the principle of direct effects, and the reasons
for that resistance, declined to follow the Advocate-General's advice and affirmed its position in Marshall:
Article 249 distinguished between regulations and directives; the case law establishing vertical direct effects was
based on the need to prevent States from taking advantage of their own wrong; to extend this case law and allow
directives to be enforced against individuals 'would be to recognise a power to enact obligations for individuals
with immediate effect, whereas (the Community) has competence to do so only where it is empowered to adopt
Regulations'. This decision was confirmed in subsequent cases, such as El Corte Ingles SA v Rivera (case C-
192/94) and Arca.ro (case C-168/95). However, in denying horizontal effects to directives in Dori, the Court was
at pains to point out that alternative remedies might be available based on principles introduced by the Court
prior to Dori, namely the principle of indirect effects and the principle of State liability introduced in Francovich
v Italy (cases C-6 & 9/90, see Chapter 8). Francovich was also suggested as providing an alternative remedy in
El Corte Ingles SA v Rivera. Pfeiffer (joined cases C-397/01 to 403/01) confirmed that directives could not have
horizontal direct effect, but it emphasised, in the strongest possible terms, that a court was obliged to interpret
domestic law in so far as possible in accordance with a directive (see 5.3, below). In the circumstances of that
case, the practical outcome would have been akin to admitting horizontal direct effect, albeit by following the
'indirect effect' route. It must be borne in mind that one of the principal justifications for rejecting 'horizontal
direct effect' has been that directives cannot, of themselves, impose obligations on individuals. In two-party
situations, this reasoning is straightforward. It is less so in a three-party situation where an individual is seeking
to enforce a right under a directive against the Member State where this would have an impact on a third party.
This issue arose most recently in Wells v SoS for Transport, Local Government and the Regions (case C-201/02),
where Mrs Wells challenged the government's failure to carry out an environmental impact assessment (as
required under Directive 85/337/EEC, [1985] OJ LI75/40) when authorising the recommencement of quarrying
works. The UK government argued that to accept that the relevant provisions of the directive had direct effect
would result in 'inverse direct effect' in that UK government would be obliged to deprive another individual (the
quarry owners) of their rights. The ECJ dismissed this, holding that permitting an individual to hold the Member
State to its obligations was not linked to the performance of any obligation which would fall on the third party (at
para. 58), although there would be consequences for the third party as a result. It would be for the national courts
to consider whether to require compliance with the directive in the particular case, or whether to compensate the
individual for any harm suffered. In coming to this conclusion, the ECJ relied, in part, on case law developed in
the context of Directive 83/189/ EEC on the enforceability of technical standards which have not been notified in
accordance with the requirements of that directive. It had been suggested that these cases create something akin
to 'incidental' horizontal effect, and it is therefore necessary to examine these in more detail.
5.2.5.7 'Incidental' horizontal effect
There have been cases in which individuals have sought to exploit the principle of direct effects not for the
purposes of claiming Community rights denied them under national law, but simply in order to establish the
illegality of a national law and thereby prevent its application to them. This may occur in a two-party situation, in
which an individual is seeking to invoke a directive, whether as a sword or a shield, against the State. It presents
particular problems in a three-cornered situation, in which a successful challenge based on an EC directive by an
individual to a domestic law or practice, although directed at action by the State, may adversely affect third
parties. In this case the effect of the directive would be felt horizontally. To give the directive direct effects in
these cases would seem to go against the Court's stance on horizontal direct effects in the line of cases beginning
with Dori v Recreb Sri, and the reasoning in these cases. Two cases, with contrasting outcomes, CIA Security
International SA v Signalson SA (case C-194/94) and Lemmens (case C-226/97), illustrate the difficulty. Both
cases involve Directive 83/189 (Directive 83/189 has been replaced and extended, by Directive 98/34 ([1998] OJ
L204/37; amended by Directive 98/44, OJ L217/18); see 15.3.6). The directive, which is designed to facilitate
the operation of the single market, lays down procedures for the provision of information by Member States to
the Commission in the field of technical standards and regulations. Article 8 prescribes detailed procedures
requiring Member States to notify, and obtain clearance from, the Commission for any proposed regulatory
measures in the areas covered by the directive. In CIA Security International SA v Signalson SA, the defendants,
CIA Security, sought to rely on Article 8 of Directive 83/189 as a defence to an action, brought by Signalson, a

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competitor, for unfair trading practices in the marketing of security systems. The defendants claimed that the
Belgian regulations governing security, which the defendants had allegedly breached, had not been notified as
required by the directive: they were therefore inapplicable. Contrary to its finding in the earlier case of Enichem
Base v Comune di Cinsello Balsamo (case C-380/87), involving very similar facts and the same directive, the
ECJ accepted this argument, distinguishing Enichem on the slenderest of grounds. Thus the effects of the
directive fell horizontally on the claimant, whose actions, based on national law, failed.
Article 8 of Directive 83/189 was again invoked as a defence in Lemmens (case C-226/97). Lemmens was
charged in Belgium with driving above the alcohol limit. Evidence as to his alcohol level at the relevant time had
been provided by a breath analysis machine. Invoking CIA Security International SA v Signalson SA, he argued
that the Belgian regulations with which breath analysis machines in Belgium were required to conform had not
been notified to the Commission, as required by Article 8 of Directive 83/189. He argued that the consequent
inapplicability of the Belgian regulations regarding breath analysis machines impinged on the evidence obtained
by using those machines; it could not be used in a case against him. The ECJ refused to accept this argument. It
looked to the purpose of the directive, which was designed to protect the interest of free movement of goods. The
Court concluded:
Although breach of an obligation (contained in the Directive) rendered (domestic) regulations inapplicable
inasmuch as they hindered the marketing of a product which did not conform with its provisions, it did not have
the effect of rendering unlawful any use of the product which conformed with the unnotified regulations. Thus
the breach (of Article 8) did not make it impossible for evidence obtained by means of such regulations,
authorized in accordance with the regulations, to be relied on against an individual.
This distinction, between a breach affecting the marketing of a product, as in CIA Security International SA v
Signalson SA, and one affecting its use, as in Lemmens, is fine, and hardly satisfactory. The decision in CIA
Security International SA v Signalson SA had been criticised because the burden imposed by the breach (by the
State) of Article 8, the non-application of the State's unfair practice laws, would have fallen on an individual, in
this case the claimant. This was seen as a horizontal application in all but name. In two other cases decided, like
CIA Security International SA v Signalson SA, in 1996, Ruiz Bemaldez (case C-129/94) and Panagis Parfttis
(case C-441/93), individuals were permitted to invoke directives to challenge national law, despite their adverse
impact on third parties.
Lemmens, on the other hand, did not involve a third-party situation. The invocation by the defendant of Article 8
of Directive 83/189 did, however, smack of abuse. The refinement introduced in Lemmens may thus be seen as
an attempt by the ECJ to impose some limits on the principle of direct effects as affected by CIA Security and as
applied to directives.
The CIA Security principle was, however, confirmed and extended to a contractual relationship between two
companies in Unilever Italia SpA v Central Food SpA (case C-443/98). Italy planned to introduce legislation on
the geographical origins of various kinds of olive oil and notified this in accordance with Article 8 of the
directive after the Commission requested that this be done. The Commission subsequently decided to adopt a
Community-wide measure and invoked the 'stand-still' procedure in Article 9 of the directive, which requires a
Member State to delay adoption of a technical regulation for 12 months if the Commission intends to legislate in
the relevant field. Italy nevertheless adopted its measure before the 12-month period had expired. The dispute
leading to the Article 234 reference arose when Unilever supplied Central Foods with olive oil which had not
been labelled in accordance with Italian law. Unilever argued that Italian legislation should not be applied
because it had been adopted in breach of Article 9 of the directive. Advocate-General Jacobs argued that the CIA
principle could not affect contractual relations between individuals, primarily because to hold otherwise would
infringe the principle of legal certainty. The Court disagreed and held that the national court should refuse to
apply the Italian legislation. It noted that there was no reason to treat the dispute relating to unfair competition in
CIA Security differently from the contractual dispute in Unilever. The Court acknowledged the established
position that directives cannot have horizontal direct effect, but went on to say that this did not apply in relation
to Articles 8 and 9 of Directive 83/189. The Court did not feel that the case law on horizontal direct effect and
the case law under Directive 83/189 were in conflict, because the latter directive does not seek to create rights or
obligations for individuals.
The initial reaction to CIA Security was that the Court appeared to accept that directives could have horizontal
direct effect. But after Unilever, it is clear that this has not been its intention. However, this area remains one of
some uncertainty. The position now seems to be that private parties to a contract for the sale or supply of goods
need to investigate whether any relevant technical regulations have been notified in accordance with the

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directive. There may then be a question of whether the limitation introduced by Lemmens comes into play. The
end result appears to be the imposition on private parties of rights and obligations of which they could not have
been aware - this was the main reason against the acceptance of horizontal direct effect in the case of directives.
Although the Court in Unilever was at pains to restrict this line of cases to Directive 83/189 (and its replacement,
Directive 98/34), this is not convincing. Nevertheless, the ECJ has maintained its approach under this Directive
(see, e.g., case C-303/04, Lidl Italia Sri v Comune di Stradella), and it would appear to be best to regard the case
law under Directive 98/34 (and its predecessor) as being confined to the context of that and similar directives
(see also, e.g., case C-201/94, R v Medicines Control Agency ex parte Smith & Nephew Ltd in the context of the
authorisation of medicinal products under Directive 65/65/EEC (superseded by 1993 measures), permitting the
holder of a marketing authorisation to rely on Article 5 of that directive in challenging the grant of an
authorisation to a competitor). Such a view should, of course, not be understood as reducing the significance of
these cases in the context of an important field of EC law, and Wells (case C-201/02) has taken this approach into
the field of direct effect generally.
5.2.5.8 No direct effect to impose criminal liability
One important limitation to the direct effect principle was confirmed in Berlusconi and others (joined cases C-
387/02, C-391/02 and C-403/02). Here, Italian company legislation had been amended after proceedings against
Mr Berlusconi and others had been commenced to make the submission of incorrect accounting information a
summary offence, rather than an indictable offence. The Italian criminal code provides that a more lenient
penalty introduced after proceedings have been commenced but prior to judgment should be imposed, and in the
instant cases, proceedings would therefore have to be terminated as the limitation period for summary offences
had expired. The ECJ was asked (in Article 234 proceedings) if Article 6 of the First Company Law Directive
(68/151/EEC) could be relied upon directly against the defendants. Having observed that the Directive required
an appropriate penalty and that it was for the national court to consider whether the revised provisions of Italian
law were appropriate, the Court confirmed that it is not permissible to rely on the direct effect of a directive to
determine the criminal liability of an individual (paras 73-78). In so holding, the ECJ followed the principles
developed in the context of indirect effect (5.3.2, below) and reflects general principles of law (see Chapter 6).
5.2.5.9 Direct effect of directives: conclusions
The jurisprudence of the ECJ in this area has matured sufficiently to permit the conclusion that, as a general rule,
directives cannot take direct effect in the context of a two-party situation where both parties are individuals.
Directives can only be relied upon against a Member State (in a broad sense) by an individual (on limitations on
the obligations an individual can enforce, see further 8.2.5, Verholen (cases C-8 7/9/90). A directive cannot
impose an obligation on an individual of itself; it needs to be implemented to have this consequence.
Nevertheless, it is apparent that the clear-cut distinction between vertical and horizontal direct effect in two-party
situations becomes blurred when transposed into a tripartite context. The enforcement by an individual of an
obligation on the Member State may affect the rights of other individuals, which, according to Wells (case C-
201/02), is a consequence of applying direct effect, but does not appear to change its vertical nature. The rather
specific context of notification and authorisation directives, which may also have an effect on relationships not
involving Member States, adds to the uncertainty. But whilst the case law may seem settled, the debate as to
whether directives should have horizontal direct effect is one that is unlikely to go away soon.
5.2.6 Decisions
A decision is 'binding in its entirety upon those to whom it is addressed' (Article 249 EC).
Decisions may be addressed to Member States, singly or collectively, or individuals. Although, like directives,
they are not described as 'directly applicable', they may, as was established in Grad v Finanzamt Traustein (case
9/70), be directly effective provided the criteria for direct effects are satisfied. The direct application of decisions
does not pose the same theoretical problems as directives, since they will only be invoked against the addressee
of the decision. If the obligation has been addressed to him and is 'binding in its entirety', there seems no reason
why it should not be invoked against him. Although it has not so far arisen it might be permissible for an
individual to invoke a decision against a 'public' party who is not the addressee of the decision, but not against a
'private' (third) party, for the same reasons as apply in the case of directives.

[]
5.3 Principle of indirect effects

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Although the ECJ has not shown willing to allow horizontal direct effect of directives, it has developed an
alternative tool by which individuals may rely on directives against another individual. This tool is known as the
principle of 'indirect effect', which is an interpretative tool to be applied by domestic courts interpreting national
legislation which conflicts with a directive in the same area. It is sometimes also called the principle of consistent
interpretation.
The principle of indirect effects was introduced in a pair of cases decided shortly before Marshall, von Co/son v
Land Nordrhein-Westfalen (case 14/83) and Harz v Deutsche Tradax GmbH (case 79/83).
Both cases were based on Article 6 of Equal Treatment Directive 76/207. Article 6 provides that:
Member States shall introduce into their national legal systems such measures as are necessary to enable all
persons who consider themselves wronged by failure to apply to them the principle of equal treatment... to
pursue their claims by judicial process after possible recourse to other competent authorities.
The claimants had applied for jobs with their respective defendants. Both had been rejected. It was found by the
German court that the rejection had been based on their sex, but it was justifiable. Under German law they were
entitled to compensation only in the form of travelling expenses. This they claimed did not meet the
requirements of Article 6. Ms von Colson was claiming against the prison service; Ms Harz against Deutsche
Tradax GmbH, a private company. So the vertical/ horizontal, public/private anomaly was openly raised and
argued in Article 234 proceedings before the ECJ.
The Court's solution was ingenious. Instead of focusing on the vertical or horizontal effects of the directive it
turned to Article 10 of the EC Treaty. Article 10 requires States to 'take all appropriate measures' to ensure
fulfilment of their Community obligations.
This obligation, the Court said, applies to all the authorities of Member States, including the courts. It thus falls
on the courts of the Member States to interpret national law in such a way as to ensure that the objectives of the
directive are achieved. It was for the German courts to interpret German law in such a way as to ensure an
effective remedy as required by Article 6 of the directive. The result of this approach is that although Community
law is not applied directly - it is not 'directly effective' - it may still be applied indirectly as domestic law by
means of interpretation.
The success of the von Colson principle of indirect effect depended on the extent to which national courts
perceived themselves as having a discretion, under their own constitutional rules, to interpret domestic law to
comply with Community law. Although the courts in the UK showed some reluctance initially to apply this
principle, relying on a strict interpretation of s. 2(1) of European Communities Act 1972 as applying only to
directly effective Community law (see the House of Lords in Duke vGEC Reliance Ltd ([1988] AC 618)), the
position soon changed (Litster v Forth Dry Dock & Engineering Co. Ltd ([1990] 1 AC 546). Occasional 'hiccups'
still occurred, however, and may still do so today. In Finnegan v Clowney Youth Training Programme Ltd
([1990] 2 AC 407) the House of Lords had refused to interpret art. 8(4) of the Sex Discrimination (Northern
Ireland) Order 1976 (SI 1976/1042) in line with Marshall, even though the order had been made after the ECJ's
decision in Marshall. This was because that provision was enacted in terms identical to the parallel provision
considered in Duke v GEC Reliance Ltd, and 'must have been intended to' have the same meaning as in that Act.
In the light of Marleasing (case 106/89, see below), such a decision would be unsustainable now, and today, the
UK courts are taking their obligation seriously (see, e.g., Braymist Ltd v Wise Finance Co Ltd [2002] Ch 273;
Director-General of Fair Trading v First National Bank [2002] 1 AC 481).
5.3.1 The scope of the doctrine: Marleasing
The ECJ considered the scope of the 'indirect effect' doctrine in some depth in Marleasing SAv La Comercial
International de Alimentation SA (case C-106/89). In this case, which was referred to the ECJ by the Court of
First Instance, Oviedo, the claimant company was seeking a declaration that the contracts setting up the
defendant companies were void on the grounds of Tack of cause', the contracts being a sham transaction carried
out in order to defraud their creditors. This was a valid basis for nullity under Spanish law. The defendants
argued that this question was now governed by EC Directive 68/151. The purpose of Directive 68/151 was to
protect the members of a company and third parties from, inter alia, the adverse effects of the doctrine of nullity.
Article 11 of the directive provides an exhaustive list of situations in which nullity may be invoked. It does not
include 'lack of cause'. The directive should have been in force in Spain from the date of accession in 1986, but it
had not been implemented. The Spanish judge sought a ruling from the ECJ on whether, in these circumstances,
Article 11 of the directive was directly effective.

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The ECJ reiterated the view it expressed in Marshall that a directive cannot of itself 'impose obligations on
private parties'. It reaffirmed its position in von Colson that national courts must as far as possible interpret
national law in the light of the wording and purpose of the directive in order to achieve the result pursued by the
directive (para. 8). And it added that this obligation applied whether the national provisions in question were
adopted before or after the directive. It concluded by ruling specifically, and without qualification, that national
courts were 'required' to interpret domestic law in such a way as to ensure that the objectives of the directive
were achieved (para. 13).
Given that in Marleasing no legislation had been passed, either before or after the issuing of the directive, to
comply with the directive, and given the ECJ's suggestion that the Spanish court must nonetheless strive to
interpret domestic law to comply with the directive, it seems that, according to the ECJ, it is not necessary to the
application of the von Colson principle that the relevant national measure should have been introduced for the
purpose of complying with the directive, nor even that a national measure should have been specifically
introduced at all.
5.3.2 The limits of Marleasing
The strict line taken in Marleasing was modified in Wagner Miret v Fondo de Garantira Salaria (case C-
334/92), in a claim against a private party based on Directive 80/987. This directive is an employee protection
measure designed, inter alia, to guarantee employees arrears of pay in the event of their employer's insolvency.
Citing its ruling in Marleasing the Court suggested that, in interpreting national law to conform with the
objectives of a directive, national courts must presume that the State intended to comply with Community law.
They must strive 'as far as possible' to interpret domestic law to achieve the result pursued by the directive. But
if the provisions of domestic law cannot be interpreted in such a way (as was found to be the case in Wagner
Miret) the State may be obliged to make good the claimant's loss on the principles of State liability laid down in
Francovich v Italy (cases 6 & 9/90).
Wagner Miret thus represents a tacit acknowledgment on the part of the Court that national courts will not
always feel able to 'construe' domestic law to comply with an EC directive, particularly when the provisions of
domestic law are clearly at odds with an EC directive, and there is no evidence that the national legislature
intended national law to comply with its provisions, or with a ruling on its provisions by the ECJ. This limitation
proved useful for courts which were unwilling to follow Marleasing. Thus, in R v British Coal Corporation, ex
parte Vardy ([1993] ICR 720), a case decided after, but without reference to, Marleasing, the English High Court
adverted to the House of Lords judgment in Litster but found that it was 'not possible' to interpret a particular
provision of the Trade Union and Labour Relations Act 1992 to produce the same meaning as was required by
the relevant EC directive (see also Re Hartlebury Printers Ltd [1993] 1 All ER 470 at p. 478b, ChD).
Thus the indirect application of EC directives by national courts cannot be guaranteed. Some reluctance on the
part of national courts to comply with the von Colson principle, particularly as applied in Marleasing, is hardly
surprising. It may be argued that in extending the principle of indirect effect in this way the ECJ is attempting to
give horizontal effect to directives by the back door, and impose obligations, addressed to Member States, on
private parties, contrary to their understanding of domestic law. Where such is the case, as the House of Lords
remarked in Duke v GEC Reliance Ltd (see also Finnegan v Clowney Youth Training Programme Ltd), this could
be 'most unfair'. Indeed, the dividing line between giving 'horizontal direct effect' to a directive and merely
relying on the interpretative obligation under the doctrine of 'indirect effect' can be a very fine and technical one
in the circumstances of a particular case, as evidenced by Mangold (case C-l 44/04). This case involved an
interpretation of the notion of 'working time' in the context of the Working Time Directive (93/104/EC [1993] OJ
L307/18). German case law had developed a distinction between duty time, on-call time and stand-by time, with
only the first being regarded as 'working time'. Emergency workers employed by the German Red Cross had
challenged a provision in their collective labour agreement which, they argued, extended their working time
beyond the prescribed 48-hour limit. The Court suggested that this agreement may be in breach of the directive,
but that the claimants could not rely on the directive itself as against their employer. Having re-stated the basic
principle that national law must be interpreted in accordance with the Treaty, in particular where this has been
enacted to implement a directive, the Court went on to say that this obligation was not restricted to the provisions
themselves, but extended to 'national law as a whole in order to assess to what extent it may be applied so as not
to produce a result contrary to that sought by the directive' (para. 115). A national court must do 'whatever lies
within its jurisdiction' to ensure compliance with EC law. The ECJ did not go so far as to state expressly that
existing case law might have to be reviewed to ensure such compliance, but the force of its reasoning appears to
point in that direction. On the facts of the case, the outcome would be very close to allowing the individuals to
invoke the direct effect of the directive against their employer.

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The case of Kolpinghuis Nijmegen (case 80/86) may offer a limitation to the 'indirect effect' doctrine, which
might also meet the objection that this might result in 'horizontal effect' by the back door. Here, in the context of
criminal proceedings against Kolpinghuis for breach of EC Directive 80/777 on water purity, which at the
relevant time had not been implemented by the Dutch authorities, the Court held that national courts' obligation
to interpret domestic law to comply with EC law was 'limited by the general principles of law which form part of
Community law [see Chapter 6] and in particular the principles of legal certainty and non-retroactivity'.
Although expressed in the context of criminal liability, to which these principles were 'especially applicable', it
was not suggested that the limitation should be confined to such situations. Where an interpretation of domestic
law would run counter to the legitimate expectations of individuals a fortiori where the State is seeking to invoke
a directive against an individual to determine or aggravate his criminal liability, as was the case in Arcaro (case
C-l 68/95, see further below), the doctrine will not apply. Where domestic legislation has been introduced to
comply with a Community directive, it is legitimate to expect that domestic law will be interpreted in conformity
with Community law, provided that it is capable of such an interpretation (cf. Mangold, case C-144/04, above).
Where legislation has not been introduced with a view to compliance domestic law may still be interpreted in the
light of the aims of the directive as long as the domestic provision is reasonably capable of the meaning
contended for. But in either case an interpretation which conflicts with the clear words and intentions of
domestic law is unlikely to be acceptable to national courts. This has been acknowledged by the Court in Wagner
Miret (case C-334/92) and Arcaro (case C-168/95).
Arcaro (Case C-168/95) could also be seen as introducing further limitations on the scope of indirect effect.
There, the ECJ held that the 'obligation of the national court to refer to the content of the directive when
interpreting the relevant rules of its own national law reaches a limit where such an interpretation leads to the
imposition on an individual of an obligation laid down by a directive which has not been transposed or, more
especially, where it has the effect of determining or aggravating, on the basis of the directive and in the absence
of a law enacted for its implementation, the liability in criminal law of persons who act in contravention of that
directive's provisions'. The Court has subsequently affirmed that the obligation to interpret domestic law in
accordance with EC law cannot result in criminal liability independent of a national law adopted to implement an
EC measure, particularly in light of the principle of non-retroactivity of criminal penalties in Article 7 of the
European Convention on Human Rights (case C-60/02 Criminal Proceedings against X ('Rolex')). This reasoning
has also been applied in the context of direct effect (see Berlusconi and others (joined cases C-387/02, C-391/02
and C-403/02)).
The phrase 'imposition on an individual of an obligation' in Arcaro could be interpreted to mean that indirect
effect could never require national law to be interpreted so as to impose obligations on individuals not apparent
on the face of the relevant national provisions. It is submitted, however, that the ECJ's view in Arcaro is limited
to the context of criminal proceedings, and that the application of the doctrine of indirect effect can result in the
imposition of civil liability not found in domestic law (see also Advocate-General Jacobs in Centrosteel Sri v
Adipol GmbH (case C-456/98), paras 31-35).
This seems to be the result of Oceano Grupo Editorial v Rocio Murdano Quintero (case C-240/98). Here,
Oceano had brought a claim in a Barcelona court for payment under a contract of sale for encyclopaedias. The
contract contained a term which gave jurisdiction to the Barcelona court rather than a court located near the
consumer's home. That court had doubts regarding the fairness of the jurisdiction clause. The Unfair Contract
Terms Directive (93/13/EEC) requires that public bodies be able to take steps to prevent the continued use of
unfair terms. It also contains a list of unfair terms, including a jurisdiction clause, but this only became effective
in Spanish law after Oceano's claim arose. Spanish law did contain a general prohibition on unfair -terms which
could have encompassed the jurisdiction clause, but the scope of the relevant Spanish law was unclear. The
question arose whether the Barcelona court should interpret Spanish legislation in accordance with the Unfair
Contract Terms Directive. The ECJ reaffirmed the established position that a
national court is obliged, when it applies national law provisions predating or postdating [a directive], to interpret
those provisions, so far as possible, in the light of the wording of the directive' (para. 32).
The Court went on to say that in light of the emphasis on public enforcement in the Unfair Contract Terms
Directive, the national court may be required to decline of its own motion the jurisdiction conferred on it by an
unfair term. As a consequence, Oceano would be deprived of a right which it might otherwise have enjoyed
under existing Spanish law. This latter consideration should not prevent the national court from interpreting
domestic law in light of the directive. In terms of the scope of the doctrine of indirect effect, it would be
nonsensical to distinguish between cases which involve the imposition of obligations and those which concern
restrictions on rights. Often, in a relationship between individuals, one individual's right is an obligation placed

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on another individual. The reasoning in Arcaro is best confined to the narrow context of criminal penalties.
It may therefore be stated that the doctrine of indirect effect continues to be significant. However, there will be
circumstances when it will not be possible to apply it. In such a situation, as the Court suggested in Wagner
Miret, it will be necessary to pursue the alternative remedy of a claim in damages against the State under the
principles laid down in Francovich v Italy (cases C-6 & 9/90, see Chapter 8). It may be significant that in El
Corte Ingles SA v Rivera (case C-192/94) the Court, in following the Dori ruling that a directive could not be
invoked directly against private parties, did not suggest a remedy based on indirect effect, as it had in Dori, but
focused only on the possibility of a claim against the State under Francovich.

5.3.3 Indirect effect in other contexts


The discussion has, so far, concentrated on the application of this principle in the context of directives. However,
in Maria Pupino (case C-105/03), the ECJ held that the obligation to interpret national law in accordance with
European rules can extend to framework decisions adopted under Article 34(2) TEU, and that a national court is
required to interpret domestic law, in so far as possible, in accordance with the wording and purpose of a
corresponding framework decision. The decision is controversial, because it extends the notion of indirect effect
into the domain of criminal law, an area in respect of which the Community has no competence to act and seems
also to circumvent the limitation on the direct effect of JHA provisions noted at 5.2.9.

5.4 Conclusions
The principle of direct effects, together with its twin principle of supremacy of EC law, discussed in Chapter 4,
has played a crucial part in securing the application and integration of Community law within national legal
systems. By giving individuals and national courts a role in the enforcement of Community law it has ensured
that EC law is applied, and Community rights enforced, even though Member States have failed, deliberately or
inadvertently, to bring national law and practice into line with Community law. Thus, as the Court suggested in
Van Gend (case 26/62), the principle of direct effects has provided a means of control over Member States add-
itional to that entrusted to the Commission under Article 226 and Member States under Article 227 (see further
Chapter 10). But there is no doubt that the ECJ has extended the concept of direct effects well beyond its
apparent scope as envisaged by the EC Treaty. Furthermore, although the criteria applied by the ECJ for
assessing the question of direct effects appear straightforward, in reality they have in the past been applied
loosely, and any provision which is justiciable has, until recently, been found to be directly effective, no matter
what difficulties may be faced by national courts in its application, or what impact it may have on the parties,
public or private, against whom it is enforced. Thus the principle of direct effects created problems for national
courts, particularly in its application to directives.
In recent years there have been signs that the ECJ, having, with a few exceptions, won acceptance from Member
States of the principle of direct effects, or at least in the case of directives of vertical effects, had become aware
of the problems faced by national courts and was prepared to apply the principles of direct and indirect effect
with greater caution. Its more cautious approach to the question of standing, demonstrated in Lemmens (case C-
226/97), has been noted above. In Comitato di Coordinamento per la Difesa della Cava v Regions Lombardia
(case C-236/92), the Court found that Article 4 of Directive 75/442 on the Disposal of Waste, which required
States to 'take the necessary measures to ensure that waste is disposed of without endangering human health and
without harming the environment', was not unconditional or sufficiently precise to be relied on by individuals
before their national courts. It 'merely indicated a programme to be followed and provided a framework for
action' by the Member States. The Court suggested that in order to be directly effective the obligation imposed
by the directive must be 'set out in unequivocal terms'. In R v Secretary of State for Social Security, ex parte
Sutton (case C-66/95) the Court refused to admit a claim for the award of interest on arrears of social security
benefit on the basis of Article 6 of EC Directive 79/7 on Equal Treatment for Men and Women in Social
Security, although in Marshall (No. 2) (case C-271/91) it had upheld a claim for compensation for discriminatory
treatment based on an identically worded Article 6 of Equal Treatment Directive 76/207. The Court's attempts to
distinguish between the two claims ('amounts payable by way of social security are not compensatory') were
unconvincing. In El Corte Ingles SA v Rivero (case C-192/94) it found the then Article 129a (now 153) of the EC
Treaty requiring the Community to take action to achieve a high level of consumer protection insufficiently clear
and precise and unconditional to be relied on as between individuals. This may be contrasted with its earlier
approach to the former Article 128 EC, which required the Community institutions to lay down general

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principles for the implementation of a vocational training policy, which was found, albeit together with the non-
discrimination principle of (the then) Article 7 EEC, to be directly effective (see Gravierv City of Liege (case
293/83), discussed in Chapter 23). Thus, a directive may be denied direct effects on the grounds that:
(a) the right or interest claimed in the directive is not sufficiently clear, precise and unconditional; or
(b) the individual seeking to invoke the directive did not have a direct interest in the provisions invoked
(Verholen, cases C-87-9/90); or
(c) the obligation allegedly breached was not intended for the benefit of the individual seeking to invoke its
provisions (Lemmens).
In the area of indirect effects, in Dori v Recreb Sri (case C-91/92), the ECJ, following its lead in Marshall (case
152/84), declared unequivocally that directives could not be invoked horizontally. This view was endorsed in El
Corte Ingles SA v Rivero, Arcaro (case C-l68/95) and, most recently, in Pfeiffer (joined cases C-397/01 to C-
403/01).
In Wagner Miret (case C-334/92) the ECJ acknowledged that national courts might not feel able to give indirect
effect to Community directives by means of 'interpretation' of domestic law. This was also approved in Arcaro.
In almost all of these cases, decided after Francovich, the Court pointed out the possibility of an alternative
remedy based on Francovich, discussed in Chapter 8.

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Cases and Materials on EU Law (8th Edition)


Stephen Weatherill
OUP 2007
(Extracts) The Direct Effect of Directives

SECTION 1: ESTABLISHING THE PRINCIPLE


The most difficult area relating to 'direct effect' arises in the application of the notion to EC Directives. Although the rest of
this Chapter concentrates on this area, it is important not to develop an inflated notion of the importance of the problem of
the direct effect of Directives. Directives are after all only one source of Community law. However, the issue deserves
examination in some depth, not least because Directives play a major role in elaborating the detailed scope of Community
policy-making in respect of which the Treaty provides a mere framework. Moreover, Directives are a rather peculiar type of act
- Community law but implemented at national level through national legal procedures. An examination of this area, then,
should reveal much about the general problem of the interrelation of national law with the Community legal order.
The starting point is Article 249 EC, formerly Article 189, set out at p.30. This suggests that a Directive, in contrast to a
Regulation, would not be directly effective. Regulations are directly applicable, and if they meet the Van Gend en Loos (Case
26/62) test for direct effect they are directly effective too. They are law in the Member States (direct applicability) and they
may confer legally enforceable rights on individuals (direct effect). Directives, in marked contrast, are clearly dependent on
implementation by each State, according to Article 249. When made by the Community, they are not designed to be
law in that form at national level. Nor are they designed directly to affect the individual. (The same is true of the European
framework law, envisaged by Article 1-33 of the Treaty establishing a Constitution as the functional successor to the
Directive, p.34 above.) Yet in Van Duyn (Case 41/74), at p.114 above, the Court held that a Directive might be relied
on by an individual before a national court. In the next case, Pubblico Ministero v Ratti (Case 148/78), the European Court
explains how, when and why Directives can produce direct effects (or, at least, effects analogous thereto) at national level.
Pubblico Ministero v Ratti (Case 148/78)
[1979] ECR 1629, [1980] 1 CMLR 96, Court of Justice of the European Communities
Directive 73/173 required Member States to introduce into their domestic legal orders rules governing the packaging and
labelling of solvents. This had to be done by December 1974. Italy had failed to implement the Directive and maintained in
force a different national regime. Ratti produced his solvents in accordance with the Directive, not the Italian law. In 1978 he
found himself the subject of criminal proceedings in Milan for non-compliance with Italian law. Could he rely on the Directive
which Italy had left unimplemented?
[18] This question raises the general problem of the legal nature of the provisions of a directive adopted under Article 189 of the
Treaty.
[19] In this regard the settled case law of the Court, last reaffirmed by the judgment of 1 February 1977 in Case 51/76 Nederlandse
Ondernemingen [1977] 1 ECR 126, lays down that, whilst under Article 189 regulations are directly applicable and, consequently,
by their nature capable of producing direct effects, that does not mean that other categories of acts covered by that article can
never produce similar effects.
[20] It would be incompatible with the binding effect which Article 189 ascribes to directives to exclude on principle the possibility
of the obligations imposed by them being relied on by persons concerned.
[21] Particularly in cases in which the Community authorities have, by means of directive, placed Member States under a duty to
adopt a certain course of action, the effectiveness of such an act would be weakened if persons were prevented from relying on it in
legal proceedings and national courts prevented from taking it into consideration as an element of Community law.
[22] Consequently a Member State which has not adopted the implementing measures required by the directive in the prescribed
periods may not rely, as against individuals, on its own failure to perform the obligations which the directive entails.
[23] It follows that a national court requested by a person who has complied with the provisions of a directive not to apply a national
provision incompatible with the directive not incorporated into the internal legal order of a defaulting Member State, must uphold
that request if the obligation in question is unconditional and sufficiently precise.
[24] Therefore the answer to the first question must be that after the expiration of the period fixed for the implementation of a
directive a Member State may not apply its internal law - even if it is provided with penal sanctions - which has not yet been
adapted in compliance with the directive, to a person who has complied with the requirements of the directive.

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NOTE: Directive 77/728 applied a similar regime to varnishes. But here Ratti had jumped the gun. The deadline for
implementation was November 1979. Yet in 1978 his varnishes were already being made according to the Directive, not
Italian law. In the criminal prosecution for breach of Italian law he sought to rely on this Directive too. He argued that he
had a legitimate expectation that compliance with the Directive prior to its deadline for implementation would be
permissible:
Pubblico Ministero v Ratti (Case 148/78)
[1979] ECR 1629, [1980] 1 CMLR 96, Court of Justice of the European Communities
[43] It follows that, for the reasons expounded in the grounds of the answer to the national court's first question, it is only at the end
of the prescribed period and in the event of the Member State's default that the directive - and in particular Article 9 thereof - will
be able to have the effects described in the answer to the first question.
[44] Until that date is reached the Member States remain free in that field.
[45] If one Member State has incorporated the provisions of a directive into its internal legal order before the end of the period
prescribed therein, that fact cannot produce any effect with regard to other Member States.
[46] In conclusion, since a directive by its nature imposes obligations only on Member States, it is not possible for an individual to plead
the principle of 'legitimate expectation' before the expiry of the period prescribed for its implementation.
[47] Therefore the answer to the fifth question must be that Directive No 77/728 of the Council of the European Communities of 7
November 1977, in particular Article 9 thereof, cannot bring about with respect to any individual who has complied with the
provisions of the said directive before the expiration of the adaptation period prescribed for the Member State any effect capable
of being taken into consideration by national courts.
NOTE: A small indentation into the Court's insistence that the expiry of the period prescribed for a Directive's
implementation is the vital trigger for its relevance in law before national courts was made in Case C-129/96 Inter-
Environnement Wallonie ASBL v Region Wallone [1997] ECR I-7411. In advance of the deadline, Member States are obliged
'to refrain ... from adopting measures liable seriously to compromise the result prescribed' by the Directive. A violation was
established in Case C-14/02 ATRAL [2003] ECR 1-4431. In normal circumstances, however, it is the expiry of the
prescribed deadline which converts an unimplemented (and sufficiently unconditional) Directive into a provision on
which an individual may rely before a national court.
QUESTION
Why did the European Court decide to uphold Ratti's ability to rely on the unimplemented 1973 solvents Directive in the face
of the apparently conflicting wording of the Treaty (Article 189, now 249)? One may return to Judge Mancini for one
explanation:
F. Mancini, 'The Making of a Constitution for Europe' (1989) 26 CML Rev 595
(Footnotes omitted.)
3. Costa v Enel may be therefore regarded as a sequel of Van Gend en Loos. It is not the only sequel, however. Eleven years after Von
Gend en Loos, the Court took in Van Duyn v Home Office a further step forward by attributing direct effect to provisions of Directives
not transposed into the laws of the Member States within the prescribed time limit, so long as they met the conditions laid down in
Van Gend en Loos. In order to appreciate fully the scope of this development it should be borne in mind that while the principal
subjects governed by Regulations are agriculture, transport, customs and the social security of migrant workers, Community
authorities resort to Directives when they intend to harmonise national laws on such matters as taxes, banking, equality of the sexes,
protection of the environment, employment contracts and organisation of companies. Plain cooking and haute cuisine, in other
words. The hope of seeing Europe grow institutionally, in matters of social relationships and in terms of quality of life rests to a large
extent on the adoption and the implementation of Directives.
Making Directives immediately enforceable poses, however, a formidable problem. Unlike Regulations and the Treaty provisions dealt
with by Van Gend en Loos, Directives resemble international treaties, in so far as they are binding only on the States and only as to
the result to be achieved. It is understandable therefore that, whereas the Van Gend en Loos doctrine established itself within a
relatively short time, its extension to Directives met with bitter opposition in many quarters. For example, the French Conse/7 d'Etat
and the German Bundesfinanzhof bluntly refused to abide by it and Professor Rasmussen, in a most un-Danish fit of temper, went so
far as to condemn it as a case of 'revolting judicial behaviour'.
Understandable criticism is not necessarily justifiable. It is mistaken to believe that in attributing direct effect to Directives not yet
complied with by the Member States, the Court was only guided by political considerations, such as the intention of by-passing the
States in a strategic area of law-making. Non-compliance with Directives is the most typical and most frequent form of Member State

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infraction; moreover, the Community authorities often turn a blind eye to it and, even when the Commission institutes proceedings
against the defaulting State under Article 169 of the Treaty, the Court cannot impose any penalty on that State. [See now Article 228
EC, a Maastricht innovation, p.110 above.] This gives the Directives a dangerously elastic quality: Italy, Greece or Belgium
may agree to accept the enactment of a Directive with which it is uncomfortable knowing that the price to pay for possible
failure to transpose it is non-existent or minimal.
Given these circumstances, it is sometimes submitted that the Van Duyn doctrine was essentially concerned with assuring
respect for the rule of law. The Court's main purpose, in other words, was 'to ensure that neither level of government can
rely upon its malfeasance - the Member State's failure to comply, the Community's failure or even inability to enforce
compliance', with a view to frustrating the legitimate expectation of the Community citizens on whom the Directive confers
rights, indeed, 'if a Court is forced to condone wholesale violation of a norm, that norm can no longer be termed law';
nobody will deny that 'Directives are intended to have the force of law under the Treaty'.
Doubtless, in arriving at its judgment in Van Duyn, the Court may also have considered that by reducing the advantages
Member States derived from non-compliance, its judgment would have strengthened the 'federal' reach of the Community
power to legislate and it may even have welcomed such a consequence. But does that warrant the revolt staged by the
Conseil d'Etat or the Bundesfinanzhof? The present author doubts it; and so did the German Constitutional Court, which
sharply scolded the Bundesfinanzhof for its rejection of the Van Duyn doctrine. This went a long way towards restoring
whatever legitimacy the Court of Justice had lost in the eyes of some observers following Van Duyn. The wound, one might
say, is healed and the scars it has left are scarcely visible.
QUESTION
Do you agree with Mancini that the Court's work in this area is 'essentially concerned with assuring respect for the rule of
law'? See also N. Green, 'Directives, Equity and the Protection of Individual Rights' (1984) 9 EL Rev 295.
NOTE: Difficult constitutional questions arise at Community level and at national level in relation to the direct effect of
Directives. You will quickly notice that many of the issues havc arisen in the context of cases about sex discrimination. This
has happened because equality between the sexes constitutes an area of Community competence which is given shape
by ; string of important Directives, often inadequately implemented at national level.

SECTION 2: CURTAILING THE PRINCIPLE


The next case allowed the Court to refine its approach to the direct effect of Directives.
Marshall v Southampton Area Health Authority (Case 152/84)
[1986] ECR723, [1986] 1 CMLR 688, Court of Justice of the European Communities
Ms Marshall was dismissed by her employers, the Health Authority, when she reached the age of 62. A man would not
have been dismissed at that age. This was discrimination on grounds of sex. But was there a remedy in law? Apparently
not under the UK's Sex Discrimination Act 1975, because of a provision excluding discrimination arising out of treatment
in relation to retirement. Directive 76/207 requiring equal treatment between the sexes, did appear to envisage a legal
remedy for such discrimination, but that Directive had not been implemented in the UK even though the deadline was
past. So could Ms Marshall base a claim on the unimplemented Community Directive before an English court? The
European Court was asked this question in a preliminary reference by the Court of Appeal
The European Court first held that Ms Marshall's situation was an instance of discrimination on grounds of sex contrary to
the Directive. It continued:
[39] Since the first question has been answered in the affirmative, it is necessary to consider whether Article 5(1) of Directive
No 76/207 may be relied upon by an individual before national courts and tribunals.
[40] The appellant and the Commission consider that that question must be answered in the affirmative. They contend in
particular, with regard to Articles 2(1) and 5(1) of Directive No 76/207, that those provisions are sufficiently clear to enable
national courts to apply them without legislative intervention by the Member States, at least so far as overt discrimination is
concerned.
[41] In support of that view, the appellant points out that directives are capable of conferring rights on individuals which may
be relied upon directly before the courts of the Member States; national courts are obliged by virtue of the binding nature of
a directive, in conjunction with Article 5 of the EEC Treaty, to give effect to the provisions of directives where possible, in
particular when construing or applying relevant provisions of national law (judgment of 10 April 1984 in Case 14/83 von Co/son
and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891). Where there is any inconsistency between national law and

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Community law which cannot be removed by means of such a construction, the appellant submits that a national court is
obliged to declare that the provision of national law which is inconsistent with the directive is inapplicable.
[42] The Commission is of the opinion that the provisions of Article 5(1) of Directive No 76/207 are sufficiently clear and
unconditional to be relied upon before a national court. They may therefore be set up against section 6(4) of the Sex
Discrimination Act, which, according to the decisions of the Court of Appeal, has been extended to the question of
compulsory retirement and has therefore become ineffective to prevent dismissals based upon the difference in retirement
ages for men and for women.
[43] The respondent and the United Kingdom propose, conversely, that the second question should be answered in the
negative. They admit that a directive may, in certain specific circumstances, have direct effect as against a Member State in so
far as the latter may not rely on its failure to perform its obligations under the directive. However, they maintain that a directive
can never impose obligations directly on individuals and that it can only have direct effect against a Member State qua
public authority and hot against a Member State qua employer. As an employer a State is no different from a private
employer. It would not therefore be proper to put persons employed by the State in a better position than those who are
employed by a private employer.
[44] With regard to the legal position of the respondent's employees the United Kingdom states that they are in the same
position as the employees of a private employer. Although according to United Kingdom constitutional law the health
authorities, created by the National Health Service Act 1977, as amended by the Health Services Act 1980 and other
legislation, are Crown bodies and their employees are Crown servants, nevertheless the administration of the National Health
Service by the health authorities is regarded as being separate from the government's central administration and its
employees are not regarded as civil servants.
[45] Finally, both the respondent and the United Kingdom take the view that the provisions of Directive No 76/207 are
neither unconditional nor sufficiently clear and precise to give rise to direct effect. The directive provides for a number of
possible exceptions, the details of which are to be laid down by the Member States. Furthermore, the wording of Article 5 is
quite imprecise and requires the adoption of measures for its implementation.
[46] It is necessary to recall that, according to a long line of decisions of the Court (in particular its judgment of 19 January
1982 in Case 8/81 Becter v Finanzamt Munster-lnnenstadt [1982] ECR 53), wherever the provisions of a directive appear, as
far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may be relied upon by
an individual against the State where that State fails to implement the directive in national law by the end of the period
prescribed or where it fails to implement the directive correctly.
[47] That view is based on the consideration that it would be incompatible with the binding nature which Article 189 confers on the
directive to hold as a matter of principle that the obligation imposed thereby cannot be relied on by those concerned. From that the
Court deduced that a Member State which has not adopted the implementing measures required by the directive within the
prescribed period may not plead, as against individuals, its own failure to perform the obligations which the directive entails.
[48] With regard to the argument that a directive may not be relied upon against an individual, it must be emphasised that
according to Article 189 of the EEC Treaty the binding nature of a directive, which constitutes the basis for the possibility of relying on
the directive before a national court, exists only in relation to 'each Member State to which it is addressed'. It follows that a directive
may not of itself impose obligations on an individual and that a provision of a directive may not be relied upon as such against such
a person. It must therefore be examined whether, in this case, the respondent must be regarded as having acted as an individual.
[49] In that respect it must be pointed out that where a person involved in legal proceedings is able to rely on a directive as against
the State he may do so regardless of the capacity in which the latter is acting, whether employer or public authority. In either case it
is necessary to prevent the State from taking advantage of its own failure to comply with Community law.
[50] It is for the national court to apply those considerations to the circumstances of each case; the Court of Appeal has, however,
stated in the order for reference that the respondent, Southampton and South West Hampshire Area Health Authority (Teaching), is
a public authority.
[51] The argument submitted by the United Kingdom that the possibility of relying on provisions of the directive against the
respondent qua organ of the State would give rise to an arbitrary and unfair distinction between the rights of State employees and
those of private employees does not justify any other conclusion. Such a distinction may easily be avoided if the Member State
concerned has correctly implemented the directive in national law.
[52] Finally, with regard to the question whether the provision contained in Article 5(1) of Directive No 76/207, which implements
the principle of equality of treatment set out in Article 2(1) of the directive, may be considered, as far as its contents are
concerned, to be unconditional and sufficiently precise to be relied upon by an individual as against the State, it must be stated that
the provision, taken by itself, prohibits any discrimination on grounds of sex with regard to working conditions, including the

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conditions governing dismissal, in a general manner and in unequivocal terms. The provision is therefore sufficiently precise to be
relied on by an individual and to be applied by the national courts.
[53] It is necessary to consider next whether the prohibition of discrimination laid down by the directive may be regarded as
unconditional, in the light of the exceptions contained therein and of the fact that according to Article 5(2) thereof the Member States
are to take the measures necessary to ensure the application of the principle of equality of treatment in the context of national law.
[54] With regard, in the first place, to the reservation contained in Article 1 (2) of Directive No 76/207 concerning the application of the
principle of equality of treatment in matters of social security, it must be observed that, although the reservation limits the scope of
the directive rations materiae, it does not lay down any condition on the application of that principle in its field of operation and in
particular in relation to Article 5 of the directive. Similarly, the exceptions to Directive No 76/207 provided for in Article 2 thereof are
not relevant to this case.
[55] It follows that Article 5 of the Directive No 76/207 does not confer on the Member States the right to limit the application of
the principle of equality of treatment in its field of operation or to subject it to conditions and that that provision is sufficiently precise
and unconditional to be capable of being relied upon by an individual before a national court in order to avoid the application of any
national provision which does not conform to Article 5(1).
[56] Consequently, the answer to the second question must be that Article 5(1) of Council Directive No 76/207 of 9 February 1976,
which prohibits any discrimination on grounds of sex with regard to working conditions, including the conditions governing
dismissal, may be relied upon as against a State authority acting in its capacity as employer, in order to avoid the
application of any national provision which does not conform to Article 5(1).
NOTES
1. Ms Marshall was able to rely on the Directive because she was employed by the State. Her subsequent quest for
compensation took her back to the European Court, where it was made clear that national limits on compensatory awards
should not be applied in so far as they impede an effective remedy (Case C-271/91 [19931 ECR 1-4367). However, had
she been employed by a private firm she would have been unable to rely on the direct effect of the Directive. So, as far as
direct effect is concerned, there are requirements which always apply - those explained above in Van Gend en Loos (Case
26/62) (p. 114). But for Directives there are extra requirements: first, that the implementation date has passed; and,
second, that the State is the party against which enforcement is claimed. Directives may be vertically directly effective, but
not horizontally directly effective.
2. In rejecting the horizontal direct effect of Directives, the Court in fact made a choice between competing rationales for the
direct effect of Directives. In its early decisions the Court laid emphasis on the need to extend direct effect in this area in
order to secure the 'useful effect' of measures left unimplemented by defaulting States. Consider para 12 of Van Duyn
(Case 41/74) (p.114 above); and, for example, in Nederlandse Ondernemingen (Case 51/76) [1977] ECR 113, the Court
observed (at para 23) that:
where the Community authorities have, by Directive, imposed on Member States the obligation to pursue a particular
course of conduct, the useful effect of such an act would be weakened if individuals were prevented from relying on it
before their national courts and if the latter were prevented from taking it into consideration as an element of Community
law.
This dictum came in the context of a case against the State, but this logic would lead a bold court to hold an unimplemented
Directive enforceable against a private party too, in order to improve its useful effect. However, in Ratti (Case 148/78) (p.133
above) and in Marshall (Case 152/84) (p.136 above), the Court appears to switch its stance away from the idea of 'useful
effect' to a type of 'estoppel' as the legal rationale for holding Directives capable of direct effect. See para 49 of the
judgment in Marshall (Case 152/84).
3. The Court's curtailment of the impact of Directives before national courts may also be seen as a manifestation of judicial
minimalism, mentioned at p.28 above. The realist would examine the awareness of the Court that in this area it risks
assaulting national sensitivities if it insists on deepening the impact of Community law in the national legal order. The next
case was mentioned in passing by Judge Mancini (p.135 above), but the decision deserves further attention.
Minister of the Interior v Cohn Bendit
[1980] 1 CMLR543, Conseil d'Etat
The matter concerned the exclusion from France of Cohn Bendit, a noted political radical (who subsequently became a
Member of the European Parliament!). He relied on Community rules governing free movement to challenge the exclusion.
The Conseil d'Etat, the highest court in France dealing with administrative law, addressed itself to the utility of a Directive
in Cohn Bendit's action before the French courts.

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According to Article 56 of the Treaty instituting the European Economic Community of 25 March 1957, no requirement of
which empowers an organ of the European Communities to issue, in matters of ordre public, regulations which are
directly applicable in the member-States, the co-ordination of statute and of subordinate legislation (dispositions
legislatives et reglementaires) 'providing for special treatment for foreign nationals on grounds of public policy (ordre public),
public security or public health' shall be the subject of Council directives, enacted on a proposal from the Commission and
after consultation with the European Assembly. It follows clearly from Article 189 of the Treaty of 25 March 1957 that while
these directives bind the member-States 'as to the result to be achieved' and while, to attain the aims set out in them, the
national authorities are required to adapt the statute law and subordinate legislation and administrative practice of the
member-States to the directives which are addressed to them, those authorities alone retain the power to decide on the form
to be given to the implementation of the directives and to fix themselves, under the control of the national courts, the means
appropriate to cause them to produce effect in national law. Thus, whatever the detail that they contain for the eyes of the
member-States, directives may not be invoked by the nationals of such States in support of an action brought against an
individual administrative act. It follows that M. Cohn-Bendit could not effectively maintain, in requesting the Tribunal
Administratif of Paris to annul the decision of the Minister of the Interior of 2 February 1976, that that decision infringed the
provisions of the directive enacted on 25 February 1964 by the Council of the European Communities with a view to
coordinating, in the circumstances laid down in Article 56 of the EEC Treaty, special measures concerning the movement and
residence of foreign nationals which are justified on grounds of public policy, public security or public health. Therefore, in the
absence of any dispute on the legality of the administrative measures taken by the French Government to comply with the
directives enacted by the Council of the European Communities, the solution to be given to the action brought by M. Cohn-
Bendit may not in any case be made subject to the interpretation of the directive of 25 February 1964. Consequently, without
it being necessary to examine the grounds of the appeal, the Minister of the Interior substantiates his argument that the
Tribunal Administratif of Paris was wrong when in its judgment under appeal of 21 December 1977 it referred to the Court of
Justice of the European Communities questions relating to the interpretation of that directive and stayed proceedings until
the decision of the European Court. In the circumstances the case should be referred back to the Tribunal Administratif of
Paris to decide as may be the action of M. Cohn-Bendit.
NOTE: See, similarly, the Bundesftnanzhof (German federal tax court) in VAT Directives [1982] 1 CMLR 527.
As D. Anderson observed in the wake of the Court's rejection in Marshall (Case 152/ 84) of the enforceability of unimplemented
Directives against private parties, '[t]he present concern of the Court is to consolidate the advances of the 1970s rather than
face the legal complexities and political risks of attempting to extend the doctrine [of direct effect] further' (Boston College
International & Comparative Law Review (1988) XI 91, 100). This implies that the Court might have been expected to return
to the matter. This proved correct. In 1993 and 1994 three Advocates-General pressed the Court to reconsider its rejection
of the horizontal direct effect of Directives: Van Gerven in 'Marshall 2' (Case C-271/91) [1993] ECR 1-4367; Jacobs in Vaneetveld
v SA Le Foyer (Case C-316/93) [1994] ECR 1-763 and Lenz in Paola Faccini Dori v Recreb Sri (Case C-91/92) [1994] ECR 1-3325.
Advocate-General Lenz insisted that the Citizen of the Union was entitled to expect equality before the law throughout the
territory of the Union and observed that, in the absence of horizontal direct effect, such equality was compromised by State
failure to implement Directives. Advocate-General Jacobs thought that the effectiveness principle militated against drawing
distinctions based on the status of a defendant. All three believed that the pursuit of coherence in the Community legal
order dictated acceptance of the horizontal direct effect of Directives. Only in the third of these cases, Faccini Dori v Recreb,
was the European Court unable to avoid addressing the issue directly.
Paolo Faccini Dori v Recreb Sri (Case C-91/92)
[1994] ECR I-3325, Court of Justice of the European Communities
Ms Dori had concluded a contract at Milan Railway Station to buy an English language correspondence course. By virtue of
Directive 85/577, which harmonizes laws governing the protection of consumers in respect of contracts negotiated away from
business premises, the so-called 'Doorstep Selling Directive', she ought to have been entitled to a 'cooling-off period of at
least seven days within which she could exercise a right to withdraw from the contract. However, she found herself unable
to exercise that right under Italian law because Italy had not implemented the Directive. She therefore sought to rely on the
Directive to defeat the claim brought against her by the private party with which she had contracted. The ruling in Marshall
(Case 152/84) appeared to preclude reliance on the Directive and the Court, despite the promptings of Advocate-General
Lenz, refused to overrule Marshal]. It maintained that Directives are incapable of horizontal direct effect.
[23] It would be unacceptable if a State, when required by the Community legislature to adopt certain rules intended to
govern the State's relations - or those of State entities - with individuals and to confer certain rights, on individuals, were
able to rely on its own failure to discharge its obligations so as to deprive individuals of the benefits of those rights. Thus the
Court has recognised that certain provisions of directives on conclusion of public works contracts and of directives on
harmonisation of turnover taxes may be relied on against the State (or State entities) (see the judgment in Case 103/88

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Fratelli Costanzo v Comune di Milano [1989] ECR 1839 and the judgment in Case 8/81 Becker v Finarizamt Munster-lnnenstadt
[1982] ECR 53).
[24] The effect of extending that case law to the sphere of relations between individuals would be to recognise a power in the
Community to enact obligations for individuals with immediate effect, whereas it has competence to do so only where it is
empowered to adopt regulations.
[25] It follows that, in the absence of measures transposing the directive within the prescribed time-limit, consumers cannot
derive from the directive itself a right of cancellation as against traders with whom they have concluded a contract or enforce
such a right in a national court.
NOTE: Paragraph 48 of the ruling in Marshall expresses comparable sentiments to those expressed in para 24 of the
Dori ruling, but the emphasis in the latter on the limits of Community competence (specifically under Article 189 - now
249 - EC) is noticeably firmer. Although the Court did not consider that Ms Dori was wholly barred from relying on the
Directive (see p.156 below on 'indirect' effect and p.164 on a claim against the defaulting State), it nevertheless refused to
allow a Directive to exert direct effect in relations between private individuals. In rulings subsequent to Dori, the Court has
repeated its rejection of the horizontal direct effect of Directives: e.g., Case C-192/94 El Corte Ingles v Cristma Blasquez Rivera
[1996] ECR 1-1281; Case C-97/96 Verband Deutscher Daihatsu Handler eV v Daihatsu Deutschland GmbH [1997] ECR 1-
6843. The reader is invited to consider whether, just as the Conseil d'Etat's ruling in Cohn Bendit (p. 139 above) may have
prompted the European Court's caution in Marshall, so too national judicial anxieties, expressed with particular force by the
the Bundesverfassungsgericht, about Treaty amendment in the guise of judicial interpretation may have prompted the
European Court in Dori to emblazon its fidelity to the text of the EC Treaty by declining to extend Community
legislative competence to include the enactment of obligations for individuals with immediate effect. Chapter 21 will
examine this material in depth.

SECTION 3: THE SCOPE OF THE PRINCIPLE: THE STATE


Whatever one's view of the Court's motivations in ruling against the horizontal direct effect of Directives in Marshall (Case
152/84), confirmed in Don (Case C-91/92) and subsequently, the decision left many questions unanswered. First, what is
the 'State'? The more widely this is interpreted, the more impact the unimplemented Directive will have.
Foster v British Gas (Case C-188/89)
[1990] ECR 1-3133, Court of Justice of the European Communities
The applicant wished to rely on the Equal Treatment Directive 76/207 against her employer before English courts. She and
other applicants had been compulsorily retired at an age earlier than male employees. This raised the familiar issue of
the enforceability of Directives before national courts where national law is inadequate. The Court examined the nature of
the defendant (the British Gas Corporation: BGC).
[3] By virtue of the Gas Act 1972, which governed the BGC at the material time, the BGC was a statutory corporation
responsible for developing and maintaining a system of gas supply in Great Britain, and had a monopoly of the supply of
gas.
[4] The members of the BGC were appointed by the competent Secretary of State. He also had the power to give the BGC
directions of a general character in relation to matters affecting the national interest and instructions concerning its
management.
[5] The BGC was obliged to submit to the Secretary of State periodic reports on the exercise of its functions, its
management and its programmes. Those reports were then laid before both Houses of Parliament. Under the Gas Act 1972
the BGC also had the right, with the consent of the Secretary of State, to submit proposed legislation to Parliament.
[6] The BGC was required to run a balanced budget over two successive financial years. The Secretary of State could
order it to pay certain funds over to him or to allocate funds to specified purposes.
It then proceeded to explain the legal approach to defining the 'State' for these purposes:
[13] Before considering the question referred by the House of Lords, it must first be observed as a preliminary point
that the United Kingdom has submitted that it is not a matter for the Court of Justice but for the national courts to
determine, in the context of the national legal system, whether the provisions of a directive may be relied upon
against a body such as the BGC.
[14] The question what effects measures adopted by Community institutions have and in particular whether those measures

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may be relied on against certain categories of persons necessarily involves interpretation of the articles of the Treaty
concerning measures adopted by the institutions and the Community measure in issue.
[15] It follows that the Court of Justice has jurisdiction in proceedings for a preliminary ruling to determine the categories of
persons against whom the provisions of a directive may be relied on. It is for the national courts, on the other hand, to decide
whether a party to proceedings before them falls within one of the categories so defined.
The Court then disposed of the question referred:
[16] As the Court has consistently held (see the judgment of 19 January 1982 in Case 8/81, Becker v Hauptzollamt Munster-
lnnenstadt, [1982] ECR 53 at paragraphs 23 to 25), where the Community authorities have, by means of a directive, placed
Member States under a duty to adopt a certain course of action, the effectiveness of such a measure would be diminished if
persons were prevented from relying upon it in proceedings before a court and national courts were prevented from taking it
into consideration as an element of Community law. Consequently, a Member State which has not adopted the implementing
measures required by the directive within the prescribed period may not plead, as against individuals, its own failure to
perform the obligations which the directive entails. Thus, wherever the provisions of a directive appear, as far as their
subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of imple-
menting measures adopted within the prescribed period, be relied upon as against any national provision which is
incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the
State.
[17] The Court further held in its judgment of 26 February 1986 in Case 152/84 (Marshall, at paragraph 49) that where a
person is able to rely on a directive as against the State he may do so regardless of the capacity in which the latter is acting,
whether as employer or as public authority. In either case it is necessary to prevent the State from taking advantage of its
own failure to comply with Community law.
[18] On the basis of those considerations, the Court has held in a series of cases that unconditional and sufficiently precise
provisions of a directive could be relied on against organizations or bodies which were subject to the authority or control of
the State or had special powers beyond those which result from the normal rules applicable to relations between
individuals.
[19] The Court has accordingly held that provisions of a directive could be relied on against tax authorities (the judgments of
19 January 1982 in Case 8/81, Becker, cited above, and of 22 February 1990 in Case C-22188, ECSC v Acciaierie e Ferriere
Busseni (in liquidation)), local or regional authorities (judgment of 22 June 1989 in Case 103/88, Fratelli Costanzo v Comune di
Milano), constitutionally independent authorities responsible for the maintenance of public order and safety (judgment of 15
May 1986 in Case 222/84, Johnston v Chief Constable of the Royal Ulster Constabulary, [1986] ECR 1651), and public
authorities providing public health services (judgment of 26 February 1986 in Case 152/84, Marshall, cited above).
[20] It follows from the foregoing that a body, whatever its legal form, which has been made responsible, pursuant to a
measure adopted by the State, for providing a public service under the control of the State and has for that purpose
special powers beyond those which result from the normal rules applicable in relations between individuals is
included in any event among the bodies against which the provisions of a directive capable of having direct effect may be
relied upon.
[21 ] With regard to Article 5(1) of Directive 76/207 it should be observed that in the judgment of 26 February 1986 in Case
152/84 (Marshall, cited above, at paragraph 52), the Court held that that provision was unconditional and sufficiently precise
to be relied on by an individual and to be applied by the national courts.
[22] The answer to the question referred by the House of Lords must therefore be that Article 5(1) of Council Directive
76/207/EEC of 9 February 1976 may be relied upon in a claim for damages against a body, whatever its legal form, which has
been made responsible, pursuant to a measure adopted by the State, for providing a public service under the control of the
State and has for that purpose special powers beyond those which result from the normal rules applicable in relations
between individuals.
NOTE: The case has been widely commented upon; see, e.g., N. Grief, (1991) 16 EL Rev 136; E. Szyszczak, (1990) 27
CML Rev 859. For a full examination of the policy issues, see D. Curtin, The Province of Government', (1990) 15 EL Rev 195.
For another case discussing the reach of unimplemented Directives in this vein see Case C-157/02, Rieser International
Transport (judgment of 5 February 2004).
QUESTION
The case arose before British Gas was 'privatized' under the Gas Act 1986 (sold to the private sector). What difference would
this sale make to the application of the Court's test?

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NOTE: The notion of the 'State' embraces local authorities.


Fratelli Costanzo v Milano (Case 103/88)
[1989] ECR 1839, Court of Justice of the European Communities
The case arose out of the alleged failure of the municipal authorities in Milan to respect inter alia a Community Directive in
awarding contracts for the construction of a football stadium for the 1990 World Cup. Could a disappointed contractor rely
on the unimplemented Directive before Italian courts against the municipal authorities? The matter reached the European
Court by way of a preliminary reference.
[28] In the fourth question the national court asks whether administrative authorities, including municipal authorities, are
under the same obligation as a national court to apply the provisions of Article 29(5) of Council Directive 71/305 and to
refrain from applying provisions of national law which conflict with them.
[29] In its judgments of 19 January 1982 in Case 8/81 Becker v Finanzamt Munster-lnnenstadt [1982] ECR 53, at p.71 and 26
February 1986 in Case 152/84 Marshall v Southampton and South-West Hampshire Area Health Authority [1986] ECR 723,
at p.748, the Court held that wherever the provisions of a directive appear, as far as their subject-matter is concerned, to be
unconditional and sufficiently precise, those provisions may be relied upon by an individual against the State where that State
has failed to implement the directive in national law by the end of the period prescribed or where it has failed to implement
the Directive correctly.
[30] It is important to note that the reason for which an individual may, in the circumstances described above, rely on the
provisions of a directive in proceedings before the national courts is that the obligations arising under those provisions
are binding upon all the authorities of the Member States.
[31 ] It would, moreover, be contradictory to rule that an individual may rely upon the provisions of a directive which fulfil the
conditions defined above in proceedings before the national courts seeking an order against the administrative authorities,
and yet to hold that those authorities are under no obligation to apply the provisions of the directive and refrain from applying
provisions of national law which conflict with them. It follows that when the conditions under which the Court has held that
individuals may rely on the provisions of a directive before the national courts are met, all organs of the administration,
including decentralized authorities such as municipalities, are obliged to apply those provisions.
[32] With specific regard to Article 29(5) of Directive 71/305, it is apparent from the discussion of the first question that it is
unconditional and sufficiently precise to be relied upon by an individual against the State. An individual may therefore plead
that provision before the national courts and, as is clear from the foregoing, all organs of the administration, including
decentralized authorities such as municipalities, are obliged to apply it.

SECTION 4: INCIDENTAL EFFECT


It has been shown that Directives are incapable of application against private individuals before national courts. It is
only when the State has fulfilled its Treaty obligation of implementation pursuant to Articles 10 and 249 EC that the
Directive, duly transformed, becomes 'live' for the purposes of imposing obligations on private parties.
But this is not to say that an unimplemented Directive will never exert an effect before a national court that is prejudicial to a
private party. Without abandoning its stance against horizontal direct effect, the Court has nevertheless chosen to recognise
circumstances in which the State's default may incidentally affect the position of a private individual.
Case C-201/94 R v The Medicines Control Agency, ex. parte Smith & Nephew Pharmaceuticals Ltd and Primecrown Ltd v
The Medicine Control Agency [1996] ECR 1-5819 concerned Article 3 of Directive 65/65. This provided that no proprietary
medicinal product could be placed on the market in a Member State unless a prior authorisation had been issued by the
competent authority of that Member State - the Medicines Control Agency (MCA) in the UK. The UK's Medicines Control
Agency (MCA) had issued to Primecrown a licence to import a proprietary medicinal product of Belgian origin bearing the
same name, and manufactured under an agreement with the same (American) licensor, as a product for which Smith &
Nephew already held a marketing authorisation in the United Kingdom. But the MCA decided it was in error and it withdrew
the authorisation. Both Primecrown and Smith & Nephew initiated proceedings before the English courts and, in a
preliminary reference, the European Court was asked to provide an interpretation of the Directive's rules governing
authorisation. But it was also asked whether Smith & Nephew, as the holder of the original authorisation issued under the
normal procedure referred to in Directive 65/65, could rely on the Directive in proceedings before a national court in which it
contested the validity of a marketing authorisation granted by a competent public authority to one of its competitors. The
Court decided that it could. The consequence is that Primecrown's position could be detrimentally affected by a competitor's
reliance on a Directive in proceedings against the public authorities. True, Smith & Nephew did not rely on the Directive in an

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action against Primecrown. This is not horizontal direct effect of the type painstakingly excluded by the Court in Don (Case C-
91/92, p.141 above). But it is a case in which the application of a Directive by a national court incidentally affected the legal
position of a private party.
The Court has developed this case law further. Without any direct challenge to its dogged resistance to the horizontal direct
effect of Directives, it has nevertheless extended the incidental effect of Directives on private parties in national proceedings.
Council Directive 83/189/EEC provided for Member States to give advance notice to the Commission and other Member States
of plans to introduce new product specifications. The amendments were consolidated in Directive 98/34 [1998] OJ L204/37,
itself amended by Directive 98/48 [1998] OJ L217/18. The purpose of this notification system is to avoid the introduction of new
measures having equivalent effect to quantitative restrictions on trade (and to supply the Commission with a possible basis
for developing its harmonisation programme). It is an 'early warning system' (see Chapter 9 more generally on 'market
management').
In the next case the Court decided that non-notification of a draft technical regulation (as defined by the Directive) affected
the enforceability of that measure before the courts of the defaulting Member State.
CIA Security International SA v Signalson SA and Securitel Sprl (Case C-194/94)
[1996] ECR 1-2201, Court of Justice of the European Communities
Signalson and Securitel sought a court order from a Belgian court requiring that their competitor CIA Security cease
marketing a burglar alarm. The alarm was not compatible with Belgian technical standards. But the Belgian technical stand-
ards had not been notified to the Commission, as was required by Directive 83/189. Did this State default have any effect in
the national proceedings involving two private parties? The Directive did not address the matter. This did not deter the
Court.
[42] It is settled law that, wherever provisions of a directive appear to be, from the point of view of their content,
unconditional and sufficiently precise, they may be relied on against any national provision which is not in accordance with
the directive (see the judgment in Case 8/81 Becker [1982] ECR 53 and the judgment in Joined Cases C-6/90 and C-9/90
Francovich and Others [1991] ECR I-5357).
[43] The United Kingdom considers that the provisions of Directive 83/189 do not satisfy those criteria on the ground, in
particular, that the notification procedure contains a number of elements that are imprecise.
[44] That view cannot be adopted. Articles 8 and 9 of Directive 83/189 lay down a precise obligation on Member States to
notify draft technical regulations to the Commission before they are adopted. Being, accordingly, unconditional and sufficiently
precise in terms of their content, those articles may be relied on by individuals before national courts.
[45] It remains to examine the legal consequences to be drawn from a breach by Member States of their obligation to notify
and, more precisely, whether Directive 83/189 is to be interpreted as meaning that a breach of the obligation to notify,
constituting a procedural defect in the adoption of the technical regulations concerned, renders such technical regulations
inapplicable so that they may not be enforced against individuals.
[46] The German and Netherlands Governments and the United Kingdom consider that Directive 83/189 is solely concerned
with relations between the Member States and the Commission, that it merely creates procedural obligations which the
Member States must observe when adopting technical regulations, their competence to adopt the regulations in question
after expiry of the suspension period being, however, unaffected, and, finally, that it contains no express provision relating
to any effects attaching to non-compliance with those procedural obligations.
[47] The Court observes first of all in this context that none of those factors prevents non-compliance with Directive 83/189
from rendering the technical regulations in question inapplicable.
[48] For such a consequence to arise from a breach of the obligations laid down by Directive 83/189, an express provision to
this effect is not required. As pointed out above, it is undisputed that the aim of the directive is to protect freedom of
movement for goods by means of preventive control and that the obligation to notify is essential for achieving such
Community control. The effectiveness of Community control will be that much greater if the directive is interpreted as
meaning that breach of the obligation to notify constitutes a substantial procedural defect such as to render the technical
regulations in question inapplicable to individuals.
[49] That interpretation of the directive is in accordance with the judgment given in Case 380/87 Enichern Base and Others v
Cornune di Cinisello Balsamo [1989] ECR 2491, paragraphs 19 to 24. In that judgment, in which the Court ruled on the
obligation for Member States to communicate to the Commission national draft rules falling within the scope of an article of
Council Directive 75/442/EEC of 15 July 1975 on waste (OJ 1975 L 194, p.39), the Court held that neither the wording nor

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the purpose of the provision in question provided any support for the view that failure by the Member States to observe their
obligation to give notice in itself rendered unlawful the rules thus adopted. In this regard, the Court expressly considered that
the provision in question was confined to imposing an obligation to give prior notice which did not make entry into force of
the envisaged rules subject to the Commission' s agreement or lack of opposition and which did not lay down the procedure
for Community control of the drafts in question. The Court therefore concluded that the provision under examination
concerned relations between the Member States and the Commission but that it did not afford individuals any right
capable of being infringed in the event of breach by a Member State of its obligation to give prior notice of its draft
regulations to the Commission.
[50] In the present case, however, the aim of the directive is not simply to inform the Commission. As already found in
paragraph 41 of this judgment, the directive has, precisely, a more general aim of eliminating or restricting obstacles to trade,
to inform other States of technical regulations envisaged by a State, to give the Commission and the other Member States
time to react and to propose amendments for lessening restrictions to the free movement of goods arising from the
envisaged measure and to afford the Commission time to propose a harmonising directive. Moreover, the wording of
Articles 8 and 9 of Directive 83/189 is clear in that those articles provide for a procedure for Community control of draft
national regulations and the date of their entry into force is made subject to the Commission' s agreement or lack of
opposition.
NOTE: The effectiveness rationale contained in para 48 is remarkably far-reaching. It was also encountered in Ratti (Case
148/78 para 21, p.134 above)). But the reasoning in Ratti was treated more circumspectly by the Court subsequently in
Marshall (Case 152/84, p. 136), and the approach taken in CIA Security has also been curtailed in the light of the salutary
experience provided by litigation.
Johannes Martinus Lemmens (Case C-226/97)
[1998] ECR 1-3711, Court of Justice of the European Communities
Lemmens was charged with driving while under the influence of alcohol. He argued that the breathalyser was made
according to a technical standard that had not been notified to the Commission and that accordingly, following CIA Security,
it was incompatible with Community law to rely on such evidence before national (criminal) courts. Para 12 of the judgment
records Mr Lemmens' disingenuous but ingenious idea:
It is apparent from the order for reference that, in the course of the criminal proceedings instituted against him, Mr
Lemmens said 1 understand from the press that there are difficulties regarding the breath-analysis apparatus. I maintain
that this apparatus has not been notified to Brussels and wonder what the consequences of this could be for my case'.
The Court concluded that the Dutch Regulation governing breathalyser kits constituted a technical regulation which should,
prior to its adoption, have been notified to the Commission in accordance with Article 8 of the Directive. But with what
consequence?
[32] . . . it should be noted that, in paragraph 40 of its judgment in CIA Security International, cited above, the Court
emphasised that the Directive is designed to protect, by means of preventive control, freedom of movement for goods,
which is one of the foundations of the Community. This control serves a useful purpose in that technical regulations covered by the
Directive may constitute obstacles to trade in goods between Member States, such obstacles being permissible only if they are
necessary to satisfy compelling requirements relating to the public interest.
[33] In paragraphs 48 and 54 of that judgment, the Court pointed out that the obligation to notify is essential for achieving such
Community control and went on to State that the effectiveness of such control will be that much greater if the Directive is
interpreted as meaning that breach of the obligation to notify constitutes a substantial procedural defect such as to render the
technical regulations in question inapplicable, and thus unenforceable against individuals.
[34] In criminal proceedings such as those in the main action, the regulations applied to the accused are those which, on the one
hand, prohibit and penalise driving while under the influence of alcohol and, on the other, require a driver to exhale his breath into an
apparatus designed to measure the alcohol content, the result of that test constituting evidence in criminal proceedings. Such
regulations differ from those which, not having been notified to the Commission in accordance with the Directive, are unenforceable
against individuals.
[35] While failure to notify technical regulations, which constitutes a procedural defect in their adoption, renders such regulations
inapplicable inasmuch as they hinder the use or marketing of a product which is not in conformity therewith, it does not have the
effect of rendering unlawful any use of a product which is in conformity with regulations which have not been notified.
[36] The use of the product by the public authorities, in a case such as this, is not liable to create an obstacle to trade which could
have been avoided if the notification procedure had been followed.

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[37] The answer to the first question must therefore be that the Directive is to be interpreted as meaning that breach of the
obligation imposed by Article 8 thereof to notify a technical regulation on breath-analysis apparatus does not have the effect of making
it impossible for evidence obtained by means of such apparatus, authorised in accordance with regulations which have not been
notified, to be relied upon against an individual charged with driving while under the influence of alcohol.
Paragraph 35 of Lemmens provides a re-focusing of the test applied in CIA Security. Paragraph 36 constitutes a narrower
reading of the effectiveness rationale. In the next case the Court explicitly adopts the reasoning advanced in Lemmens
but accepts the application of the notification Directive in litigation between two contracting parties in which, at first glance,
the State had no involvement.
Unilever Italia SpA v Central Food SpA (Case C-443/98)
[2000] ECR I-7535, Court of Justice of the European Communities
Unilever had supplied Central Food with a quantity of virgin olive oil. Central Food rejected the goods on the basis that they
were not labelled in accordance with a relevant Italian law. This law had been notified to the Commission but Italy had not
observed the Directive's 'standstill' obligation, which required it to wait a defined period before bringing the law into force.
The Court treated breach of the 'standstill' obligation as indistinguishable for these purposes from outright failure to notify
(which was the nature of the default in both CIA Security and Lemmens). Unilever submitted that the law should not be
applied and sued Central Food under the contract for the price of the goods.
[46] . . . in civil proceedings of that nature, application of technical regulations adopted in breach of Article 9 of Directive 83/189 may
have the effect of hindering the use or marketing of a product which does not conform to those regulations.
[47] That is the case in the main proceedings, since application of the Italian rules is liable to hinder Unilever in marketing the
extra virgin olive oil which it offers for sale.
[48] Next, it must be borne in mind that, in CIA Security, the finding of inapplicability as a legal consequence of breach of
the obligation of notification was made in response to a request for a preliminary ruling arising from proceedings between
competing undertakings based on national provisions prohibiting unfair trading.
[49] Thus, it follows from the case law of the Court that the inapplicability of a technical regulation which has not been
notified in accordance with Article 8 of Directive 83/189 can be invoked in proceedings between individuals for the reasons
set out in paragraphs 40 to 43 of this judgment. The same applies to non-compliance with the obligations laid down by
Article 9 of the same directive, and there is no reason, in that connection, to treat disputes between individuals relating to
unfair competition, as in the CIA Security case, differently from disputes between individuals concerning contractual rights
and obligations, as in the main proceedings.
[50] Whilst it is true, as observed by the Italian and Danish Governments, that a directive cannot of itself impose obligations
on an individual and cannot therefore be relied on as such against an individual (see Case C-91/92 Faccini Dori [1994] ECR I-
3325, paragraph 20), that case-law does not apply where non-compliance with Article 8 or Article 9 of Directive 83/189,
which constitutes a substantial procedural defect, renders a technical regulation adopted in breach of either of those
articles inapplicable.
[51] In such circumstances, and unlike the case of non-transposition of directives with which the case-law cited by those two
Governments is concerned, Directive 83/189 does not in any way define the substantive scope of the legal rule on the basis of
which the national court must decide the case before it. It creates neither rights nor obligations for individuals.
[52] In view of all the foregoing considerations, the answer to the question submitted must be that a national court is required,
in civil proceedings between individuals concerning contractual rights and obligations, to refuse to apply a national technical
regulation which was adopted during a period of postponement of adoption prescribed in Article 9 of Directive 83/189.
NOTE: This is not horizontal direct effect. The Directive did not impose an obligation on Central Food. The contract with
Unilever imposed the obligation. This seems to be the Court's point in para 51. But the invocation of the Directive
completely changed the legal position that had appeared to prevail between the two parties under the contract. It
transplanted the commercial risk.
Advocate-General Jacobs had argued vigorously in his Opinion in Unilever that legal certainty would be damaged by a finding
that the notification Directive be relevant to the status of the contractual claim between private parties.
ADVOCATE-GENERAL JACOBS:
[99] . . . The fact that a Member State did not comply with the procedural requirements of the directive as such should not,
in my view, entail detrimental effects for individuals.

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[100] That is, first, because such effects would be difficult to justify in the light of the principle of legal certainty. For the day-to-
day conduct of trade, technical regulations which apply to the sale of goods must be clearly and readily identifiable as
enforceable or as unenforceable. Although the present dispute concerns a relatively small quantity of bottled olive oil of a
value which may not affect the finances of either Unilever or Central Food to any drastic extent, it is easy to imagine an
exactly comparable case involving highly perishable goods and sums of money which represent the difference between
prosperity and ruin for one or other of the parties concerned. In order to avoid difficulties in his contractual relations, an
individual trader would have to be aware of the existence of Directive 83/189, to know the judgment in CIA Security, to identify a
technical regulation as such, and to establish with certainty whether or not the Member State in question had complied with all the
procedural requirements of the directive. The last element in particular might prove to be extremely difficult because of the lack of
publicity of the procedure under the directive. There is no obligation on the Commission to publish the fact that a Member State
has notified or failed to notify a given draft technical regulation. In respect of the standstill periods under Article 9 of the directive,
there is no way for individuals to know that other Member States have triggered the six-month standstill period by delivering
detailed opinions to the Commission. Similarly, the Commission is also not required to publish the fact that it has informed a
Member State of intended or pending Community legislation.
[101] The second problem is possible injustice. If failure to notify were to render a technical regulation unenforceable in private
proceedings an individual would lose a case in which such a regulation was in issue, not because of his own failure to comply with an
obligation deriving from Community law, but because of a Member State's behaviour. The economic survival of a firm might be
threatened merely for the sake of the effectiveness of a mechanism designed to control Member States' regulatory activities. That
would be so independently of whether the technical regulation in question constituted an obstacle to trade, a measure with neutral
effects on trade, or even a rule furthering trade. The only redress for a trader in such a situation would be to bring ex post a
hazardous and costly action for damages against a Member State. Nor is there any reason for the other party to the proceedings
to profit, entirely fortuitously, from a Member State's failure to comply with the directive.
[102] It follows, in my view, that the correct solution in proceedings between individuals is a substantive solution. The applicability of a
technical regulation in proceedings between individuals should depend only on its compatibility with Article 30 [now 28: Chapter 11
of this book] of the Treaty. If in the present case Italian Law No 313 complies with Article 30, I can see no reason why Central Food,
which understandably relied on the rules laid down in the Italian statute book, should lose the case before the national court. If,
however, Italian Law No 313 infringes Article 30 then the national court should be obliged to set the Law aside on that ground.
[103] I accordingly conclude that as against an individual another individual should not be able to rely on a Member State's failure to
comply with the requirements of Directive 83/189 in order to set aside a technical regulation.
NOTE: Plainly these anxieties did not move the Court in Unilever. It did not follow the Advocate-General and it did not limit
the matter to resolution under Article 28 (ex 30) EC, concerning the free movement of goods. It accepted the incidental
effect of the notification Directive on the contractual claim. This thrusts EC law of market integration deep into national
contract law in so far as private compliance with technical standards is at stake. In the next case the Court nonetheless
adopts an additional line of reasoning which may be capable of providing a basis for softening some of the harsh
commercial uncertainty likely to flow from the principle that technical standards may be treated as unenforceable by
national courts if the requirements of the notification Directive are not observed bv the State.
Sapod Audic v Eco-Emballages SA (Case C-159/00)
[2002] ECR 1-5031, Court of Justice of the European Communities
[49] . . . it should be observed, first, that according to settled case law Directive 83/189 must be interpreted as meaning that a failure
to observe the obligation to notify laid down in Article 8 of that directive constitutes a substantial procedural defect such as to render
the technical regulations in question inapplicable and thus unenforceable against individuals (see, in particular, CIA Security
International, paragraphs 48 and 54, and Lemmens, paragraph 33).
[50] Second, it should be borne in mind that according to the case law of the Court the inapplicability of a technical regulation which
has not been notified to the Commission in accordance with Article 8 of Directive 83/189 may be-invoked in legal proceedings
between individuals concerning, inter alia, contractual rights and duties (see Unilever, paragraph 49).
[51] Accordingly, if the national court were to interpret the second paragraph of Article 4 of Decree No 92-377 as
establishing an obligation to apply a mark or label and, hence, as constituting a technical regulation within the meaning of
Directive 83/189, it would be incumbent on that court to refuse to apply that provision in the main proceedings.
[52] It should, however, be observed that the question of the conclusions to be drawn in the main proceedings from
the inapplicability of the second paragraph of Article 4 of Decree No 92-377 as regards the severity of the sanction under
the applicable national law, such as nullity or unenforceability of the contract between Sapod and Eco-Emballages, is a
question governed by national law, in particular as regards the rules and principles of contract law which limit or adjust

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that sanction in order to render its severity proportionate to the particular defect found. However, those rules and
principles may not be less favourable than those governing similar domestic actions (principle of equivalence) and may not
be framed in such a way as to render impossible in practice the exercise of rights conferred by Community law
(principle of effectiveness) (see, inter alia, Case 33/76 Rewe v Landwirtschaftskammer fur das Saarland [1976] ECR 1989,
paragraph 5, and Joined Cases C-52/99 and C-53/99 Camorotto and Vignone [2001] ECR 1-1395, paragraph 21).
NOTE: The principles of equivalence and effectiveness, mentioned in para 52, were examined above in Chapter 4, p.122
above. With reference to relevant national rules on remedies with which you are familiar, consider what they may mean in
the context sketched by the Court in para 52 of Sapod Audic.
In conclusion, none of these decisions on 'incidental' effect overturns the Court's long-standing exclusion of the horizontal
direct effect of Directives. After all in none of these cases did a Directive impose an obligation directly on a private party.
However these decisions do demonstrate that the legal position of private parties may be prejudicially affected by the lurking
presence of an unimplemented Directive of which they may be perfectly unaware.
QUESTION
The Court's case law places a sharp distinction between the horizontal direct effect of Directives (which is not allowed) and
the 'incidental' effect of Directives of private parties (which is allowed). Is this distinction fair?

SECTION 5: THE PRINCIPLE OF INDIRECT EFFECT, OR THE OBLIGATION OF CONFORM-INTERPRETATION


The previous section questioned the extent to which the rejected notion that Directives may exert horizontal direct effect can
be rationally sealed off from the phenomenon of incidental effect. But however one chooses to categorize the horizontal
direct effect/incidental effect case law, and however one defines the 'State' for the purposes of fixing the outer limits of
'vertical' direct effect (Case 152/84 Marshall, p.136 above), an unavoidable anomaly taints the law governing the scope of the
direct effect of Directives. Consider the sex discrimination Directives. If a State has failed to implement a Directive properly,
then, provided that the standard Van Gend en Loos (Case 26/62) 'test' for direct effect is met by the provision in question, a
State employee can rely on the direct effect of the Directive (vertical direct effect). A private employee cannot (horizontal
direct effect). So, in the UK, where Directive 76/207 on Equal Treatment of the Sexes was not properly implemented in time,
Ms Marshall (above), a State employee, succeeded in relying on Community law, whereas Ms Duke (Duke vGEC Reliance
[1988] 2WLR359, [1988] 1 All ER 626), who was making the same complaint, failed, for she happened to be a private sector
employee.
The UK had made this point in Marshall (Case 152/84) as a reason for withholding direct effect, but its objections were swept
aside by the Court in para 51 of the judgment (p.138 above). Yet the anomaly is real, even if the Court's refusal to permit a
recalcitrant State to benefit from pointing it out is understandable. Submissions in Don (Case C-91/92, p.141 above) urged
the Court to eliminate the anomaly by extending direct effect, but these were not successful.
The European Court's contribution to the resolution of this anomaly first began to take shape in Von Colson and Kamann v
Land Nordrhein-Westfalen (Case 14/83) and Harz vDeutsche Tradax (Case 79/83). Mention is made of Case 14/83 in para 41 of
the judgment in Marshall at p.137 above, but the Court's approach in the case deserves careful separate attention.
Von Colson and Kamann v Land Nordrhein-Westfalen (Case 14/83)
[1984] ECR 1891, [1986] 2 CMLR 430, Court of Justice of the European Communities
The case was a preliminary reference from Germany, and concerned that fertile source of litigation, the Equal Treatment
Directive 76/207. The issue was described by the Court as follows:
[2] Those questions were raised in the course of proceedings between two qualified social workers, Sabine von Colson and
Elisabeth Kamann, and the Land Nordrhein-Westfalen. It appears from the grounds of the order for reference that Werl prison,
which caters exclusively for male prisoners and which is administered by the Land Nordrhein-Westfalen, refused to engage
the plaintiffs in the main proceedings for reasons relating to their sex. The officials responsible for recruitment justified their
refusal to engage the plaintiffs by citing the problems and risks connected with the appointment of female candidates and for
those reasons appointed instead male candidates who were however less well-qualified.
[3] The Arbeitsgehcht Hamm held that there had been discrimination and took the view that under German law the only
sanction for discrimination in recruitment is compensation for 'Vertrauens-schaden', namely the loss incurred by candidates
who are victims of discrimination as a result of their belief that there would be no discrimination in the establishment of the
employment relationship. Such compensation is provided for under Paragraph 611 a(2) of the Burgerliches Gesetzbuch.
[4] Under that provision, in the event of discrimination regarding access to employment, the employer is liable for

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'damages in respect of the loss incurred by the worker as a result of his reliance on the expectation that the establishment of
the employment relationship would not be precluded by such a breach [of the principle of equal treatment]'. That provision
purports to implement Council Directive No 76/207.
[5] Consequently the Arbeitsgericht found that, under German law, it could order the reimbursement only of the travel
expenses incurred by the plaintiff von Colson in pursuing her application for the post (DM 7.20) and that it could not allow
the plaintiffs' other claims.
Von Colson's objection centred on Article 6 of the Directive:
[18] Article 6 requires Member States to introduce into their national legal systems such measures as are necessary to enable
all persons who consider themselves wronged by discrimination 'to pursue their claims by judicial process'. It follows from
the provision that Member States are required to adopt measures which are sufficiently effective to achieve the objective
of the directive and to ensure that those measures may in fact be relied on before the national courts by the persons
concerned. Such measures may include, for example, provisions requiring the employer to offer a post to the candidate
discriminated against or giving the candidate adequate financial compensation, backed up where necessary by a system of
fines. However the directive does not prescribe a specific sanction; it leaves Member States free to choose between the
different solutions suitable for achieving its objective.
Was this adhered to in the German legal order? The Court's approach was markedly different from standard 'direct effect'
analysis:
[22] It is impossible to establish real equality of opportunity without an appropriate system of sanctions. That follows not
only from the actual purpose of the directive but more specifically from Article 6 thereof which, by granting applicants for a
post who have been discriminated against recourse to the courts, acknowledges that those candidates have rights of which
they may avail themselves before the courts.
[23] Although, as has been stated in the reply to Question 1, full implementation of the directive does not require any specific
form of sanction for unlawful discrimination, it does entail that that sanction be such as to guarantee real and effective
judicial protection. Moreover it must also have a real deterrent effect on the employer. It follows that where a Member
State chooses to penalize the breach of the prohibition of discrimination by the award of compensation, that compensation
must in any event be adequate in relation to the damage sustained.
[24] In consequence it appears that national provisions limiting the right to compensation of persons who have been
discriminated against as regards access to employment to a purely nominal amount, such as, for example, the reimbursement of
expenses incurred by them in submitting their application, would not satisfy the requirements of an effective transposition of the
directive.
[25] The nature of the sanctions provided for in the Federal Republic of Germany in respect of discrimination regarding access to
employment and in particular the question whether the rule in Paragraph 611a (2) of the Burgerliches Gesetzbuch excludes the
possibility of compensation on the basis of the general rules of law were the subject of lengthy discussion before the Court. The
German Government maintained in the oral procedure that that provision did not necessarily exclude the application of the general
rules of law regarding compensation. It is for the national court alone to rule on that question concerning the interpretation of its
national law.
[26] However, the Member States' obligation arising from a directive to achieve the result envisaged by the directive and their duty
under Article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that
obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that,
in applying the national law and in particular the provisions of a national law specifically introduced in order to implement Directive
No 76/207, national courts are required to interpret their national law in the light of the wording and the purpose of the directive in
order to achieve the result referred to in the third paragraph of Article 189.
[27] On the other hand, as the above considerations show, the directive does not include any unconditional and sufficiently precise
obligation as regards sanctions for discrimination which, in the absence of implementing measures adopted in good time may be
relied on by individuals in order to obtain specific compensation under the directive, where that is not provided for or permitted under
national law.
[28] It should, however, be pointed out to the national court that although Directive No 76/207/EEC, for the purpose of imposing a
sanction for the breach of the prohibition of discrimination, leaves the Member States free to choose between the different solutions
suitable for achieving its objective, it nevertheless requires that if a Member State chooses to penalize breaches of that prohibition by
the award of compensation, then in order to ensure that it is effective and that it has a deterrent effect, that compensation must in
any event be adequate in relation to the damage sustained and must therefore amount to more than purely nominal compensation
such as, for example, the reimbursement only of the expenses incurred in connection with the application. It is for the national court

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to interpret and apply the legislation adopted for the implementation of the directive in conformity with the requirements of
Community law, in so far as it is given discretion to do so under national law.
NOTE: J. Steiner, (1985) 101 LQR 491, observed that the decision marks 'a subtle but significant change of direction' in the
European Court's approach to the enforceability of EEC Directives before national courts'. P. Morris, (1989) JBL 233, at
p.241, suggested that 'if national judiciaries respond positively to this exhortation [in Von Colson] something approaching
horizontal direct effect may be achieved by a circuitous route'. B. Fitzpatrick, (1989) 9 OJLS 336, at p.346, refers to Von Colson
having established a principle of 'indirect effect' and suggests that 'it may effectively bridge the gap between vertical and
horizontal direct effect'.
QUESTION
To what extent do you think the Von Colson approach offers a route for resolving the anomalies of the horizontal/vertical
direct effect distinction which emerges from the Court's ruling in Marshall (Case 152/84)?
NOTE: In the Von Colson (Case 14/83) judgment itself, one can pick out important contradictions in respect of the
national court's task of 'conform-interpretation' (para 28). Compare the second sentence of para 26 with the more
qualified statement in the concluding sentence of the Court's ruling in answer to the questions referred to above. The
next two cases are both worthy of examination from the perspective of clarifying the ambit of Von Colson (Case 14/83).

Offic/er van Just/tie v Kolpinghuis Nijmegen (Case 80/86)


[1987] ECR 3969, Court of Justice of the European Communities
A criminal prosecution was brought against a cafe owner for stocking mineral water which was in fact simply fizzy tap
water. The Dutch authorities sought to supplement the basis of the prosecution by relying on definitions of mineral water
detrimental to the defendant which were contained in a Directive which had not been implemented in The Netherlands. A
preliminary reference was made to the European Court.
The Court ruled that 'a national authority may not rely, as against an individual, upon a provision of a Directive whose
necessary implementation in national law has not yet taken place'. It then turned to the third question referred to it:
[11 ] The third question is designed to ascertain how far the national court may or must take account of a directive as an aid
to the interpretation of a rule of national law.
[12] As the Court stated in its judgment of 10 April 1984 in Case 14/83 Von Co/son and Kamann v Land Nordrhein-
Westfalen [1984] ECR 1891, the Member States' obligation arising from a directive to achieve the result envisaged by
the directive and their duty under Article 5 of the Treaty to take all appropriate measures, whether general or particular,
to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within
their jurisdiction, the courts. It follows that, in applying the national law and in particular the provisions of a national law
specifically introduced in order to implement the directive, national courts are required to interpret their national law in
the light of the wording and the purpose of the directive in order to achieve the result referred to in the third paragraph of
Article 189 of the Treaty.
[13] However, that obligation on the national court to refer to the content of the directive when interpreting the relevant
rules of its national law is limited by the general principles of law which form part of Community law and in particular the
principles of legal certainty and non-retroactivity. Thus the Court ruled in its judgment of 11 June 1987 in Case 14/86 Pretore
di So/6 v X [1987] ECR 2545 that a directive cannot, of itself and independently of a national law adopted by a Member
State for its implementation, have the effect of determining or aggravating the liability in criminal law of persons who act
in contravention of the provisions of that directive.
[14] The answer to the third question should therefore be that in applying its national legislation a court of a Member State
is required to interpret that legislation in the light of the wording and the purpose of the directive in order to achieve the
result referred to in the third paragraph of Article 189 of the Treaty, but a directive cannot, of itself and independently of a law
adopted for its implementation, have the effect of determining or aggravating the liability in criminal law of persons who act in
contravention of the provisions of that directive.
NOTE: The Court is anxious to emphasise the importance of preserving legal certainty and protecting reasonable
expectations. See also Case C-168/95 Luciano Arcaro [1996] ECR 1-4705.
Marleasing SA v La Comercial International de Alimentation SA (Case C-106/89)
[1990] ECR 1-4135, Court of Justice of the European Communities

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The case arose out of a conflict between the Spanish Civil Code and Community Company Law Directive (68/151) which
was unimplemented in Spain. The litigation was between private parties, which, following Marshall (Case 152/84), ruled out
the direct effect of the Directive. The European Court explained the national court's duty of interpretation in the following
terms:
[8]. . . [T]he Member States' obligation arising from a directive to achieve the result envisaged by the directive and their duty
under Article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that
obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It
follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the
national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose
of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article
189 of the Treaty.
NOTE: The obligation imposed on national courts in Marleasing (Case C-108/89) has a firmer feel than that in Von Colson
(Case 14/83, p.152 above). See J. Stuyck and P. Wytinck, (1991) 28 CMLRev205.
The Court also confirmed the obligation of sympathetic interpretation that is cast on national courts by virtue of what was
Article 5 and is now Article 10 EC post-Amsterdam in its ruling in Paola Faccini Dori (Case C-91/92). Even though Ms Dori
was not able to rely directly on the unimplemented Directive in proceedings involving another private party (p.141 above), she
was entitled to expect that the national court would not simply ignore the Directive in applying national law.
Paola Faccini Dori v Recreb Sri (Case C-91/92)
[1994] ECR I-3325, Court of Justice of the European Communities
[26] It must also be borne in mind that, as the Court has consistently held since its judgment in Case 14/83 Von Colson and
Kamann v Land Nordrhein-Westfalen [1984] ECR 1891, paragraph 26, the Member States' obligation arising from a directive
to achieve the result envisaged by the directive and their duty under Article 5 of the Treaty to take all appropriate measures,
whether general or particular, is binding on all the authorities of Member States, including, for matters within their
jurisdiction, the courts. The judgments of the Court in Case C-106/89 Marleasing v La Comercial Internacional de
Alimentation [1990] ECR 1-4135, paragraph 8, and Case C-334/92 Wagner Miret v Fonda de Garantia Salahal [1993] ECR 1-
6911, paragraph 20, make it clear that, when applying national law, whether adopted before or after the directive, the
national court that has to interpret that law must do so, as far as possible, in the light of the wording and the purpose of the
directive so as to achieve the result it has in view and thereby comply with the third paragraph of Article 189 of the Treaty.
NOTE: The logic of this reasoning leads to the conclusion that the Community law obligations pertaining to the absorption
of a Directive into the national legal order are enduring, and do not come to an end on the Directive's transposition 'on
paper' into national law. This is made clear in the next case.
Marks and Spencer pic v Commissioners of Customs and Excise (C-62/00)
[2002] ECR 1-6325, Court of Justice of the European Communities
[24] . . . it should be remembered, first, that the Member States' obligation under a directive to achieve the result envisaged
by the directive and their duty under Article 5 of the EC Treaty (now Article 10 EC) to take all appropriate measures, whether
general or particular, to ensure fulfilment of that obligation are binding on all the authorities of the Member States, including,
for matters within their jurisdiction, the courts (see, inter alia, Case C-168/95 Arcaro [1996] ECR I-4705, paragraph 41). It
follows that in applying domestic law the national court called upon to interpret that law is required to do so, as far as possible,
in the light of the wording and purpose of the directive, in order to achieve the purpose of the directive and thereby comply with
the third paragraph of Article 189 of the EC Treaty (now the third paragraph of Article 249 EC) (see, in particular, Case C-
106/89 Marleasing [1990] ECR 1-4135, paragraphs, and Case C-334/92 Wagner Miret [1993] ECR 1-6911, paragraph 20).
[25] Second, as the Court has consistently held, whenever the provisions of a directive appear, so far as their subject-matter is
concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals
against the State where the latter has failed to implement the directive in domestic law by the end of the period prescribed
or where it has failed to implement the directive correctly (see, inter alia, Case 8/81 Becker [1982] ECR 53, paragraph 25;
Case 103/88 Prate/// Costanzo [1989] ECR 1839, paragraph 29; and Case C-319/97 Kortas [1999] ECR 1-3143, paragraph 21).
[26] Third, it has been consistently held that implementation of a directive must be such as to ensure its application in full (see
to that effect, in particular, Case C-217/97 Commission v Germany [1999] ECR I-5087, paragraph 31, and Case C-214/98
Commission v Greece [2000] ECR 1-9601, paragraph 49).
[27] Consequently, the adoption of national measures correctly implementing a directive does not exhaust the effects of the
directive. Member States remain bound actually to ensure full application of the directive even after the adoption of those

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measures. Individuals are therefore entitled to rely before national courts, against the State, on the provisions of a directive
which appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise whenever the full
application of the directive is not in fact secured, that is to say, not only where the directive has not been implemented or
has been implemented incorrectly, but also where the national measures correctly implementing the directive are not being
applied in such a way as to achieve the result sought by it.
[28] As the Advocate General noted in point 40 of his Opinion, it would be inconsistent with the Community legal order for
individuals to be able to rely on a directive where it has been implemented incorrectly but not to be able to do so where
the national authorities apply the national measures implementing the directive in a manner incompatible with it.
NOTE: The scope of the obligation to interpret national law in conformity with a Directive was taken a step further in the
next case. However, the Court did not help to stabilize and clarify the State of the law by introducing textual anomalies into
its ruling.
Centrosteel Sri v Adipol GmbH (Case C-456/98)
[2000] ECR I-6007, Court of Justice of the European Communities
[15] It is true that, according to settled case law of the Court, in the absence of proper transposition into national law, a
directive cannot of itself impose obligations on individuals (Case 152/84 Marshall v Southampton and South-West
Hampshire Health Authority [1986] ECR 723, paragraph 48, and Case C-91/92 Facdni Don v Recreb [1994] ECR I-3325,
paragraph 20).
[16] However, it is also apparent from the case law of the Court (Case C-106/89 Marleasing v La Comercial Internacional de
Alimentation [1990] ECR 1-4135, paragraph 8; Case C-334/92 Wagner Miret v Fondo de Garantia Salarial [1993] ECR 1-6911,
paragraph 20; Facdni Dor/, paragraph 26; and Joined Cases C-240/98 to C-244/98 Oceano Grupo Editorial v Salvat Ed/tores
[2000] ECR 1-4941, paragraph 30) that, when applying national law, whether adopted before or after the directive, the
national court that has to interpret that law must do so, as far as possible, in the light of the wording and the purpose of the
directive so as to achieve the result it has in view and thereby comply with the third paragraph of Article 189 of the EC
Treaty (now the third paragraph of Article 249 EC).
[17] Where it is seised of a dispute falling within the scope of the Directive and arising from facts postdating the expiry of
the period for transposing the Directive, the national court, in applying provisions of domestic law or settled domestic case
law, as seems to be the case in the main proceedings, must therefore interpret that law in such a way that it is applied in
conformity with the aims of the Directive...
The reference in para 17 to the application of 'settled domestic case law' in conformity with the aims of the Directive is
striking. However, this phrase is missing from the formal ruling.
Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-
employed commercial agents precludes national legislation which makes the validity of an agency contract conditional upon
the commercial agent being entered in the appropriate register. The national court is bound, when applying provisions of
domestic law predating or postdating the said Directive, to interpret those provisions, so far as possible, in the light of the
wording and purpose of the Directive, so that those provisions are applied in a manner consistent with the result pursued by
the Directive.
NOTE: In its subsequent ruling in AXA Royal Beige (Case C-386/00 [2002] ECR1-2209) the Court referred explicitly to its own
ruling in Centrosteel (Case C-456/98), but cited only paragraphs 15 and 16, not 17!
This peculiarity was not addressed directly by the Court in the next case, but the Court did take the opportunity to refer to
Centrosteel and to revisit its view of the nature of the obligation imposed on national judges.
Bernhard Pfeiffer v Deutsches Rotes Kreuz (Joined Cases C-397/01 to C-403/01)
Judgment of 5 October 2004, Court of Justice of the European Communities
The litigation, originating before German labour courts, concerned matters falling within the scope of Directive 89/391 on
health and safety at work and Directive 93/ 104 on the organization of working time. After confirming its long-standing refusal
to accept that Directives are capable of application in litigation before national courts exclusively involving private parties -
that is, no horizontal direct effect -the Court insisted:
[111] It is the responsibility of the national courts in particular to provide the legal protection which individuals derive from
the rules of Community law and to ensure that those rules are fully effective.
[112] That is a fortiori the case when the national court is seised of a dispute concerning the application of domestic

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provisions which, as here, have been specifically enacted for the purpose of transposing a directive intended to confer rights
on individuals. The national court must, in the light of the third paragraph of Article 249 EC, presume that the Member State,
following its exercise of the discretion afforded it under that provision, had the intention of fulfilling entirely the obligations
arising from the directive concerned (see Case C-334/92 Wagner Miret[1993] ECR 1-6911, paragraph 20).
[113] Thus, when it applies domestic law, and in particular legislative provisions specifically adopted for the purpose of
implementing the requirements of a directive, the national court is bound to interpret national law, so far as possible, in the
light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and
consequently comply with the third paragraph of Article 249 EC (see to that effect, inter alia, the judgments cited above in
Von Co/son and Kamann, paragraph 26; /War/easing, paragraph 8, and Faccini Dor/, paragraph 26; see also Case C-63/97
BMW [1999] ECR I-905, paragraph 22; Joined Cases C-240/98 to C-244/98 Oceano Grupo Editorial and Salvat Ed/tores [2000]
ECR 1-4941, paragraph 30; and Case C-408/01 Adidas-Salomon and Adidas Benelux [2003] ECR I-OOOO, paragraph 21).
[114] The requirement for national law to be interpreted in conformity with Community law is inherent in the system of the
Treaty, since it permits the national court, for the matters within its jurisdiction, to ensure the full effectiveness of
Community law when it determines the dispute before it (see, to that effect, Case C-160/01 Mau [2003] ECR 1-4791,
paragraph 34).
[115] Although the principle that national law must be interpreted in conformity with Community law concerns chiefly
domestic provisions enacted in order to implement the directive in question, it does not entail an interpretation merely of
those provisions but requires the national court to consider national law as a whole in order to assess to what extent it
may be applied so as not to produce a result contrary to that sought by the directive (see, to that effect, Carbonari [Case C-
131/97], paragraphs 49 and 50).
[116] In that context, if the application of interpretative methods recognised by national law enables, in certain circumstances, a
provision of domestic law to be construed in such a way as to avoid conflict with another rule of domestic law or the scope of that
provision to be restricted to that end by applying it only in so far as it is compatible with the rule concerned, the national court is
bound to use those methods in order to achieve the result sought by the directive.
[117] In such circumstances, the national court, when hearing cases which, like the present proceedings, fall within the scope of
Directive 93/104 and derive from facts postdating expiry of the period for implementing the directive, must, when applying the
provisions of national law specifically intended to implement the directive, interpret those provisions so far as possible in such a way
that they are applied in conformity with the objectives of the directive (see, to that effect, the judgment in Case C-456/98
Centrostee/[2000] ECR I-6007, paragraphs 16 and 17).
[118] In this instance, the principle of interpretation in conformity with Community law thus requires the referring court to do whatever
lies within its jurisdiction, having regard to the whole body of rules of national law, to ensure that Directive 93/104 is fully effective, in
order to prevent the maximum weekly working time laid down in Article 6(2) of the directive from being exceeded (see, to that
effect, /War/easing, paragraphs 7 and 13).
[119] Accordingly, it must be concluded that, when hearing a case between individuals, a national court is required, when applying
the provisions of domestic law adopted for the purpose of transposing obligations laid down by a directive, to consider the whole
body of rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the directive in order
to achieve an outcome consistent with the objective pursued by the directive. In the main proceedings, the national court must thus
do whatever lies within its jurisdiction to ensure that the maximum period of weekly working time, which is set at 48 hours by
Article 6(2) of Directive 93/104, is not exceeded.
The assertion in para 114 that the principle of conform-interpretation is 'inherent in the system of the Treaty' is strikingly
bold. However, this cements a direct connection between this principle and the Court's finding in Francovich (Cases C-6/90 &
C-9/90) that a State may be liable for damage caused to individuals as a result of breach of EC law. That judgment too locates
the principle as 'inherent in the system of the Treaty' (para 35 of the judgment in Francovich, p.162 below).
If the obligation cast on national courts is inherent in the system of the Treaty it is not to be confined to the impact of
Directives. A Regulation is directly applicable but may in some circumstances leave room for necessary national
implementation (for example in fixing penalties in the event of infringement). In Case C-60/02 Rolex judgment of 7 January
2004 the Court transposed the principle of 'conform-interpretation' from the sphere of Directives to the context of a
Regulation of this type. It stated that 'National courts are required to interpret their national law within the limits set by
Community law, in order to achieve the result intended by the Community rule in question', referring to Case C-106/89
Marleasing [1990] ECR 1-4135 (para 59 of the ruling in Rolex). However, the Court accepted the relevance of principles of legal
certainty and of non-retroactivity in criminal matters, which preclude an EC act from determining or aggravating the liability in
criminal law of persons who act in contravention of its provisions, referring to Case C-168/95 Arcaro [1996] ECR 1-4705,
mentioned at p. 155 above.

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EU Law (9th Edition)


Steiner, Woods and Twigg-Flesner
OUP 2006

9: The preliminary rulings procedure (Extracts)


9.1 Introduction
The preliminary rulings procedure is important for a number of reasons relating not only to the substantive
development of EC law, but also to the relationship between EC law and national law. A glance through the
preceding chapters of this book will reveal that the majority of cases cited, and almost all the major principles
established by the ECJ, were decided in the context of a reference to that court for a preliminary ruling under
Article 234 (ex 177) EC. Cases such as Van Gend en Loos (case 26/62), Costa v ENEL (case 6/64) and Defrenne
v Sabena (No. 2) (case 43/75), concerned with questions of interpretation of EC law, enabled the ECJ to develop
the crucial concepts of direct effects and the supremacy of EC law. Internationale Handelsgesellschaft mbH
(case 11/70); Stauder v City of Vim (case 29/69) and Royal Scholten-Honig (Holdings) Ltd (cases 103 & 145/77)
(see Chapter 6), which raised questions of the validity of EC law, led the way to the incorporation of general
principles of law into EC law. The principle of State liability in damages was laid down inFrancovich (cases C-
6, 9/90) in preliminary ruling proceedings. In all areas of EC law, the Article 234 procedure has played a major
role in developing the substantive law. The procedure accounts for over 50 per cent of all cases heard by the
ECJ. This percentage has of course increased as the CFI has taken over responsibility for judicial review actions
(Chapters 11 and 12) and actions for damages (Chapter 13). Nonetheless, the preliminary rulings procedure plays
a central part in the development and enforcement of EC law.
If the procedure has been valuable from the point of view of the Community, as a means of developing and
clarifying the law, it has been equally valuable to the individual, since it has provided him or her with a means of
access to the ECJ when other, direct avenues have been closed. In this way the individual has been able
indirectly to challenge action by Member States (e.g., Van Gend en Loos - import charge levied in breach of the
then Article 12 (now 25)) or by Community institutions (e.g., Royal Scholten-Honig - EC regulation invalid for
breach of principle of equality) before the ECJ and obtain an appropriate remedy from his national court (see
Chapter 8).
The importance of the Article 234 procedure, both in absolute terms and relative to other remedies, has been
greatly increased by the development by the ECJ of the concept of direct effects. Where originally only 'directly
applicable' regulations might have been expected to be invoked before national courts, these courts may now be
required to apply treaty articles, decisions and even directives. Even where EC law is not directly effective it may
be invoked before national courts on the principles of indirect effects or State liability under Francovich. As a
result, national courts now play a major role in the enforcement of EC law. As we will see, the cooperative
relationship between the ECJ and the national courts has been a key factor in the success of the preliminary
rulings procedure.
Although the preliminary rulings procedure has assumed such an importance in the ways outlined above, its
primary and original purpose was to ensure, by means of authoritative rulings on the interpretation and validity
of EC law, the correct and uniform application of EC law by the courts of Member States. In assessing its
effectiveness, and the attitudes of national courts and the ECJ towards its use, this function, as well as its
importance both for individuals and for the Community, should be borne in mind.
9.2 The procedure
Article 234 EC provides that:
The Court of Justice shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of this Treaty;
(b) the validity and interpretation of acts of the institutions of the Community;
(c) the interpretation of the statutes of bodies established by an act of the Council, where those statutes so
provide.
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it
considers that a decision on the question is necessary to enable it to give judgment, request the Court of Justice to

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give a ruling thereon. Where any such question is raised in a case pending before a court or tribunal of a Member
State, against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring
the matter before the Court of Justice.
Since the TEU, Article 234 is not the only preliminary reference mechanism. Maastricht introduced the
possibility for preliminary references within the JHA pillar by virtue of Article 35 TEU. With Amsterdam and
the introduction of the new title into the EC Treaty came a separate preliminary rulings mechanism in Article 68
EC for questions relating to that title. The majority of this chapter is devoted to Article 234; Articles 68 EC and
36 TEU will be discussed briefly below at 9.9.
The Treaty of Nice amended Article 225 (ex 168) EC on the jurisdiction of the Court of First Instance to enable
it to deal with preliminary rulings under Article 234 'in specific areas laid down by the Statute [of the Court of
Justice]' (Article 225(3)). So far, the CFI has not been allocated any specific areas and has therefore yet to give a
preliminary ruling (see Statute of the Court of Justice, November 2005 version). (On the relationship between the
CFI and ECJ, see also Chapter 7.)
9.2.1 Nature of the preliminary rulings procedure
The preliminary rulings procedure is not an appeals procedure. An appeals procedure implies a hierarchy
between the different types of court, some courts being higher and having more authority than those lower down
the judicial architecture.
Typically, appeal courts can overrule the decisions of lower courts. The decision whether or not to appeal lies, in
the first place, in the hands of the parties, although in some instances leave to appeal from certain courts is
required. In contrast, the preliminary rulings procedure merely provides a means whereby national courts, when
questions of EC law arise, may apply to the ECJ for a preliminary ruling on matters of interpretation or validity
prior to themselves applying the law. In principle, it is a matter for the national courts to decide whether or not to
make a reference. (See further 9.6.7.) It is an example of shared jurisdiction, depending for its success on mutual
cooperation. As Advocate-General Lagrange said in De Geus en Uitdenbogerd v Robert Bosch GmbH (case
13/61), the first case to reach the ECJ on an application under the preliminary rulings procedure:
Applied judiciously - one is tempted to say loyally - the provisions of Article 177 [now 234] must lead to a real
and fruitful collaboration between the municipal courts and the Court of Justice of the Communities with mutual
regard for their respective jurisdiction.
To assess how this collaboration operates, in principle and in practice, it is necessary to examine the procedure
from the point of view of: (a) the ECJ, and (b) national courts.
9.3 jurisdiction of the Court of Justice
The jurisdiction of the ECJ is twofold. It has jurisdiction to give preliminary rulings concerning:
(a) interpretation, and
(b) validity.

9.3.1 Interpretation
In its interpretative role, the Court may rule on the interpretation of the Treaty, of acts of the institutions, and of
statutes of bodies established by an act of the Council, where those statutes so provide. Its jurisdiction with
regard to interpretation is thus very wide. 'Interpretation of the Treaty' includes the EC Treaty and all treaties
amending or supplementing it. It did not, however, pursuant to original Article L TEU, have jurisdiction to
interpret Articles A-F, J and K TEU (save for Article K. 3(2)(c)(3)) (Grau Gomis (case C-167/94)), effectively
excluding a number of the common provisions of the TEU, together with the JHA and CFSP pillars. As noted in
Chapter 2, the ToA amended the original Article L, now 46 TEU, to give the ECJ jurisdiction in relation to the
JHA Pillar of the TEU (subject to the requirement in new Article 35 TEU that Member States must, by
declaration, accept the ECJ's jurisdiction) and the TEU provisions on closer cooperation (now Articles 43-45
TEU). These changes will be discussed further below.
'Acts of the institutions' is a broad concept. It covers not only binding acts in the form of regulations, directives
and decisions, but even non-binding acts such as recommendations and opinions, since they may be relevant to
the interpretation of domestic implementing measures. On the same reasoning the Court has held that an act need
not be directly effective to be subject to interpretation under Article 234 (Mazzalai (case 111/75)), nor need the

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party concerned have relied on the act before his national court: that court can raise it before the ECJ of its own
motion (Verholen (cases 87, 88 & 89/90)). The Court has also given rulings on the interpretation of international
treaties entered into by the Community, on the basis that these constitute 'acts of the institutions' (see R. & V.
Haegeman Sprl v Belgium (case 181/73)). This includes 'mixed agreements', such as the WTO agreement, where
interpretation relates to obligations undertaken by the Community (Hermes (case C-53/96), noted (1999) 36
CML Rev 663). However, the Court has held in the context of a claim based on the Statute of the European
School, that it has no jurisdiction to rule on agreements which, although linked with the Community and to the
functioning of its institutions, have been set up by agreement between Member States and not on the basis of the
Treaty or EC secondary legislation (Hurd v Jones (case 44/84) - headmaster of European School unable to
invoke Statute against HM Tax Inspectorate).
9.3.2 Validity
Here the Court's jurisdiction is confined to acts of the institutions. It has been suggested, by extension of the
reasoning in R. & V. Haegeman Sprl v Belgian State, that 'acts of the institutions' would include international
agreements entered into by the Community. Here, however, the ruling would be binding only on the Community
members; it would be ineffective against third-party signatories. The grounds for invalidity are the same as in an
action for annulment under Article 230 (ex 173) (see Chapter 11).
As with interpretation, Article 46 TEU excludes the majority of the TEU from the ECJ's jurisdiction. Although
the ECJ has not had to consider the limits to its jurisdiction under Article 46 TEU in respect of references for a
preliminary ruling, it has had to consider these matters in the context of a judicial review action (Commission v
Council (Airport transit visas) (case C-l 70/96)). The case concerned the appropriate Treaty base for airport
transit visas, the Council arguing that the then Article K.3 TEU (which has been significantly amended by the
ToA) was the appropriate base, the Commission (and the Parliament) considering that the then Article l00c EC
(repealed by the ToA), which dealt with visas, was more appropriate. The Council claimed that the ECJ had no
jurisdiction to hear the case as the then Article L TEU in its original form (now Article 46), applied to exclude
the ECJ's jurisdiction. The ECJ emphasised that that provision was subject to Article 47 (ex M) TEU, which
provides that nothing in the TEU shall affect the EC Treaty, a phrase which the ECJ has interpreted to include
the acquis (i.e., the entire body of EC law). The ECJ from this basis argued that it had the duty to review
measures made under TEU provisions to ensure that they did not erode Community law. Presumably, it would
take a similar approach were a similar question to arise under an Article 234 EC reference on validity. This
boundary would seem now be of less significance as the ToA, in amending Article 46 TEU, permitted the ECJ
jurisdiction to interpret and review the validity of certain acts and agreements made under the JHA pillar, should
the Member States agree thereto (see Article 35 TEU).
One important question in relation to the ECJ's jurisdiction under Article 234 and correspondingly the national
courts' right to refer was identified in T. Port GmbH & Co. KG v Bundesanstalt fur Landwirtschaft und
Erniihrung (case C-68/95). There the ECJ held that the preliminary ruling procedure did not give the Member
States' courts the power to refer questions concerning an EC institution's alleged failure to act. Any such claim
would have to be brought under Article 232 (ex 175) EC (see Chapter 12).
9.4 Scope of the Court's jurisdiction
9.4.1 Matters of Community law
The Court is only empowered to give rulings on matters of Community law (and, as noted, limited aspects of the
JHA). It has no jurisdiction to interpret domestic law, nor to pass judgment on the compatibility of domestic law
with EC law. The Court has frequently been asked such questions (e.g., Van Gend en Loos (case 26/62); Costa v
ENEL (case 6/64) Netherlands v Ten Kate Holding BV (case C-511/03)), since it is often the central problem
before the national court. But as the Court said in Costa v ENEL: 'a decision should be given by the Court not
upon the validity of an Italian law in relation to the Treaty, but only upon the interpretation of the above-
mentioned [Treaty] Articles in the context of the points of law stated by the Giudice Conciliatore'. Where the
Court is asked to rule on such a matter it will merely reformulate the question and return an abstract
interpretation on the point of EC law involved.
9.4.2 Interpretation, not application
The Court maintains a similarly strict dividing line in principle between interpretation and application. It has no
jurisdiction to rule on the application of Community law by national courts. However, since the application of
Community law often raises problems for national courts, the Court, in its concern to provide national courts
with 'practical' or 'worthwhile' rulings, will sometimes, when interpreting Community law, also offer

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unequivocal guidance as to its application (see e.g., Stoke-on-Trent City Council v B & Q (case C-169/91); R v
Her Majesty's Treasury, ex parte British Telecommunications pic (case C-392/93); Arsenal Football Club v Reed
(case C-206/01)).
9.4.3 Non-interference
The Court maintains a strict policy of non-interference over matters of what to refer, when to refer and how to
refer. Such matters are left entirely to the discretion of the national judge. As the Court said in De Geus en
Uitdenbogerd v Robert Bosch GmbH (case 13/61), its jurisdiction depends 'solely on the existence of a request
from the national court'. However, it has no jurisdiction to give a ruling when, at the time when it is made, the
procedure before the court making it has already been terminated (Pardini (case 338/85); Grogan (case C-
159/90)). In contrast, the Court does have jurisdiction where a court is involved in preparatory inquiries in
criminal proceedings which may or may not lead to a formal prosecution, where the question of EC law may
determine whether the inquiries will continue (case C-60/02, Criminal proceedings against X ('Rolex')).
No formal requirements are imposed on the framing of the questions. Where the questions are inappropriately
phrased the Court will merely reformulate the questions, answering what it sees as the relevant issues. It may
interpret what it regards as the relevant issues even if they are not raised by the referring court (e.g., OTO SpA v
Ministero delle Finanze (case C-130/92)). Nor will it question the timing of a reference. However, since 'it is
necessary for the national court to define the legal context in which the interpretation requested should be
placed', the Court has suggested that it might be convenient for the facts of the case to be established and for
questions of purely national law to be settled at the time when the reference is made, in order to enable the Court
to take cognisance of all the features of fact and law which may be relevant to the interpretation of Community
law which it is called upon to give (Irish Creamery Milk Suppliers Association v Ireland (cases 36 & 711 80);
approved in Pretore di Said (case 14/86)). In Telemarsicabruzzo SpA v Circostel (cases C-320, 321, 322/90) it
rejected an application for a ruling from an Italian magistrates' court on the grounds that the reference had
provided no background factual information and only fragmentary observations on the case. The ECJ has since
reaffirmed this approach in several cases (e.g., Pretore di Genova v Banchero (case C-157/92); Monin
Automobiles v France (case C-386/92)). The ECJ has held, however, that the need for detailed factual
background to a case is less pressing when the questions referred by the national court relate to technical points
(Vaneetveld v Le Foyer SA (case C316/93)) or where the facts are clear, for example, because of a previous
reference (Crispoltoni v Fattoria Autonoma Tabacchi (cases C-133, 300 & 362/92)). The concern seems to be
that not only must the ECJ know enough to give a useful ruling in the context, but that there is also enough
information for affected parties to be able to make representations. This, according to the ECJ, is especially
relevant in competition cases (Deliege (case C-191/97), paras 30 and 36). (See further Chapter 29.) The Court
has issued an 'Information Note on references from national courts for a preliminary ruling' ([2005] OJ C143/1,
replacing guidance issued in 1996), consolidating its rulings in these cases. The circumstances in which the ECJ
will decline jurisdiction are discussed further below.
[]
9.6 Jurisdiction of the national courts to refer
Although any court or tribunal may refer questions to the ECJ under Article 234, a distinction must be drawn
between those courts or tribunals which have a discretion to refer ('permissive' jurisdiction) and those for which
referral is mandatory ('mandatory' jurisdiction). Under Article 234(3), where a question concerning interpretation
is raised 'in a case pending before a court or tribunal of a Member State, against whose decisions there is no
judicial remedy under national law, that court or tribunal shall bring the matter before the Court of Justice'
(emphasis added). For all courts other than those within Article 234(3) referral is discretionary. Note that special
rules apply to cases falling within the new Title IV to the EC Treaty, introduced by the ToA. These are discussed
below. (See also Chapter 24.)
9.6.1 Mandatory jurisdiction
The purpose of Article 234(3) must be seen in the light of the function of Article 234 as a whole, which is to
prevent a body of national case law not in accordance with the rules of Community law from coming into
existence in any Member State (Hoffman-La Roche AGv Centrafarm Vertiebsgesellschaft Pharmazeutischer
Erzeugnisse mbH (case 107/76)). To this end Article 234(3) seeks to ensure that, when matters of EC law arise,
there is an obligation to refer to the ECJ at some stage in the proceedings. This purpose should be kept in mind
when questions of interpretation of Article 234(3) arise.
The scope of Article 234(3) is not entirely clear. While it obviously applies to courts or tribunals whose decisions

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are never subject to appeal (the 'abstract theory'), such as the House of Lords in England, or the Conseil d'Etat in
France, it is less clear whether it applies also to courts whose decisions in the case in question are not subject to
appeal (the 'concrete theory'), such as the Italian magistrates' court (giiid-ice conciliatore) in Costa v ENEL (case
6/64) (no right of appeal because sum of money involved too small). When leave to appeal from the Court of
Appeal (or, in certain criminal matters, from the High Court) to the House of Lords is refused, or when the High
Court refuses leave for judicial review from a tribunal decision, do these courts become courts 'against whose
decisions there is no judicial remedy under national law'?
The judgment of the ECJ in Costa v ENEL was seen, albeit obiter, to support the wider, 'concrete' theory. In that
case, in the context of a reference from the Italian magistrates' court, from which there was no appeal due to the
small amount of money involved, the Court said, with reference to the then Article 177(3) (now 234(3)): 'By the
terms of this Article ... national courts against whose decisions, as in the present case, there is no judicial
remedy, must refer the matter to the Court of Justice' (emphasis added). Taking into account the function of
Article 234(3) and particularly its importance for the individual, this would have seemed to be the better view.
It has been suggested that where the right of appeal or judicial review depends on the granting of leave, a lower
court or tribunal from which a reference under Article 234 is sought must either grant leave or refer to the ECJ.
Where this is not done, and leave depends on permission from a superior 'final' court, that latter court should be
obliged to grant the requested leave. Any other course would frustrate the purpose of Article 234 and amount to a
denial of the individual's Community rights.
The issue has finally been resolved by the ECJ. In Lyckeshog (case C-99/00), the question was referred of
whether national courts are 'final' courts for the purposes of Article 234(3) if leave to appeal from their judgment
is required. The ECJ noted that the function of the obligation on courts against whose decisions there was no
judicial remedy to refer questions to the ECJ was to prevent a body of national case law coming into being that
was inconsistent with the requirements of Community law. Despite this finding, the ECJ went on to hold that
decisions of courts which could be challenged did not fall within this category of court. The ECJ argued that 'the
fact that examination of the merits of such appeals is subject to a prior declaration of admissibility by the
supreme court does not have the effect of depriving the parties of a judicial remedy' (para. 16). In coming to this
conclusion, the ECJ assumed that 'uncertainty as to the interpetation of the law applicable, including Community
law, may give rise to review, at last instance, by the supreme court' (para. 17). It would seem, as some have
suggested, that the ECJ has been influenced by the recurring possibilities for review of the ECJ's jurisdiction
which the repeated Treaty amendments constitute and the consequent threat of its jurisdiction's curtailment.
Nonetheless, in terms of access to justice this ruling is somewhat worrying, as it presupposes that litigants have
the time and the money to litigate through to the last possible court before being able to obtain a reference to the
ECJ.
9.6.2 Discretionary or 'permissive' jurisdiction
Courts or tribunals which do not fall within Article 234(3) enjoy, according to the ECJ, an unfettered discretion
in the matter of referrals. A court or tribunal at any level is free, 'if it considers that a decision on the question is
necessary to enable it to give judgment', to refer to the ECJ in any kind of proceedings, including interim
proceedings (Hoffman-La Roche AG v Centrafarm Vertriebsgesells-chaft Pharmazeutischer Erzeugnisse mbH
(case 107/76)), at any stage in the proceedings. In De Geus en Uitdenbogerd v Robert Bosch GmbH (case 13/61)
the Court held that national courts have jurisdiction to refer whether or not an appeal is pending; the ECJ is not
even concerned to discover whether the decision of the national judge has acquired the force of res judicata.
However, following Pardini (case 338/85) and Grogan (case C-159/90), if proceedings have been terminated
and the Court is aware of this fact, it may refuse jurisdiction on the grounds that its ruling is not necessary to
enable the national court to give judgment.

9.6.2.1 Referral where there is previous ruling


Even if the ECJ has already ruled on a similar question, national courts are not precluded from requesting a
further ruling. This point was made in Da Costa en Schaake NV (cases 28-30/62). There the Court held, in the
context of a reference for interpretation of a question substantially the same as that referred in Van Gend en
Loos, that the Court should retain a legal right to depart from its previous judgments. It may recognise its errors
in the light of new facts. It ruled in similar terms in the context of a request concerning the effect of a prior ruling
of validity in International Chemical Corporation SpA v Amministrazione delle Finanze dello State (case 66/80).
Here it held that while national courts could assume from a prior declaration of invalidity that the regulation was

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invalid, they should not be deprived of an opportunity to refer the same issue if they have a 'real interest' in
making a further reference.

9.6.2.2 Impact of national rules of precedent


This discretion to refer is in no way affected by national rules of precedent within the Member State. This
important principle was established in the case of Rheinmuhlen-Dusseldorf (case 146/73). In this case, which
concerned an attempt by a German cereal exporter to obtain an export rebate under Community law, the German
federal tax court (the Bundesfinanzhof), hearing the case on appeal from the Hessian tax court (Hessische
Finanzgericht), had quashed the Hessian court's judgment and remitted the case to that court for a decision on
certain issues of fact. The Hessian court was not satisfied with the Bundesfinanzhof's ruling since questions of
Community law were involved. It sought a ruling from the ECJ on the interpretation of the Community law, and
also on the question of whether it was permissible for a lower court to refer in this way when its own superior
court had already set aside its earlier judgment on appeal. On an appeal by Rheinmuhlen-Dusseldorf to the
Bundesfinanzhof challenging the Hessian court's right to refer to the ECJ, the Bundesfinanzhof itself referred
certain questions to the Court of Justice. The principal question, raised in both cases, was whether Article 234
gave national courts an unfettered right to refer or whether that right is subject to national provisions whereby
lower courts are bound by the judgments of superior courts.
The Court's reply was in the strongest terms. The object of the preliminary rulings procedure, the Court held,
was to ensure that in all circumstances the law was the same in all Member States. No provision of domestic law
can take away the power provided by Article 234. The lower court must be free to make a reference if it
considers that the superior court's ruling could lead it to give judgment contrary to Community law. It would
only be otherwise if the question put by the lower court were substantially the same. The ECJ's view may be
compared with that of Wood J in the Employment Appeal Tribunal in Enderby v Frenchay Health Authority
([1991] ICR 382). Here he suggested that lower English Courts were bound even in matters of Community law
by decisions of their superior courts; thus they should not make references to the ECJ but should leave it to the
House of Lords, a fortiori when the House has decided on a particular issue that British law does not conflict
with EC law. Wood J's observations are clearly at odds with Community law. It appears that Rheinmuhlen-
Dusseldorfwas not cited before the tribunal. A reference to the ECJ was subsequently made in this case by the
Court of Appeal ([1992] IRLR 15) resulting in a ruling (case C-127/92) and a decision on an important issue of
equal pay for work of equal value contrary to that of Wood J and in the claimant's favour.
If national courts have the widest discretion in matters of referral, when, and on what basis, should they exercise
this discretion? Two aspects of this problem may be considered.
First, the national judge must consider that a decision on a question of Community law is 'necessary to enable it
to give judgment'; then, if it is necessary, he must decide whether, in his discretion, he should refer.
Guidelines on both these matters have been supplied by the ECJ and by national courts. It is submitted that as the
ultimate arbiter on matters of Community law only the ECJ's rulings are fully authoritative on this point.

9.6.3 When will a decision be necessary?


The ECJ was asked to consider this matter in CILFITSrl (case 283/81). The reference was from the Italian
Supreme Court, the Cassazione, and concerned national courts' mandatory jurisdiction under Article 234(3). On
a literal reading of Article 234(2) and (3) it would appear that the question of whether 'a decision on a matter of
Community law if necessary' only applies to the national courts' discretionary jurisdiction under Article 234(2).
However, in C/LF/Tthe ECJ held that:
it followed from the relationship between Article 177(2) and (3) [now 234(2) and (3) ] that the courts or tribunals
referred to in Article 177(3) [now 234(3) ] have the same discretion as any other national court or tribunal to
ascertain whether a decision on a question of Community law is necessary to enable them to give judgment.
There would be no need to refer if:
(a) the question of EC law is irrelevant; or
(b) the provision has already been interpreted by the ECJ, even though the questions at issue are not strictly
identical; or

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(c) the correct application is so obvious as to leave no scope for reasonable doubt. This matter must be
assessed in the light of the specific characteristics of Community law, the particular difficulties to which
its interpretation gives rise, and the risk of divergences in judicial decisions within the Community.
These guidelines may be compared with Lord Denning' in H.P. Bulmer Ltd v Bollinger SA ([1974] Ch 401),
Court of Appeal. He suggested that a decision would only be 'necessary' if it was 'conclusive' to the judgment.
Even then it would not be necessary if:
(a) the ECJ had already given judgment on the question, or
(b) the matter was reasonably clear and free from doubt.
Although the criteria in both cases are similar, the first and third C1LFIT Sri criteria are clearly stricter; it
would be easier under Lord Denning's guidelines to decide that a decision was not 'necessary'. The issues at
stake in the former case have proved to be both important and difficult, and were only finally resolved by the
ECJ in the cases of Brown (case 197/86) and Lair (case 39/86) (for full discussion of the issues see Chapter 20).

9.6.4 Acte clair


Criteria (b) and (c) of CILFIT Sri (case 238/81) and (a) and (b) of H.P. Bulmer Ltd v J. Bollinger SA ([1974] Ch
401) could be described as versions of acte clair. Acte clair is a doctrine originating in French administrative
law, whereby if the meaning of a provision is clear no 'question' of interpretation arises. The doctrine was intro-
duced in the context of interpretation of treaties, in order to strengthen the powers of the Conseil d'Etat vis-a-vis
the executive. If doubts existed concerning the interpretation of a treaty, the courts were obliged to refer to the
government. If the provision was found to be acte clair, there was no need to refer. The utility of the doctrine, in
that context, is clear.
The doctrine was first invoked in the sphere of EC law by Advocate-General Lagrange in Da Costa en Schaake
NV (cases 28-30/62), in the context of a reference on a question of interpretation almost identical to a matter
already decided by the Court in Van Gend en Loos (case 26/62). Like CILFITSrl, it arose in a case concerning
the court's mandatory jurisdiction under Article 234(3). While asserting that Article 234(3) 'unqualifiedly'
required national courts to submit to the ECJ 'every question of interpretation raised before the court', the Court
added that this would not be necessary if the question was materially identical with a question which had already
been the subject of a preliminary ruling in a similar case.
This case has been taken as an endorsement by the Court of acte clair, albeit interpreted in a very narrow sense.
The principle was approved in CILFIT Srl.
Acte clair was applied in a much wider sense, in very different circumstances, in the French case of Re Societe
des Petroks Shell-Berre ([1964] CMLR 462). This case involved a number of difficult questions of French and
EC competition law. These questions had not been subject to prior rulings under Article 234. Nevertheless the
Conseil d'Etat, led by the Commissaire du Gouvernement, Madame Questiaux, took the view that only if the
judge is not competent to determine the meaning of an act is he faced with a 'question of interpretation' and
decided that there was no doubt as to the meaning and so there was no need to refer.
The dangers of acte clair were revealed in the Court of Appeal in the case of R v Henn ([1978] 1 WLR 1031).
There Lord Widgery suggested that it was clear from the case law of the Court of Justice that a ban on the import
of pornographic books was not a quantitative restriction within Article 28 (ex 30) of the EC Treaty. A sub-
sequent referral on this matter by the House of Lords revealed that it undoubtedly was. Lord Diplock, giving
judgment in the House of Lords ([1981] AC 850), warned English judges not to be too ready to hold that because
the meaning of an English text seemed plain to them no question of interpretation was involved: the ECJ and the
English courts have very different styles of interpretation and may ascribe different meanings to the same
provision. He did, however, approve a version of acte clair consistent with that of the ECJ in Da Costa en
Schaake NV and CILFIT Sri in Garland v British Rail Engineering Ltd ([1983] 2 AC 751) when he suggested
that where there was a 'considerable and consistent line of case law' from the ECJ the answer would be 'too
obvious and inevitable' to be capable of giving rise to what could properly be called a question within the
meaning of Article 234.
Although most of the above cases arose in the context of Article 234(3) they have been discussed at this stage
because they may equally be invoked in the context of national courts' discretionary jurisdiction, and they
demonstrate that acte clair can be applied both in a narrow sense, as in Da Costa en Schaake NV ('provision

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materially identical') and CILFIT Sri ('so clear as to leave no room for doubt, taking into account', etc.) and in a
looser, more subjective sense, as in H.P. Bulmer Ltd v J. Bollinger SA ('reasonably clear and free from doubt')
and Shell-Bern ('no doubt'). Although a loose interpretation does not have such serious consequences in the
context of a court's discretionary jurisdiction as in its mandatory jurisdiction, a narrow interpretation is
preferable if the pitfalls of R v Inner London Education Authority, ex parte Hinde ([1985] 1 CMLR 716) and R v
Henn are to be avoided. Where a disappointed party does not have the means or the stamina to appeal it may
result in a misapplication of EC law.

9.6.5 Exercise of discretion


If courts within the area of discretionary jurisdiction consider, applying the CILFIT criteria, that a decision from
the ECJ is necessary, how should they exercise their discretion?
On the question of timing, the ECJ has suggested that the facts of the case should be established and questions of
purely national law settled before a reference is made (Irish Creamery Milk Suppliers Association v Ireland
(cases 36 & 71/80)). This would avoid precipitate referrals, and enable the Court to take cognisance of all the
features of fact and law which may be relevant to the issue of Community law on which it is asked to rule. A
similar point was made by Lord Denning MR in H.P. Bulmer Ltd v. Bollinger SA ([1974] Ch 401) ('decide the
facts first') and approved by the House of Lords in R v Henn ([1981] AC 850). However, Lord Diplock did con-
cede in R v Henn that in an urgent, e.g., interim matter, where important financial interests are concerned, it
might be necessary to refer before all the facts were found.
With regard to other factors, Lord Denning suggested in H.P. Bulmer Ltd v Bollinger SA that time, cost,
workload of the ECJ and the wishes of the parties should be taken into account by national courts in the exercise
of their discretion. Factors such as time and cost need to be treated with care, weighing the fact, as did Bingham
J in Commissioners of Customs and Excise v Samex ApS ([1983] 3 CMLR 194), that deferring a referral may in
the end increase the time and cost to the parties: there may be cases where it is appropriate to refer at an early
stage. The more difficult and uncertain the issue of EC law, the greater the likelihood of appeal, requiring, in the
end, a referral to the ECJ under Article 234(3).
The workload of the ECJ is an increasing problem and no doubt a reason for some modification in recent years
of its open-door policy. However, whereas it may justify non-referral in a straightforward case, it should not
prevent referral where the point of EC law is difficult or novel. The CILFIT criteria should operate to prevent
unnecessary referrals.
The wishes of the parties also need to be treated with caution. If the point of EC law is relevant (which under
CILFIT it must be) and difficult or uncertain, clearly one of the parties' interests will be better served by a
referral. As Templeman LJ said in the Court of Appeal in Polydor Ltd v Harlequin Record Shops Ltd ([1980] 2
CMLR 413) when he chose to refer a difficult point of EC law in proceedings for an interim injunction, 'it is the
right of the plaintiff [claimant] to go to the European Court'. Furthermore, the ECJ has held that the question of
referral is one for the national court and that a party to the proceedings in the context of which the reference is
made cannot challenge a decision to refer, even if that party thinks that the national court's findings of fact are
inaccurate (SAT Fluggesellschaft mbH v European Organization for the Safety of Air Navigation (case C-
364/92)).
Another factor which might point to an early referral, advanced by Ormrod LJ in Polydor Ltd v Harlequin
Record Shops Ltd is the wider implications of the ruling. In Polydor Ltd v Harlequin Record Shops Ltd there
were a number of similar cases pending. The issue, which was a difficult one, concerned the protection of British
copyright law in the context of an international agreement between the EC and Portugal, and affected not merely
the parties to the case but the record industry as a whole.
Finally, in R v Henn Lord Diplock suggested that in a criminal trial on indictment it might be better for the
question to be decided by the national judge and reviewed if necessary through the hierarchy of the national
courts. Although this statement could be invoked to counter spurious defences based on EC law, and
unnecessary referrals, it is submitted that where a claim is genuinely based on EC law, and a ruling from the ECJ
would be conclusive of the case, delay would serve no purpose. The time and cost of the proceedings would only
be increased.
Where matters of validity are concerned special considerations apply. Although a national court may find a
Community act to be valid, it has no power to make a finding of invalidity. Thus, despite the apparent permissive

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words of Article 234(2), where a court has serious doubts as to the validity of the act in question, provided that a
decision on the question of EC law is 'necessary', a referral to the ECJ should be made. A national court may,
however, grant an interim injunction based on the (alleged) invalidity of Community law. These matters, hinted
at in Foto-Frost v Hauptzollamt Liibeck-Ost (case 314/85), have now been confirmed in Zuckerfabrik
Suderdithmarschen AG v Hauptzollamt Itzehoe (cases C-143/88 and C-92/89).
[]
9.6.7 National courts' ability to refer of their own motion
Another possible limitation on the ability of the national courts to refer questions to the ECJ concerns the degree
to which national courts are free to refer an issue of Community law of their own motion. In R v Secretary of
State for the Environment, ex parte Greenpeace Ltd ([1994] 4 All ER 352), the English High Court took the
approach that since the parties did not request a preliminary rulings reference, then, despite the fact that national
rules expressly permit the court to refer of its own motion, the court should not make a reference. It is submitted
that this approach is unduly restrictive. It ignores the underlying purpose of Article 234, which is to ensure
correct and uniform interpretation of EC law throughout the Community, and it undermines the effectiveness of
the Community law remedies (see Chapter 8). Although the ECJ has not discussed this point directly, it has itself
assumed jurisdiction to rule on questions not referred (OTO SpA v Ministero delle Finanze (case C-130/92)) and
it has more recently touched on these questions indirectly in Peterbroeck Van Campenhout & Cie SCS v Belgium
(case C-312/93) and van Schijndel v Stichting Pensioenfonds voor Fysiotherapeuten (cases C-430 & 431/93).
Unlike the British example cited above, the last two cases involved applications to amend pleadings to include a
new point of Community law. In Peterbroeck the ECJ held that because the claimant had, in the circumstances,
not had the opportunity of amending its pleadings before the time limit for so doing had expired, the
effectiveness of Community law would preclude the application of national procedural rules preventing the court
from considering an issue of Community law. In Van Schijndel the applicants sought to introduce the
Community law point on appeal. The ECJ held that if one could include new points of national law on appeal,
one could not treat Community rules less favourably, but the national court was otherwise not obliged to raise
the issue of its own motion in civil cases where the Community law point was beyond the existing ambit of the
dispute. In civil litigation, both parties to the dispute have the opportunity to define the issues relevant to their
dispute, and to allow the introduction of new issues might endanger legal certainty and procedural fairness. Thus
one may conclude that Community law does not prevent national courts from raising issues of their own motion
and, where it is desirable to ensure effective protection of individuals' rights, it should be done, provided that
both parties have an opportunity to put forward their cases.
9.7 Effect of a ruling
Clearly a ruling from the ECJ under Article 234 is binding in the individual case although the English High
Court in Arsenal v Reed had taken a narrow view of what this obligation means.
Given Member States' obligation under Article 10 (ex 5) EC to 'take all appropriate measures ... to ensure
fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the
Community' the ruling should also be applied in all subsequent cases. This does not preclude national courts
from seeking a further ruling on the same issue should they have a 'real interest' in making a reference (Da Costa
en Schaake (cases 28-30/62) - interpretation; International Chemical Corporation SpA (case 66/80) -validity).
9.7.1 References involving interpretation
The question of the temporal effect of a ruling, whether it should take effect retroactively ('ex tune', i.e., from the
moment of entry into force of the provision subject to the ruling) or only from the date of judgment ('ex nunc') is
less clear. In Defrenne v Sabena (No. 2) (case 43/75) the Court was prepared to limit the effect of the then
Article 119 (now 141) to future cases (including Defrenne itself) and claims lodged prior to the date of judgment.
'Important considerations of legal certainty' the Court held, 'affecting all the interests involved, both public and
private, make it impossible to reopen the question as regards the past'. The Court was clearly swayed by the
arguments of the British and Irish Governments that a retrospective application of the equal pay principle would
have serious economic repercussions on parties (i.e., employers) who had been led to believe they were acting
within the law.
However, in Ariete SpA (case 811/79) and Salumi Sri (cases 66, 127 & 128/79) the Court made it clear that
Defrenne was to be an exceptional case. As a general rule an interpretation under Article 234 of a rule of
Community law 'clarifies and defines where necessary the meaning and scope of that rule as it must be or ought
to be understood and applied from the time of its coming into force' (emphasis added). A ruling under that article

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must therefore be applied to legal relationships arising prior to the date of the judgment provided that the
conditions for its application by the national court are satisfied. 'It is only exceptionally', the Court said 'that the
Court may, in the application of the principle of legal certainty inherent in the Community legal order and in
taking into account the serious effects which its judgments might have as regards the past, on legal relationships
established in good faith, be moved to restrict for any person concerned the opportunity of relying on the
provision as thus interpreted with a view to calling into question those legal relationships.'
Moreover, 'such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought'
and 'it is for the Court of Justice alone to decide on the temporal restrictions as regards the effects of the
interpretation which it gives'.
These principles were applied in Blaizot (case 24/86) and Barra (case 309/85). Both cases involved a claim for
reimbursement of the Belgian minerval, based on Gravier (case 293/83, see Chapter 20). In both cases the claims
were in respect of periods prior to the ECJ's ruling in Gravier. In Earra it was not disputed that the course for
which the minerval had been charged was vocational; but Blaizot's course, a university course in veterinary
medicine, was, the defendant university argued, not vocational, not within the scope of the Gravier ruling.
Since Bana's case fell squarely within Gravier and the Court had imposed no temporal limits on the effect of its
judgment in Gravier itself, that ruling was held to apply retrospectively in Barra's favour. Blaizot, on the other
hand, raised new issues. In deciding that university education could, and a course in veterinary science did,
constitute vocational training the Court, clearly conscious of the impact of such a ruling on Belgian universities
if applied retroactively, decided that 'important considerations of legal certainty' required that the effects of its
ruling should be limited on the same lines as Defrenne, that is, to future cases and those lodged prior to
judgment.
Unless the Court can be persuaded to change its mind and reconsider the question of the temporal effect of a
prior ruling in a subsequent case when no new issues are raised, the question of the temporal effect will need to
be considered in every case in which a retrospective application may give rise to serious repercussions as regards
the past. Yet it is in the nature of this kind of ruling that it, and therefore its consequences, are unpredictable.
Should a party wish, subsequently, to limit the effects of an earlier ruling, it will be necessary to ensure, as in
Blaizot, that some new issue of EC law is raised.
In Barber v Guardian Royal Exchange Assurance Group (case C-262/88) the Court was again persuaded by
'overriding considerations of legal certainty' to limit the effects of its ruling that employers' contracted-out
pension schemes fell within the then Article 119 (now 141) EC. Unfortunately the precise scope of the non-
retroactivity principle that 'Article 119 [now 141] may not be relied upon in order to claim entitlement to a
pension with effect prior to that of this judgment (except in the case of workers ... who have initiated
proceedings before this date or raised an equivalent claim under the applicable national law)' was disputed as
being unclear. This lack of specificity, a characteristic of the Court's style of judgment, can create problems in
the context of rulings on interpretation under Article 234. The Court's judgments can on occasions be too
Delphic, leaving too much to be decided by national courts. It has taken a Protocol to the Maastricht Treaty and
further cases to spell out the precise scope of the Barber ruling (see Chapter 25). Only now are the full
implications of the Court's rulings in Francovich (cases C-6, 9/90) and Marshall (No. 2) (case C-271/91) being
revealed.
Despite its commitment to the principle of legal certainty the Court has chosen not to limit the effect of its
rulings in a number of cases in which it has introduced new and unexpected principles with significant
consequences for Member States and even (in the case of Treaty articles) for individuals. It did not limit the
effects of its judgment in Francovich despite Advocate-General Mischo's warnings as to the 'extremely serious'
financial consequences for Member States if the judgment were not so limited: nor did it do so when it laid down
a principle of full compensation for breach of a directly effective directive in Marshall (No. 2). Where a ruling is
likely to result in serious consequences, whether for States or 'public' or private bodies, for example employers,
Member States would be advised to take advantage of their opportunity to intervene in Article 234 proceedings
as they are entitled to do, to argue against retroactivity, as they did successfully in Defrenne and Barber. Other
'interested parties' may also apply to intervene.
The effects of the ECJ's strict approach to retroactivity may be mitigated by its more recent approach to Member
States' procedural rules. In a number of cases (IN CO GE '90 (cases C-10 & 22/97) and EDIS (case C-231/96)), it
has held that the principle of retroactivity should not prevent the application of detailed procedural rules (in these
cases relating to limitation of actions) governing legal proceedings under national law, provided that these
national rules do not make it 'impossible or excessively difficult' for individuals to exercise their Community

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rights (see further Chapter 8).


The impact of an interpretation on previous rulings by domestic administrative authorities which conflict with
the ECJ's ruling was considered in Kuhne&Heitz NV v Productschap voorPluimvee en Eieren (case C-453/00).
The case involved a claim for reimbursement of export refunds made by a Dutch administrative authority against
Kiihne. The latter's objection had been rejected by a court and the claim had therefore become a final decision by
the administrative authority. The ECJ then delivered a ruling (Voogd Vkesimport en-export (case C-151/93))
which rendered the previous Dutch decision incorrect. Kiihne therefore requested a reopening of the
administrative procedure. The EC] held that there was an obligation on administrative authorities to comply with
an interpretation given by the Court in respect of all legal relationships, because the effect of a ruling is to clarify
and define the meaning of a European rule 'as it ought to have been understood and applied from the time of its
coming into force' (para. 21). This was subject to the principle of legal certainty, requiring finality of
administrative decisions once a reasonable time-limit for legal remedies had expired or those remedies had been
exhausted (para. 24); in such circumstances, there was no obligation to reopen previous decisions which had
become final. However, on the facts of the case, the Dutch authority could reopen its decision, and the ECJ held
that in such a situation, where a decision had become final and was based on a misinterpretation of EC law
adopted without a preliminary ruling, and the matter had been raised without delay after the ECJ's intepretation,
the administrative authority should review its decision.
9.7.2 References as to validity
The cases considered above relate to rulings on interpretation. Where matters of validity are concerned, the
Court's approach is more flexible. It has assimilated the effects of a ruling of invalidity to those of a successful
annulment action, as a result of which the illegal act is declared void. However, arguing from Article 231(2) (ex
174(2)), which enables the Court, in a successful annulment action, to limit the effects of a regulation which it
has declared void (see Chapter 11), the Court has limited the effects of a finding of invalidity in a number of
cases, sometimes holding the ruling to be purely prospective (i.e., for the future only, excluding the present case,
e.g., Roquette Freres v France (case 145/79); policy doubted in Roquette Freres SA vHauptzollamt Geldern
(case C-228/92, see Chapter 11). The Court has not so far insisted that the effect of a ruling of invalidity can only
be limited in the case in which the ruling itself is given.
The Court is more likely to be prepared to limit the effects of a ruling on validity than one on interpretation.
Where matters of validity are concerned parties will have relied legitimately on the provision in question. A
retrospective application of a ruling of invalidity may produce serious economic repercussions: thus it may not
be desirable to reopen matters as regards the past. On the other hand too free a use of prospective rulings in
matters of interpretation would seriously threaten the objectivity of the law, its application to all persons and all
situations. Moreover, as the Court no doubt appreciates, a knowledge on the part of Member States and
individuals that the law as interpreted may not be applied retrospectively could foster a dangerous spirit of non-
compliance.
9.8 Interim measures
A national court may be requested to order interim measures pending a ruling from the ECJ under Article 234,
either on interpretation or validity. R v Secretary of State for Transport, ex parte Factortame Ltd (case C-213/89)
established that a national court must grant interim relief pending a ruling on the interpretation of Community
law where this is necessary to protect individuals' directly effective Community rights, even where such a
remedy is not available as a matter of national law. As a result of this ruling the House of Lords was prepared to
grant an interim injunction against the Crown, preventing the application of the Merchant Shipping Act 1988. In
Zuckerfabrik (cases C-143/88 & 92/89) the Court confirmed that national courts may also be obliged to grant
interim relief pending a ruling from the ECJ on the validity of Community law, and set out the criteria to be
applied by national courts in the exercise of their discretion as to whether or not to do so. It may be deduced
from the terms of the Court's judgment that these criteria should be applied in all applications for interim relief,
whether relating to matters of interpretation or validity. National courts' powers to grant interim relief pending a
ruling under Article 234 have been held to include positive as well as suspensory measures (Atlanta
Fruchthandelsgesellschaft mbH v Bundesamt fiir Emahrung und Forstwirtschaft (case C-465/93)) (see further
Chapter 8).
[]
9.12 Conclusions
The success of the preliminary rulings procedure depends on a fruitful collaboration between the ECJ (and, at

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some point, the CFI) and the courts of Member States. Generally speaking both sides have played their part in
this collaboration. The ECJ has rarely refused its jurisdiction or attempted to interfere with national courts'
discretion in matters of referral and application of EC law. National courts have generally been ready to refer;
cases in which they have unreasonably refused to do so are rare. Equally rare are the cases in which the ECJ has
exceeded the bounds of its jurisdiction without justification.
However, this very separation of powers, the principal strength of Article 234, is responsible for some of its
weaknesses. The decision whether to refer and what to refer rests entirely with the national judge. No matter how
important referral may be to the individual concerned (e.g., Sandhit) he cannot compel referral; he can only seek
to persuade. And although the ECJ will extract the essential matters of EC law from the questions referred it can
only give judgment in the context of the questions referred (see Hessische Knappschaft v Maison Singer et Fils
(case 44/65)). Thus, it is essential for national courts to ask the right questions. As the relevance of the questions
can only be assessed in the light of the factual and legal circumstances of the case in hand, these details must
also be supplied. A failure to fulfil both these requirements may result in a wasted referral or a misapplication of
EC law. Given the increasing pressures on the ECJ, wasted references and the drafting of sloppy questions can
also be seen as a waste of the limited judicial resources at the Community level.
As the body of case law from the ECJ has developed and national courts have acquired greater confidence and
expertise in applying EC law and ascertaining its relevance to the case before them, there should be less need to
resort to Article 234. The initial question, of whether a decision on a question of EC law is 'necessary', has
become crucial. As we have seen CILFIT Sri (case 283/81) has supplied guidelines to enable national courts to
answer this question. Where a lower court is in doubt as to whether a referral is necessary the matter may be left
to be decided on appeal. On the other hand, where a final court has the slightest doubt as to whether a decision is
necessary it should always refer, bearing in mind the purpose of Article 234(3) and its particular importance for
the individual litigant. These courts would do well to follow the lead provided by the German Constitutional
Court. They will be more likely to do so if they are confident that the ECJ will not abuse its power in these
proceedings by interpreting EC law too freely and failing to pay sufficient regard to 'important considerations of
legal certainty'.
The significance of the ECJ's rulings and the Article 234 procedure has been well recognised by courts,
commentators and Member States. The restrictions currently placed on its new jurisdiction, however, indicate
not only that these areas are sensitive, but that the Member States wished to limit the opportunities for the ECJ to
deliver one of its more far-reaching judgments in these areas. One point seems certain: the creation of a new
approach to references to the ECJ indicates that both the Court and the procedure have been victims of their own
success, and the occasional excess.

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Note for guidance on references by national courts for preliminary rulings issued by the European
Court of Justice

[The following guidance notes were issued in 1996 by the Court of Justice]

The development of the Community legal order is largely the result of cooperation between the Court of Justice of the
European Communities and national courts and tribunals through the preliminary ruling procedure under Article 177 of
the EC Treaty and the corresponding provisions of the ECSC and Euratom Treaties.1
In order to make this cooperation more effective, and so enable the Court of Justice better to meet the requirements of
national courts by providing helpful answers to preliminary questions, this Note for Guidance is addressed to all
interested parties, in particular to all national courts and tribunals.
It must be emphasised that the Note is for guidance only and has no binding or interpretative effect in relation to the
provisions governing the preliminary ruling procedure. It merely contains practical information which, in the light of
experience in applying the preliminary ruling procedure, may help to prevent the kind of difficulties which the Court has
sometimes encountered.
1. Any court or tribunal of a Member State may ask the Court of Justice to interpret a rule of Community law, whether
contained in the Treaties or in acts of secondary law, if it considers that this is necessary for it to give judgment in a
case pending before it.
Courts or tribunals against whose decisions there is no judicial remedy under national law must refer questions of
interpretation arising before them to the Court of Justice, unless the Court has already ruled on the point or unless the
correct application of the rule of Community law is obvious.2
2. The Court of Justice has jurisdiction to rule on the validity of acts of the Community institutions. National courts or
tribunals may reject a plea challenging the validity of such an act. But where a national court (even one whose decision
is still subject to appeal) intends to question the validity of a Community act, it must refer that question to the Court of
Justice.3
Where, however, a national court or tribunal has serious doubts about the validity of a Community act on which a
national measure is based, it may, in exceptional cases, temporarily suspend application of the latter measure or grant
other interim relief with respect to it. It must then refer the question of validity to the Court of Justice, stating the reasons
for which it considers that the Community act is not valid.4
3. Questions referred for a preliminary ruling must be limited to the interpretation or validity of a provision of Community
law, since the Court of Justice does not have jurisdiction to interpret national law or assess its validity. It is for the
referring court or tribunal to apply the relevant rule of Community law in the specific case pending before it.
4. The order of the national court or tribunal referring a question to the Court of Justice for a preliminary ruling may be
in any form allowed by national procedural law. Reference of a question or questions to the Court of Justice generally
involves stay of the national proceedings until the Court has given its ruling, but the decision to stay proceedings is one
which it is for the natibnal court alone to take in accordance with its own national law.
5. The order for reference containing the question or questions referred to the Court will have to be translated by the
Courts translators into the other official languages of the Community. Questions concerning the interpretation or validity
of Community law are frequently of general interest and the Member States and Community institutions are entitled to
submit observations. It is therefore desirable that the reference should be drafted as clearly and precisely as possible.
6. The order for reference should contain a statement of reasons which is succinct but sufficiently complete to give the
Court, and those to whom it must be notified (the Member States, the Commission and in certain cases the Council and
the European Parliament), a clear understanding of the factual and legal context of the main proceedings.5 In particular,
it should include:
a statement of the facts which are essential to a full understanding of the legal significance of the main proceedings;
an exposition of the national law which may be applicable;
a statement of the reasons which have prompted the national court to refer the question or questions to the Court of
Justice; and
where appropriate, a summary of the arguments of the parties.
The aim should be to put the Court of Justice in a position to give the national court an answer which will be of
assistance to it.

1 A preliminary ruling procedure is also provided for by protocols to several conventions concluded by the Member States, in particular the
Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.
2 Judgment in Case 283/81 CILFITv Ministry of Health [1982] ECR 3415.
3 Judgment in Case 314/85 Foto-Frost v Hauptzollamt Lubeck-Ost [1987] ECR 4199.
4 Judgments in Joined Cases C-143/88 and C-92/89 Zuckerfabrik Suderdithrnarschen and Zuckerfabrik Soest [1991] ECR 1-415 and in Case C-

465/93 Atlanta Fruchthandelsgcsselschaft [1995] ECR 1-3761.


5 Judgment in Joined Cases C-320/90, C-321/90 and C-322/90 Telemarsicabruzzo [1993] ECR 1-393

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The order for reference should also be accompanied by copies of any documents needed for a proper understanding of
the case, especially the text of the applicable national provisions. However, as the case-file or documents annexed to
the order for reference are not always translated in full into the other official languages of the Community, the national
court should ensure that the order for reference itself includes all the relevant information.
7. A national court or tribunal may refer a question to the Court of Justice as soon as it finds that a ruling on the point or
points of interpretation or validity is necessary to enable it to give judgment. It must be stressed, however, that it is not
for the Court of Justice to decide issues of fact or to resolve disputes as to the interpretation or application of rules of
national law. It is therefore desirable that a decision to refer should not be taken until the national proceedings have
reached a stage where the national court is able to define, if only as a working hypothesis, the factual and legal context
of the question; on any view, the administration of justice is likely to be best served if the reference is not made until
both sides have been heard.6
8. The order for reference and the relevant documents should be sent by the national court directly to the Court of
Justice, by registered post, addressed to:

The Registry
Court of Justice of the European Communities
L-2925 Luxembourg
Telephone (352) 43031

The Court Registry will remain in contact with the national court until judgment is given, and will send copies of the
various documents (written observations, Report for the Hearing, Opinion of the Advocate General). The Court will also
send its judgment to the national court. The Court would appreciate being informed about the application of its
judgment in the national proceedings and being sent a copy of the national courts final decision.

9. Proceedings for a preliminary ruling before the Court of Justice are free of charge. The Court does not rule on costs.

6 Jugdment on Case 70/77 Simmenthal v Administrazione delle Finanze dello Statto [1978] ECR 1453.

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Cases and Materials on EU Law (8th Edition)


Stephen Weatherill
OUP 2007

Pps 59-66 (Extracts): Proportionality


The principle of proportionality is not spelled out in those terms in the EC Treaty. But Article 5(3) captures the concept.

ARTICLE 5(3) EC
Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.
This statement is amplified by the Protocol attached to the EC Treaty on the application of the principles of subsidiarity and
proportionality, which, admittedly, is more concerned to elucidate the former principle than the latter.
NOTE: Article 5(3) is a relative newcomer to the EC Treaty. It was inserted by the Maastricht Treaty and therefore entered
into force only in 1993 (p.9 above). The Court had long before already developed proportionality as a basis for checking the
exercise of power in the Community. So Article 5(3) clearly establishes the shape of the principle, but it is the Court's case
law that amplifies what is at stake in applying the principle of proportionality.
The following case arose before English courts. It reached the European Court via the Article 234 preliminary reference
procedure which allows national courts to cooperate with the Community Court and is discussed in Chapter 7. It allows the
European Court to answer questions about Community law referred to it by a national court. The European Court took the
opportunity in this case to insist that Community legislation must conform to the principle of proportionality.
R v Intervention Board, exports Man (Sugar) Ltd (Case 181/84)
[1985] ECR 2889, Court of Justice of the European Communities
The case involved the sugar market, which is regulated by Community legislation administered at national level. Man, a
British sugar trader, submitted to the Intervention Board, the regulatory agency, tenders for the export of sugar to States
outside the Community. It lodged securities with a bank. Under relevant Community legislation, Man ought to have applied
for export licences by noon on 2 August 1983. It was nearly four hours late, because of its own internal staff difficulties. The
Board, acting pursuant to Community Regulation 1880/83, declared the security forfeit. This amounted to 1,670,370 lost by
Man. Man claimed that this penalty was disproportionate; a small error resulted in a severe sanction. It accordingly instituted
judicial review proceedings before the English courts in respect of the Board's action and argued that the authorising
Community legislation was invalid because of its disproportionate effect. The matter was referred to the European Court
under the preliminary reference procedure. Man's submission was explained by the Court as follows:
[16] ... Man Sugar maintains that, even if it is accepted that the obligation to apply for an export licence is justifiable, the
forfeiture of the entire security for failure to comply with that obligation infringes the principle of proportionality, in particular for
the following reasons: the contested regulation unlawfully imposes the same penalty for failure to comply with a secondary
obligation - namely, the obligation to apply for an export licence - as for failure to comply with the primary obligation to export
the sugar. The obligation to apply for an export licence could be enforced by other, less drastic means than the forfeiture of
the entire security and therefore the burden imposed is not necessary for the achievement of the aims of the legislation. The
severity of the penalty bears no relation to the nature of the default, which may, as in the present case, be only minimal and
purely technical.
The Court held:
[20] It should be noted that, as the Court held in its judgments of 20 February 1979 (Case 122/78, Buitoni v FORMA, [1979]
ECR 677) and of 23 February 1983 (Case 66/82, Fromonco SA v FORMA, [1983] ECR 395), in order to establish whether a
provision of Community law is in conformity with the principle of proportionality it is necessary to ascertain whether the
means which it employs are appropriate and necessary to attain the objective sought. Where Community legislation makes a
distinction between a primary obligation, compliance with which is necessary in order to attain the objective sought, and a
secondary obligation, essentially of an administrative nature, it cannot, without breaching the principle of proportionality,
penalize failure to comply with the secondary obligation as severely as failure to comply with the primary obligation.
[21] It is clear from the wording of the abovementioned Council and Commission regulations concerning standing invitations
to tender for exports of white sugar, from an analysis of the preambles thereto and from the statements made by the
Commission in the proceedings before the Court that the system of securities is intended above all to ensure that the

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undertaking, voluntarily entered into by the trader, to export the quantities of sugar in respect of which tenders have been
accepted is fulfilled. The trader's obligation to export is therefore undoubtedly a primary obligation, compliance with which is
ensured by the initial lodging of a security of 9 ECU per 100 kilograms of sugar.
[22] The Commission considers, however, that the obligation to apply for an export licence within a short period, and to
comply with that time-limit strictly, is also a primary obligation and as such is comparable to the obligation to export; indeed, it
is that obligation alone which guarantees the proper management of the sugar market. In consequence, according to the
Commission, failure to comply with that obligation, and in particular failure to comply with the time-limit, even where that
failure is minimal and unintentional, justifies the forfeiture of the entire security, just as much as the total failure to comply
with the primary obligation to export justifies such a penalty.
[23] In that respect the Commission contended, both during the written procedure and in the oral argument presented before
the Court, that export licences fulfil four separate and important functions:
(i) They make it possible to control the release onto the market of sugar.
(ii) They serve to prevent speculation.
(iii) They provide information for the relevant Commission departments.
(iv) They establish the system of monetary compensatory amounts chosen by the exporter.
[24] As regards the use of export licences to control the release onto the world market of exported sugar, it must be noted
that the traders concerned have a period of five months within which to export the sugar and no Community provision
requires them to export it at regular, staggered intervals. They may therefore release all their sugar onto the market over a
very short period. In those circumstances export licences cannot be said to have the controlling effect postulated by the
Commission. That effect is guaranteed, though only in part, simply by staggering the invitations to tender.
[25] The Commission considers, secondly, that the forfeiture of the entire security for failure to comply with the time-limit for
applying for an export licence makes it possible to prevent traders from engaging in speculation with regard to fluctuations in
the price of sugar and in exchange rates and accordingly delaying the submission of their applications for export licences.
[26] Even if it is assumed that there is a real risk of such speculation, it must be noted that Article 12(c) of Regulation No
1880/83 requires the successful tenderer to pay the additional security provided for in Article 13(3) of the same regulation.
The Commission itself recognised at the hearing that that additional security removes any risk of speculation by traders. It is
true that at the hearing the Commission expressed doubts about the applicability of Article 13(3) before export licences have
been issued. However, even if those doubts are well founded, the fact remains that a simple amendment of the rules
regarding the payment of an additional security, requiring for example that, in an appropriate case, the additional security
should be paid during the tendering procedure, in other words, even before the export licence has been issued, would make
it possible to attain the objective sought by means which would be much less drastic for the traders concerned. The
argument that the fight against speculation justifies the contested provision of Regulation No 1880/83 cannot therefore be
accepted.
[27] With regard to the last two functions attributed by the Commission to export licences, it is true that those licences make it
possible for the Commission to monitor accurately exports of Community sugar to non-member countries, although they do
not provide it with important new information not contained in the tenders and do not, in themselves, guarantee that the
export will actually take place. It is also true that the export licence makes it possible for the exporter to state whether he
wishes the monetary compensatory amounts to be fixed in advance.
[28] However, although it is clear from the foregoing that the obligation to obtain export licences performs a useful
administrative function from the Commission's point of view, it cannot be accepted that that obligation is as important as the
obligation to export, which remains the essential aim of the Community legislation in question.
[29] It follows that the automatic forfeiture of the entire security, in the event of an infringement significantly less serious than
the failure to fulfil the primary obligation, which the security itself is intended to guarantee, must be considered too drastic a
penalty in relation to the export licence's function of ensuring the sound management of the market in question.
[30] Although the Commission was entitled, in the interests of sound administration, to impose a time-limit for the submission
of applications for export licences, the penalty imposed for failure to comply with that time-limit should have been significantly
less severe for the traders concerned than forfeiture of the entire security and it should have been more consonant with the
practical effects of such a failure.
[31 ] The reply to the question submitted must therefore be that Article 6(3) of Regulation No 1880/83 is invalid inasmuch as
it prescribes forfeiture of the entire security as the penalty for failure to comply with the time-limit imposed for the submission

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of applications for export licences.


NOTE: A key element in the practical expression of the principle of proportionality is the need to show a link between the
nature and scope of the measures taken and the object in view. The next extract is taken from a case in which a firm sought
to show that a measure affected it disproportionately and that it was accordingly invalid. The issue arose in the coal and steel
sector, and therefore the provisions in question were found in the ECSC Treaty, which has now expired. However, the Court
explained the nature of the principle of proportionality in terms of general application.

Valsabbia v Commission (Case 154/78)


[1980] ECR 907, Court of Justice of the European Communities
[117] It is now necessary to examine whether in view of the omissions established the obligations imposed upon the
undertakings cast disproportionate burdens upon the applicants which would constitute an infringement of the principle of
proportionality. In reply to the applicants' allegations on this matter, the Commission states that the validity of a general
decision cannot depend on the existence or absence of other formally independent decisions.
[118] That argument is not relevant in this case and the Court must inquire whether the defects established imposed
disproportionate burdens upon the applicants, having regard to the objectives laid down by Decision No 962/77. But the
Court has already recognised in its judgment of 24 October 1973 in Case 5/73, Balkan-Import-Export v Hauptzollamt Berlin-
Packhof [1973] ECR 1091, that 'In exercising their powers, the Institutions must ensure that the amounts which commercial
operators are charged are no greater than is required to achieve the aim which the authorities are to accomplish; however, it
does not necessarily follow that that obligation must be measured in relation to the individual situation of any one particular
group of operators'.
[119] It appears that, on the whole, the system established by Decision No 962/77 worked despite the omissions disclosed
and in the end attained the objectives pursued by that decision. Although it is true that the burden of the sacrifices required of
the applicants may have been aggravated by the omissions in the system, that does not alter the fact that that decision did
not constitute a disproportionate and intolerable measure with regard to the aim pursued.
[120] In those circumstances, and taking into consideration the fact that the objective laid down by Decision No 962/77 is in
accordance with the Commission's duty to act in the common interest, and that a necessary consequence of the very nature
of Article 61 of the ECSC Treaty is that certain undertakings must, by virtue of European solidarity, accept greater sacrifices
than others, the Commission cannot be accused of having imposed disproportionate burdens upon the applicants.
NOTE: The nature of the Court's scrutiny is influenced by the type of act subject to challenge. (See, for example, Hermann,
G., 'Proportionality and Subsidiarity' Ch. 3 in Barnard, C. and Scott, J., The Law of the Single European Market (Oxford: Hart
Publishing, 2002).) It was mentioned above (p.43) that the UK's submission that Directive 93/104 on Working Time violated
the principle of proportionality was rejected. The Court explained its role in the following terms.
United Kingdom v Council (Case C-84/94)
[1996] ECR I-5755, Court of Justice of the European Communities
[57] As regards the principle of proportionality, the Court has held that, in order to establish whether a provision of
Community law complies with that principle, it must be ascertained whether the means which it employs are suitable for the
purpose of achieving the desired objective and whether they do not go beyond what is necessary to achieve it (see, in
particular, Case C-426/93 Germany v Council [1995] ECR I-3723, paragraph 42).
[58] As to judicial review of those conditions, however, the Council must be aiiowed a wide discretion in an area which, as
here, involves the legislature in making social policy choices and requires it to carry out complex assessments. Judicial
review of the exercise of that discretion must therefore be limited to examining whether it has been vitiated by manifest error
or misuse of powers, or whether the institution concerned has manifestly exceeded the limits of its discretion.
There were no such flaws and consequently the plea failed. Notice that in Case 181/84 (p.59 above) Man Sugar was not
complaining about a broad legislative choice. The matter was more specific to its circumstances. In Case C-84/94 the Court's
concession that the legislature be allowed a 'wide discretion' in areas of policy choice means that the principle of
proportionality, though flexible and therefore a tempting addition to any challenge to the validity of a Community act, is only
infrequently held to have been violated where broad legislative choices are impugned. This is well illustrated by revisiting a
ruling already considered above.

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R v Secretary of State for Health, ex parte British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd
(Case C-491/01)
[2002] ECR 1-11543, Court of Justice of the European Communities
The validity of Directive 2001/37, which amended and extended common rules governing tar yields and warnings on tobacco
product packaging, was challenged in this case. As explained above (p.51), the Court was not persuaded that an incorrect
legal base had been chosen. The applicant fared no better by alleging the measure violated the principle of proportionality.
[122] As a preliminary point, it ought to be borne in mind that the principle of proportionality, which is one of the general
principles of Community law, requires that measures implemented through Community provisions should be appropriate for
attaining the objective pursued and must not go beyond what is necessary to achieve it (see, inter alia, Case 137/85 Maizena
[1987] ECR 4587, paragraph 15; Case C-339/92 ADM Qlmuhlen [1993] ECR I-6473, paragraph 15, and Case C-210/00
Kaserei Champignon Hofmeister [2002] ECR I-6453, paragraph 59).
[123] With regard to judicial review of the conditions referred to in the previous paragraph, the Community legislature must be
allowed a broad discretion in an area such as that involved in the present case, which entails political, economic and social
choices on its part, and in which it is called upon to undertake complex assessments. Consequently, the legality of a
measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective
which the competent institution is seeking to pursue (see, to that effect, Case C-84/94 United Kingdom v Council [1996] ECR
I-5755, paragraph 58; Case C-233/94 Germany v Parliament and Council [1997] ECR I-2405, paragraphs 55 and 56, and
Case C-157/96 National Farmers' Union and Others [1998] ECR 1-2211, paragraph 61).
[124] With regard to the Directive, the first, second and third recitals in the preamble thereto make it clear that its objective is,
by approximating the rules applicable in this area, to eliminate the barriers raised by differences which, notwithstanding the
harmonization measures already adopted, still exist between the Member States' laws, regulations and administrative
provisions on the manufacture, presentation and sale of tobacco products and impede the functioning of the internal market.
In addition, it is apparent from the fourth recital that, in the attaining of that objective, the Directive takes as a basis a high
level of health protection, in accordance with Article 95(3) of the Treaty.
[125] During the procedure various arguments have been put forward in order to challenge the compatibility of the Directive
with the principle of proportionality, particularly so far as Articles 3, 5 and 7 are concerned.
[126] It must first be stated that the prohibition laid down in Article 3 of the Directive on releasing for free circulation or
marketing within the Community cigarettes that do not comply with the maximum levels of tar, nicotine and carbon monoxide,
together with the obligation imposed on the Member States to authorise the import, sale and consumption of cigarettes which
do comply with those levels, in accordance with Article 13(1) of the Directive, is a measure appropriate for the purpose of
attaining the objective pursued by the Directive and one which, having regard to the duty of the Community legislature to
ensure a high level of health protection, does not go beyond what is necessary to attain that objective.
[127] Secondly, as pointed out in paragraph 85 above, the purpose of the prohibition, also laid down in Article 3 of the
Directive, on manufacturing cigarettes which do not comply with the maximum levels fixed by that provision is to avoid the
undermining of the internal market provisions in the tobacco products sector which might be caused by illicit reimports into
the Community or by deflections of trade within the Community affecting products which do not comply with the requirements
of Article 3(1).
[128] The proportionality of that ban on manufacture has been called into question on the ground that it is not a measure for
the purpose of attaining its objective and that it goes beyond what is necessary to attain it since, in particular, an alternative
measure, such as reinforcing inspections of imports from non-member countries, would have been sufficient.
[129] It must here be stated that, while the prohibition at issue does not of itself make it possible to prevent the development
of the illegal trade in cigarettes in the Community, having particular regard to the fact that cigarettes which do not comply with
the requirements of Article 3(1) of the Directive may also be placed illegally on the Community market after being
manufactured in non-member countries, the Community legislature did not overstep the bounds of its discretion when it con-
sidered that such a prohibition nevertheless constitutes a measure likely to make an effective contribution to limiting the risk
of growth in the illegal trafficking of cigarettes and to preventing the consequent undermining of the internal market.
[130] Nor has it been established that reinforcing controls would in the circumstances be enough to attain the objective
pursued by the contested provision. It must be observed that the prohibition on manufacture at issue is especially
appropriate for preventing at source deflections in trade affecting cigarettes manufactured in the Community for export to
non-member countries, deflections which amount to a form of fraud which, ex hypothesi, it is not possible to combat as
efficiently by means of an alternative measure such as reinforcing controls on the Community's frontiers.

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[131] As regards Article 5 of the Directive, the obligation to show information on cigarette packets as to the tar, nicotine and
carbon monoxide levels and to print on the unit packets of tobacco products warnings concerning the risks to health posed
by those products are appropriate measures for attaining a high level of health protection when the barriers raised by
national laws on labelling are removed. Those obligations in fact constitute a recognised means of encouraging consumers
to reduce their consumption of tobacco products or of guiding them towards such of those products as pose less risk to
health.
[132] Accordingly, by requiring in Article 5 of the Directive an increase in the percentage of the surface area on certain sides
of the unit packet of tobacco products to be given over to those indications and warnings, in a proportion which leaves
sufficient space for the manufacturers of those products to be able to affix other material, in particular concerning their trade
marks, the Community legislature has not overstepped the bounds of the discretion which it enjoys in this area.
[133] Article 7 of the Directive calls for the following observations.
[134] The purpose of that provision is explained in the 27th recital in the preamble to the Directive, which makes it clear that
the reason for the ban on the use on tobacco product packaging of certain texts, such as 'low-tar', light', 'ultra-light', 'mild',
names, pictures and figurative or other signs is the fear that consumers may be misled into the belief that such products are
less harmful, giving rise to changes in consumption. That recital states in this connection that the level of inhaled substances
is determined not only by the quantities of certain substances contained in the product before consumption, but also by
smoking behaviour and addiction, which fact is not reflected in the use of such terms and so may undermine the labelling
requirements set out in the Directive.
[135] Read in the light of the 27th recital in the preamble, Article 7 of the Directive has the purpose therefore of ensuring that
consumers are given objective information concerning the toxicity of tobacco products.
[136] Such a requirement to supply information is appropriate for attaining a high level of health protection on the
harmonization of the provisions applicable to the description of tobacco products.
[137] It was possible for the Community legislature to take the view, without overstepping the bounds of its discretion, that
stating those tar, nicotine and carbon monoxide levels in accordance with Article 5(1) of the Directive ensured that
consumers would be given objective information concerning the toxicity of tobacco products connected to those substances,
whereas the use of descriptors such as those referred to in Article 7 of the Directive did not ensure that consumers would be
given objective information.
[138] As the Advocate-General has pointed out in paragraphs 241 to 248 of his Opinion, those descriptors are liable to
mislead consumers. In the first place, they might, like the word 'mild', for example, indicate a sensation of taste, without any
connection with the product's level of noxious substances. In the second place, terms such as 'low-tar', 'light', 'ultra-light', do
not, in the absence of rules governing the use of those terms, refer to specific quantitative limits. In the third place, even if the
product in question is lower in tar, nicotine and carbon monoxide than other products, the fact remains that the amount of
those substances actually inhaled by consumers depends on their manner of smoking and that that product may contain
other harmful substances. In the fourth place, the use of descriptions which suggest that consumption of a certain tobacco
product is beneficial to health, compared with other tobacco products, is liable to encourage smoking.
[139] Furthermore, it was possible for the Community legislature to take the view, without going beyond the bounds of the
discretion which it enjoys in this area, that the prohibition laid down in Article 7 of the Directive was necessary in order to
ensure that consumers be given objective information concerning the toxicity of tobacco products and that, specifically, there
was no alternative measure which could have attained that objective as efficiently while being less restrictive of the rights of
the manufacturers of tobacco products.
[140] It is not clear that merely regulating the use of the descriptions referred to in Article 7, as proposed by the claimants in
the main proceedings and by the German, Greek and Luxembourg Governments, or saying on the tobacco products'
packaging, as proposed by Japan Tobacco, that the amounts of noxious substances inhaled depend also on the user's
smoking behaviour would have ensured that consumers received objective information, having regard to the fact that those
descriptions are in any event likely, by their very nature, to encourage smoking.
[141] It follows from the preceding considerations concerning Question 1(c) that the Directive is not invalid by reason of
infringement of the principle of proportionality.
R v Secretary of State for Health, ex parte Swedish Match AB (Case C-210/03)
Judgment of 14 December 2004, Court of Justice of the European Communities
This is the decision, encountered above (p.52), in which the Court found that Directive 2001/37's ban on the marketing of
tobacco for oral use was validly based on Article 95 EC. Faced with the submission that the measure was nonetheless

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invalid for violation of the proportionality principle, the Court made an explicit connection with the direction in Article 95(3) that
the Community legislature shall take as a base a high level of health protection in setting harmonized standards.
[56] To satisfy its obligation to take as a base a high level of protection in health matters, in accordance with Article 95(3) EC,
the Community legislature was thus able, without exceeding the limits of its discretion in the matter, to consider that a
prohibition of the marketing of tobacco products for oral use was necessary, and in particular that there was no alternative
measure which allowed that objective to be achieved as effectively.
[57] As the Advocate General observes in points 116 to 119 of his Opinion, no other measures aimed at imposing technical
standards on manufacturers in order to reduce the harmful effects of the product, or at regulating the labelling of packagings
of the product and its conditions of sale, in particular to minors, would have the same preventive effect in terms of the
protection of health, inasmuch as they would let a product which is in any event harmful gain a place in the market.
[58] It follows from the above considerations that, with respect both to the objective of ensuring a high level of protection of
human health given to the Community legislature by Article 95(3) EC and to its obligation to comply with the principle of
proportionality, the contested prohibition cannot be regarded as manifestly inappropriate.
NOTE: The principle of proportionality applies not only to Community legislation, but also arises in the application of
substantive Treaty provisions.

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The Substantive Law of the EU (2nd Edition)


The Four Freedoms
Catherine Barnard

Chapter 6 (Extracts)

MEASURES HAVING EQUIVALENT EFFECT TO QUANTITATIVE RESTRICTIONS UNDER


ARTICLE 28

INTRODUCTION
In the last chapter we considered the prohibition in Article 28 on quantitative restrictions (QRs). We saw
that QRs concern quotas or a total ban on imports into a Member State, that they breach Article 28, and can
be saved only by reference to the Article 30 derogations. In this chapter we consider the other aspect of the
Article 28 prohibition: measures having equivalent effect to quantitative restrictions (MEEs). MEEs cover a
range of measures--such as national rules on the shape, content, packaging and labelling of goods--all of
which may hinder inter-state trade but which cannot be described as quantitative restrictions. In this chapter
we examine how the Court has defined MEEs and how it has developed a sophisticated case law around
MEEs, distinguishing between distinctly and indistinctly applicable measures and, in the case of indistinctly
applicable measures, developing a presumption that the standards laid down by the home State are
equivalent to those required by the host State unless the host State can show a good reason why its own
rules should apply.

WHAT ARE MEASURES HAVING EQUIVALENT EFFECT?


INTRODUCTION: THE DASSONVILLE FORMULA
The general definition of MEEs is now found in Dassonville, where the Court said:
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 an effect equivalent to
quantitative restrictions.

The potential breadth of the so-called Dassonville formula is striking. In principle, measures having only an
indirect, potential effect on trade fall within its scope and therefore breach Article 28. It therefore tends to
support a reading of Article 28 as the basis for an economic constitution for the EU: maximising the right
for individuals to participate on the market on whatever terms they choose, and providing a vehicle to
challenge any national rule which stands in their way - even potentially and indirectly.

Dassonville is thus read as granting market access to products from other Member States. Taken to
extremes, a broad, market access reading of Dassonville might mean that Article 28 could be used to
challenge national rules limiting Sunday trading or development in the green belt or age restrictions on who
can buy alcohol. While such legislation does circumscribe general commercial freedom in various ways, the
national rules serve a variety of social purposes and their effects on inter-state trade is remote. For this
reason, the Court was eventually, forced to curtail the broad sweep of the Dassonville formula when, in its
judgment in Keck, it recognized that non-discriminatory national measures restricting 'certain selling
arrangements' (CSAs) did not constitute MEEs and so fell outside the scope of Article 28 (see fig. 6.1). The
details of this important case will be considered in Chapter 7. For now we shall examine the elements of the
Dassonville formula.

'ALL TRADING RULES'


According to Dassonville Article 28 applies to 'all trading rules', which means that Article 28 applies to the
marketing stage, and not to the production stage, of the economic process. Therefore, in Kramer the Court
said that national rules limiting fishing in order to conserve fish stocks did not concern a trading rule and so
did not constitute an MEE. In subsequent cases the Court has dropped the emphasis on the need to show a
trading rule. For example, when defining MEEs in Keck the Court talked only of 'rules' that lay down
requirements to be met by goods coming from other Member States.

But even the reference to 'rules' is misleading. Article 28 itself refers to the more general term 'measures'

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and the Court has insisted that these measures need not be legally binding. Therefore in Commission v.
Ireland ('Buy Irish') the Court said that a campaign sponsored by the Irish government encouraging its
citizens to buy Irish goods amounted to the establishment of a 'national practice introduced by the Irish
government and prosecuted with its assistance'. It continued that by influencing the conduct of traders and
consumers in Ireland the campaign's potential effect on imports was comparable to that resulting from
government measures of a binding nature.

Thus, Buy Irish shows that the term 'rules' includes practices and policies. Commission v. France (postal
franking machines) takes the definition one stage further. It says that 'rules' also include administrative
regulations and action which show 'a certain degree of consistency and generality'. Therefore an
administrative practice requiring prior approval to be given to postal franking machines, where, approval
was given to French machines but not those produced in the UK, breached Article 28.

'ENACTED BY MEMBER STATES'


The next element of the Dassonville formula, 'enacted by Member States', is also misleading. As the
previous section showed, the national measure does not need to be 'enacted' to fall within the scope of
Article 28: a consistent policy or practice will suffice. The rules also do not need to be enacted by the
central government of a Member State. Article 28 applies to measures adopted by the authorities of a
federal State and other territorial authorities. It also applies to bodies for whose acts the national
government is responsible, as Commission v. Ireland demonstrates. The 'Buy Irish' campaign was
administered by the Irish Goods Council (IGC), a registered company. Nevertheless, the Court said that
Article 28 still applied because the aims and broad outline of the campaign were set by the government, the
management committee of the IGC was made up of ten people appointed by the Minister for Industry, and
most of the funding for the Council's activities came from the government.

Not only does Article 28 apply to government or quasi-government bodies but it also applies to bodies
which regulate the conduct of a particular profession. For example, in ex parte Association of
Pharmaceutical Importers (API) the Court ruled that Article 28 applied to the Royal Pharmaceutical Society
of Great Britain, the professional body for pharmacy.

These rulings support the view that Article 28 has vertical direct effect and can be enforced against a broad
category of State or quasi-state defendants. This raises a further question: can or should Article 28 also have
horizontal direct effect? This question has assumed a renewed importance since the decision in Angonese,
where the Court ruled that Article 39 on the free movement of workers has horizontal (as well as vertical)
direct effect. From the perspective of ensuring the effectiveness of Article 28, there are good policy reasons
for giving Article 28 horizontal direct effect.

If a large British supermarket chain, Costco, were to refuse to stock French products on the ground that it
objected to certain policies pursued by the French government, then the supermarket's decision would have
a damaging effect on inter-state trade. On the other hand, Article 28 is addressed to the Member States and
not to private parties who should be able to contract freely, unconstrained by Article 28. This was the view
taken by the Court in Sapod-Audic, where it said that a contractual obligation to affix the 'Green dot logo' to
packaging could not be regarded as a barrier to trade for the purposes of Article 28 'since it was not imposed
by a Member State but agreed between individuals'. For these reasons Article 28 should not have horizontal
direct effect.

Most commentators consider that, outside the field of intellectual property, Article 28 has only vertical
direct effect and so does not apply to action between individuals. Their action is constrained by the (less
demanding) regime of the competition rules (Articles 81 and 82). Article 81 applies only in the case of
agreements between undertakings (so a unilateral decision by a supermarket is unlikely to be covered);
Article 82 applies only if there is an abuse of a dominant position. Even the largest supermarket is unlikely
to satisfy the criteria of dominance (40% of market share). In these circumstances Costco's conduct is likely
to fall outside the scope of Community law.

That said, the State may have to take responsibility for the action of individuals who have been disrupting

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the application of Article 28, even though the activity of the individuals is not in itself caught by Article 28.
This principle was established in Commission v. France (Spanish strawberries). For many years French
farmers sabotaged imported agricultural produce while the French authorities simply stood back and turned
a blind eye. As a result, the Commission brought Article 226 enforcement proceedings against the French
government 'for failing to take all necessary and proportionate measures' to prevent the free movement of
goods from being obstructed by the actions of private individuals, contrary to Article 28 read in conjunction
with Article 10 on the duty of co-operation. The Court agreed, saying that Article 28 prohibited not only
State action but also inaction. It said:

The fact that a Member State abstains from taking action or, as the case may be, fails to adopt adequate
measures to prevent obstacles to the free movement of goods that are created, in particular, by actions by
private individuals on its territory aimed at products originating in other Member States is just as likely to
obstruct intra-Community trade as is a positive act.

However, it seems that liability will arise only where the State has 'manifestly and persistently abstained
from adopting appropriate and adequate measures' to put an end to individual action which jeopardizes free
movement. Less serious interference by individuals will not attract this sanction.

'DIRECTLY OR INDIRECTLY, ACTUALLY OR POTENTIALLY'


'Actually or potentially'
The third limb of the Dassonville formula is that the national measure must 'directly or indirectly, actually
or potentially' hinder intra-Community trade. While most of the cases concern measures which have an
actual effect on trade, the Court has recognized that it is sufficient for the measure to have a potential effect
to breach Article 28. This can be seen in Commission v. France (foie gras) concerning French rules on the
composition of foie gras. Although very little foie gras was produced in other Member States, the Court still
found that because the national rule was 'capable of hindering, at least potentially, inter-state trade' it
breached Article 28. This case also demonstrates the point made explicitly elsewhere that no de minimis
rule applies to Article 28. For this reason, the Court has said that national rules need apply only to part, and
often a very small part, of the market to trigger the Article 28 prohibition. Therefore, in Bluhme the Court
said that Article 28 applied to a rule which affected the Danish island of Ls which covered only 0.3 per
cent of Danish territory.

'Directly or indirectly'
Dassonville also provides that the national measure must 'directly or indirectly' hinder intra-Community
trade. This has been interpreted to mean that both direct and indirect discrimination against imported goods
are prohibited. Since Keck, this requirement has become increasingly important. However, in its early case
law the Court focused less on concepts of discrimination than on whether the measures had the effect of
restricting inter-state trade - in other words a market access based approach. This can be seen in
Dassonville itself where Belgian law required importers of Scotch whisky to hold a British certificate of
authentication. This rule favoured those importing whisky directly from the UK over traders importing
Scotch whisky into Belgium from other Member States where the whisky was already in free circulation.
Such 'indirect' importers could obtain this certificate only with great difficulty. The Court did not analyse
this problem in terms of discrimination; instead it merely said that the requirement to hold the certificate
constituted an MEE.

However, the Commission has always recognized that Article 28 prohibits discrimination. In Commission
Directive 70/50 it distinguished between measures which discriminate directly against imports ('distinctly
applicable measures') and measures that indirectly affect imports ('indistinctly applicable measures' or
'equally applicable measures'). This Directive applied only to the Community's transitional period (now
expired) but continues to be an important source to help understand this terminology. Article 2 of Directive
70/50 describes distinctly applicable measures. It says:

This Directive covers measures, other than those applicable equally to domestic or imported products,
which hinder imports which could otherwise take place, including measures which make importation more
difficult or costly than the disposal of domestic production.

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Thus, distinctly applicable measures expressly treat imported goods less favourably than domestic goods.
By contrast, indistinctly applicable measures appear on their face to treat domestic and imported goods
alike, but in fact disadvantage imported good by requiring them to satisfy an additional set of rules (e.g.
repackaging) before they can be sold on the host State's market. Such rules may have been introduced with
the purpose of protecting national markets or may have that effect: it is immaterial. Article 3 of Directive
70/50 makes no reference to the purpose of the measure. It merely provides:
This Directive 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.
The distinction between distinctly and indistinctly applicable measures has generally been accepted by the
Court. We shall now examine the meaning of these two concepts.

DISTINCTLY APPLICABLE MEASURES


INTRODUCTION
Distinctly applicable measures are loosely equivalent to directly discriminatory measures: the imported
goods are treated less favourably than the domestic product when in objective terms they should be treated
in the same way. Putting it another way, the national measure has a different burden in law and in fact on
the domestic and imported good. As figure 6.1 demonstrates, distinctly applicable measures breach Article
28 and, due to their obvious impact on inter-state trade, can be saved only by reference to Article 30.

EXAMPLES OF DISTINCTLY APPLICABLE MEASURES


Imposing an additional requirement on the imported goods
One group of distinctly applicable measures is those which, as Article 2 of Directive 70/50 puts it, place
conditions on imported products only, or demand higher standards of imports than of domestic products.
Therefore, a requirement that imported goods be inspected breaches Article 28 due to the delays inherent in
the inspection process and the additional transport costs which the importer may incur. So, in Rewe
phytosanitary inspections of imported apples to control the spread of the apple disease San Jos scale
breached Article 28.

Other unlawful conditions relate to the requirement for the imported goods (but not the domestic goods) to
have a licence or other official approval, such as a certificate of fitness. Alternatively the condition may
relate instead to the composition of the goods. In Weinvertriebs the Court said that a German law specifying
the minimum alcohol content for imported vermouth breached Article 28. The condition may also concern
the circumstances under which the goods are promoted. Hence, a ban or other restriction on advertising
foreign products but not their domestic equivalents breaches Article 28.

Rules limiting channels of distribution


A second group of situations considered to be distinctly applicable concerns national rules limiting channels
of distribution. We have already seen in Dassonville how a national rule requiring the production of a
certificate of authenticity favoured direct importers over indirect importers and so breached Article 28. This
can also be seen in De Peijper, where a parallel importer, who was not appointed to sell certain medicines
directly on the Dutch market, bought them instead from a British wholesaler, and then imported them into
the Netherlands. The parallel importer could not obtain the necessary authorization from the Dutch
authorities because the appointed importer refused to give it access to the relevant documentation. The
Court said that 'rules or practices which result in imports being channelled in such a way that only certain
traders can effect these imports, whereas others are prevented from doing so' constitute an MEE.

National rules giving preference to domestic goods


A third group of distinctly applicable measures involve national rules which give preference to or advantage
for domestic products. This can be seen in Dundalk Water concerning a clause in a tender to supply pipes
for drinking water which specified that the pipes had to be made according to an Irish standard by a firm
approved by the Irish standards body as a supplier of pipes complying with the Irish standard. Only one
(Irish) firm had been approved by the body. The authorities rejected a tender from an Irish/Spanish
consortium proposing to supply pipes manufactured according to an alternative, international standard. The

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Court said that the terms of the tender discouraged those producing pipes to equivalent standards from
tendering. This had 'the effect of restricting the supply of the pipes needed for the Dundalk scheme to Irish
manufacturers alone' and therefore breached Article 28.

'Buy national' campaigns also fall within this group of cases since, by their very nature, they are intended to
encourage the purchase of national products in preference to imported products. Therefore, in Commission
v. Ireland ('Buy Irish' the Court condemned the Irish campaign since it reflected the Irish government's
desire to achieve 'the substitution of domestic products for imported products and was liable to affect the
volume of trade between Member States'. It reached this conclusion even though trade had actually fallen
by 6 per cent over the three years of the campaign.
Commission v. Ireland needs to be compared with the decision in Apple and Pear Development Council
('buy British fruit') where the Court said that a British government-supported development council was
under a duty not to run advertising designed to discourage the purchase of products from other Member
States nor to disparage those products in the eyes of the consumers nor to advise consumers to purchase
domestic products solely by reason of their national origin. However, the Court did say that such a body
could draw attention in its publicity to the specific qualities of fruit grown in the UK and could organize
campaigns to promote the sale of certain varieties, mentioning their particular properties, even if those
varieties were typical of national production. This case law highlights the fine line between State-sponsored
promotion of national goods generally, which is unlawful, and State-sponsored promotion of specific goods
having distinctive qualities, which is permissible.

If 'buy national' campaigns are considered distinctly applicable, a fortiori national rules requiring the
purchase of certain quantities of the domestic product will be distinctly applicable. In PreussenElektra the
Court ruled that an obligation placed on electricity suppliers to purchase all of the renewable electricity
produced in their area was an MEE since it limited the supplies those traders could obtain from producers in
other Member States. The Court reached a similar conclusion in Du Pont de Nemours where Italian law
reserved 30 per cent of public supply contracts to companies established in certain regions of Italy. In its
defence Italy argued that Italian regions not covered by the preferential system also suffered. The Court
rejected the argument, saying that 'although not all the products of the Member State in question benefit by
comparison with products from abroad, the fact remains that all the products benefiting by the preferential
system are domestic products'. The measure therefore breached Article 28.

Origin marking cases are also considered distinctly applicable, as Commission v. Ireland (Irish souvenirs)
demonstrates. Irish law required that all imported (but not domestic) jewellery depicting motifs suggesting
that they were souvenirs of Ireland (for example, an Irish character, wolfhound, or shamrock) had to bear an
indication of the country of origin or the word 'foreign'. The Irish government justified its rule on the
ground that the appeal of souvenirs lay in the fact that they were manufactured in the place where they were
bought. The Court rejected these arguments, favouring instead the Commission's view that buyers did not
need to know where a product came from unless the product implied a certain quality (which was not the
case here). Rather dismissively, the Court said that since the souvenirs were of little commercial value,
bought by tourists on the spot as 'pictorial reminders' of the place visited, they did not have to be
manufactured in the country of origin. Therefore, the Irish law requiring an indication of origin was a
distinctly applicable MEE and breached Article 28. However, the Court added that Article 28 did allow
domestic manufacturers to choose whether to attach the mark of origin to their goods. This might be to their
commercial advantage for the very reasons given by the Irish government.

It might be thought that a rule concerning origin marking did serve the interests of consumers since, as the
Court said in GB-INNO-BM, the provision of information to the consumer is a fundamental right.
However, in Commission v. UK (origin marking), a case concerning a British law that certain imported
goods be marked with an indication of origin, the Court explained why this might not always be so. It said
that this law breached Article 28 because the origin marking requirement enabled consumers to distinguish
between domestic and imported products, allowing them to assert any prejudices which they might have
against foreign product. In a single market an origin marking rule not only made the marketing of imported
goods more difficult but it also had 'the effect of slowing down economic interpenetration in the
Community by handicapping the sale of goods produced as the result of a division of labour between

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Member States'.

As the Court suggested in the Buy Irish and Origin Marking cases, indications of provenance and
designations of origin are lawful only where the product genuinely has distinguishing qualities and
characteristics which are due to the fact that it originated in a specific geographic area. This was confirmed
in Commission v. Germany (Weinbrand where the Court found that a German law reserving the well-
known names 'Sekt' and 'Weinbrand' to products originating in Germany or coming from countries where
German was the official language breached Article 28. The Court said that an area of origin defined on the
basis of the national territory (Germany) or a linguistic criterion (German speaking) could not constitute a
geographic area capable of justifying an indication of origin because the production of these drinks did not
involve specific grapes or production methods. In other words, because the products did not have any
qualities and characteristics rendering them typically German Germany could not reserve the generic names
'Sekt' and 'Weinbrand' to these national products. Furthermore, the Court said that by reserving these names
to domestic products, products from other Member States were compelled to employ names which were
'unknown or less esteemed by the consumer'. As a result, the German legislation was 'calculated to favour
the disposal of the domestic product on the German market to the detriment of the products from other
Member States'.

A common theme running through this line of case law is the Court's insistence on examining the effect of
the measure. If, in reality, the measure has a different burden in law and in fact on the imported goods it is
considered to be distinctly applicable, no matter that the measure might be drafted in an indistinctly
applicable manner. This can be seen most clearly in Commission v. UK (origin marking) where, in response
to the UK's argument that the rule was actually indistinctly applicable, the Court said
The requirements relating to the indication of origin of goods are applicable without distinction to domestic
and imported products only in form because, by their very nature, they are intended to enable the consumer
to distinguish between those two categories of products, which may thus prompt him to give his preference
to national products.

For the defendant Member State the significance of having its measure classified as a distinctly applicable
measure is that it can justify it only by reference to one of the Article 30 derogations, not by the broader list
of mandatory requirements which apply only to indistinctly applicable measures (see fig. 6.1).

...............

CASSIS DE DIJON
As we have seen, if a measure is caught by Article 28 it is prohibited unless it can be saved by a derogation
in Article 30. However, Article 30 contains an exhaustive list of derogations, which has not been amended
since 1957. From the perspective of a Member State, Article 30 does not include the sort of good policy
reasons (such as environmental and consumer protection) which justify the adoption of many indistinctly
applicable measures. At the same time an increasing number of national measures were being caught by
Article 28 owing to the scope of the Dassonville formula. However, traders also resented Member States'
ability to impose additional technical requirements on their goods each time they tried to break into a new
national market. If goods were lawfully produced according to the laws of one Member State, why could
they not be sold on the markets of all other Member States? These issues were addressed in the Court's
remarkable decision in Cassis de Dijon.

Cassis de Dijon was a straightforward product requirement case concerning the composition of fruit
liqueurs. The German authorities refused to allow Cassis de Dijon, a blackcurrant fruit liqueur made in
France, to be sold in Germany owing to its insufficient alcoholic strength. German law required fruit
liqueurs to have a minimum alcohol content of 25 per cent, whereas the French Cassis had an alcohol
content of only 15-20 per cent. The Court said that '[i]n the absence of common rules [i.e., harmonization] it
is for Member States to regulate all matters relating to the production and marketing of alcohol and
alcoholic beverages on their own territory'. It continued:

Obstacles to movement in the Community resulting from disparities between the national laws relating to

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the marketing of the products in question must be accepted in so far as those provisions may be recognised
as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of
fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of
the consumer.
To this the Court added in Rau:

It is also necessary for such rules to be proportionate to the aim in view. If a Member State has a choice
between various measures to attain the same objective it should choose the means which least restricts the
free movement of goods.

Thus, in the absence of harmonization legislation, Member States can regulate product requirements and
insist that national rules be applied to imported goods provided that the national rules can be justified by
showing one of the mandatory requirements (e.g., consumer protection) and that the steps taken are
proportionate.
In Cassis the German government relied on two of the mandatory requirements: public health and the
protection of the consumer against unfair commercial practices. It argued, first, that the minimum alcohol
content rule prevented a proliferation of low alcohol drinks on the national market since such drinks more
readily induced tolerance towards alcohol than stronger drinks. Not surprisingly, the Court dismissed this
argument. It said that German consumers could obtain a wide range of weaker alcoholic products and
strongly alcoholic drinks were often consumed in a diluted form. As far as the consumer protection/fair
trading argument was concerned, the German government said that drinks with a lower alcohol content
secured a competitive advantage over drinks with a higher alcohol content, since alcohol was the most
expensive constituent of the product. The Court rejected this too, saying that 'it is a simple matter to ensure
that suitable information is conveyed to the purchaser by requiring the display of an indication of origin and
of the alcohol content on the packaging of products'. Therefore, the national rules constituted an obstacle to
trade and breached Article 28; labelling would have been an adequate response.

The Court then added:


There is therefore no valid reason why, provided that they have been lawfully produced and marketed in
one of the Member States, alcoholic beverages should not be introduced into any other Member State.
This idea, known as the presumption of equivalence or mutual recognition, is of great importance. It means
that goods lawfully produced and marketed in one Member State (France) can, in principle, be sold in
another Member State (Germany) without further restriction. Putting it another way, Germany must
recognize French standards as equivalent to its own. However, this presumption can be rebutted by the host
State (Germany) demonstrating that its laws can be justified under one of the mandatory requirements, and
that the national rules are proportionate. In other words, as figure 6.1 shows, owing to the presumption of
equivalence, indistinctly applicable national measures which prevent goods lawfully produced in State A
from being sold on the market in State B constitute a prima facie breach of Article 28. However, if the host
state (B's) rules can be justified by reference to one of the mandatory requirements (or by one of the Article
30 derogations) and the steps taken are proportionate, then there is no breach of Article 28 and the national
interest takes precedence over the free movement of goods.

The result of Cassis is to replace dual regulation of a product (by both the home and host States) with
single regulation (home State) which, under the principle of mutual recognition, the host State is require to
respect. Thus, Cassis introduces the principle of home state control and, in so doing, gives extra-territorial
effect to the laws and standards laid down by the home state, at least in principle. As we saw in Chapter 1,
the effect of the principle of mutual recognition is to put the different legal systems in competition with one
another. Goods produced in France can be sold in Germany; the German consumers then have the choice
between French goods and German goods produced according to different standards. This maintains a
diversity of national rules. However, since in the common market there is also free movement of capital
there is a risk that business might flee to France and set up there to produce fruit liqueurs according to the
'lower' French standards, with serious implications for German jobs. Alternatively, if capital does not move
but the German consumers buy the cheaper French cassis, this outcome will also be detrimental to German
jobs. One response would be for the German producers to lobby their government for lower standards. If
successful, this might prompt the French producers to request their government to lower standards still

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further, leading to a race to the bottom and a convergence (rather than a diversity) of standards at this low
level. This problem was raised by the German government in Cassis itself:
to allow alcoholic products into free circulation wherever, as regards their alcohol content, they comply
with the rules laid down in the country of production would have the effect of imposing as a common
standard within the Community the lowest alcohol content permitted in any of the Member States, and even
of rendering any requirements in this field inoperative since a lower limit of this nature is foreign to the
rules of several Member States.

The mandatory requirements recognized by the Court in Cassis are intended to place a brake on any such
race to the bottom. They allow for (residual) host state control where an important interest of the host State
is at issue. Therefore, if Germany could successfully invoke a mandatory requirement, this would require
French products to comply with the higher German standards. However, as we shall see, the Member States
have experienced difficulties both in successfully invoking these mandatory requirements and in showing
that the steps taken were proportionate. Cassis is therefore seen as a decision promoting the Community
interest of market integration, but at the cost of potentially eroding diverse (high) national standards
adopted by democratically elected national governments. This may create a 'regulatory gap'--if national law
is struck down and not replaced by an equivalent Community law, the market is left unregulated. However,
if a Community law is enacted this will create a further brake on any race to the bottom.

While many have expressed concern about Cassis' deregulatory potential, Weatherill warns against too
much sentiment. He argues that the development of European market integration confronts the dead wood
of centuries of regulatory tradition in all the Member States. He says that '[t]he whole point of the exercise
is regulatory renovation and a bonfire of red-tape on the pyre of Article 28 constitutes the anticipated, even
necessary, method'. He continues that the Court is frequently asked to deal with the collision between, on
the one hand, the making of a market for Europe and, on the other, national rules introduced for once sound
reasons that lost their purpose generations ago, mixed together with other national rules cherished by
national producers as convenient means for insulating themselves from the threat of out-of-state
competition. The result of this collision in Cassis was to favour market making over the interests of German
producers while benefiting German consumers who now have access to a wider choice of products, and
traders from other Member States who can sell to a wider market.

The Commission was quick to realize the importance of Cassis. It issued an interpretative communication
on the judgment, which recognized that the presumption of equivalence obviated the need for much
harmonization legislation. Because each national standard was presumed to be equivalent, goods produced
according to that national standard would have access to the market of all other Member States. Therefore,
there was no longer a need for a directive prescribing the content of a 'Euro' fruit liqueur; harmonization
would be confined to areas where Member States legitimately invoked a mandatory requirement or an
Article 30 derogation. Outside those areas of harmonisation, the principle of mutual recognition applies and
goods lawfully produced in one Member State enjoy access to the market in another state, with the result
that different regulatory traditions and different products continue to co-exist.

THE 'MANDATORY REQUIREMENTS'


As we have seen, in Cassis the Court developed an open-ended list of mandatory requirements to
supplement the Article 30 derogations. Soon after Cassis, the Court confirmed that these mandatory
requirements applied only to indistinctly applicable measures and not to distinctly applicable measures (see
fig. 6.1). It also said that, like the Article 30 derogations, the mandatory requirements were available only in
the absence of harmonization, provided the harmonization occupies the field to the exclusion of Member
State competence.

These mandatory requirements, now increasingly called 'imperative requirements' or 'overriding


requirements in the public interest' to dovetail with the Court's jurisprudence on the free movement of
persons, are 'good' reasons put forward by the Member States to justify their conduct. They must be
unrelated to the origin of the goods and must serve objectives considered by the Court to be legitimate.
They are the functional equivalents of the concept of objective justification developed in the context of
indirectly discriminatory national taxes under Article 90 (see fig. 4.2). These 'good' reasons, of which

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Cassis provides an illustrative list, are often based on Community policies identified in the Treaty. The
Court introduced these mandatory requirements, as an additional strand of justification over and above the
Article 30 derogations, to placate the Member States. Its ruling on mutual recognition made significant
inroads into states' competence to regulate products traded on their territory. This was their compensation.
The Court has recognized the following non-exhaustive list of mandatory requirements:
-- the effectiveness of fiscal supervision;
-- the protection of public health;
-- the fairness of commercial transactions;
-- the defence of the consumer;
-- protection of the environment;
-- protection of working conditions;
-- protection of cinema as a form of cultural expression;
-- protection of national or regional socio-cultural characteristics;
-- maintenance of press diversity;
-- preventing the risk of seriously undermining the financial balance of the social security system;
-- protection of fundamental rights;
-- preserving the maintenance of order in society.
This list demonstrates that the Court accepts most of the mandatory requirements put forward by the
Member States provided that the national policies do not pursue aims of a purely economic nature. The list
demonstrates a recognition by the EU of non-commercial values important to the Member States and a
confirmation by the Court that the EC Treaty is not purely an economic constitution. However, the problem
facing the Court is that, each time it is called to adjudicate on any case where a mandatory requirement is
invoked and the proportionality of the steps taken to achieve that objective, it has to adjudicate on broad
policy questions, thereby placing judges 'at the outer limits of their legitimate judicial role, where the
judiciary risks substituting its assessment for that of the legislature'.

The two mandatory requirements most commonly invoked by the Member States are public health and
consumer protection. Public health reflects the more carefully worded derogation found in Article 30 and
the Court invariably refers to Article 30 when justifications based on public health are raised. This
derogation is considered in more detail in Chapter 5.

As far as consumer protection is concerned, the Court has in mind 'the presumed expectations of an average
consumer who is reasonably well-informed and reasonably observant and circumspect'. This individual also
reads labels on products. In other words, Community law does not permit national laws protecting the
unobservant and unintelligent consumer when such laws stand in the way of market integration which is of
benefit to the consumer body as a whole. This can be seen in two references from Germany, Clinique and
Mars. In Clinique a German rule required that all 'Clinique' (cosmetic) products be sold under the name
'Linique' on the ground that the 'Clinique' name could mislead consumers into believing that the products
had medicinal properties. Rejecting the consumer protection justification, the Court noted that the Clinique
products were sold only in department stores and not in pharmacies, where they were presented as
cosmetics and not as medicinal products. It concluded that the products were ordinarily marketed under the
name Clinique in other countries where 'the use of that name apparently does not mislead consumers'.

In Mars the German association against 'pernicious trading practices' which had complained about Mars'
+10% promotion argued that the campaign might conceal a price rise and that, since the +10% flash
covered more than a tenth of the total surface area of the wrapping, consumers might be misled into
thinking that they were receiving more than 10 per cent extra. The Court rejected both arguments. It said
that Mars had not profited from the campaign by increasing its prices and that '[r]easonably circumspect
consumers could be deemed to know that there was not necessarily a link between the size of publicity
markings relating to an increase in a product's quantity and the size of that increase'.

So, in defining a European approach to consumer protection in Clinique and Mars, the Court rejected the
German model based on the 'uninformed consumer' in favour of the model of the 'mature and prudent'
consumer which dominates in other Member States. In so doing, the Court adopted a majoritarian approach,
allowing the view of the majority of Member States to prevail over that of the German minority. The Court

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is, however, prepared to relax these criteria in appropriate circumstances. For example, it has conceded that
account can be taken of 'social, cultural or linguistic factors' when assessing consumer protection. It has also
permitted national laws designed to protect the below average consumer where, as in Buet, the product is
targeted at the 'particularly vulnerable consumer', such as those who are 'behind with their education and are
seeking to catch up'. The case concerned a French law prohibiting doorstep selling of educational materials
which, the Court said, while constituting an obstacle to the free movement of goods could be justified on
the ground of consumer protection. It said that since teaching material was not a consumer product in daily
use, an ill-considered purchase could cause the consumer harm other than mere financial loss because the
purchase of unsuitable or low-quality material could 'compromise the consumer's chances of obtaining
further training and thus consolidating his position on the labour market'. In these circumstances the Court
said a right to cancel the contract was not sufficient and the Member State was permitted to retain its more
protective national laws.

If the Court considers that there is a sufficiently serious risk of consumers being misled, owing to
linguistic, cultural, and social differences, then the marketing of the product can be prohibited on the ground
of consumer protection. Therefore, in Graffioi the Court said that a Member State was justified in
prohibiting the sale of toilet paper and paper handkerchiefs under the trade mark Cotonelle if there was a
sufficiently serious risk of consumers thinking that they contained cotton. Generally, however, the Court
tends to be rather sceptical of the claims by States for consumer protection because it fears that such
arguments are a simple disguise for protectionism. This can be seen in GB-INNO which concerned a
Luxembourg rule prohibiting shops from advertising when their sales were due to take place and how long
they would last. Because the effect of this rule was to deny consumers, particularly those in Belgium, access
to certain kinds of information the Court said it could not be justified on the ground of consumer protection.
Thus the Luxembourg rule which was intended to protect consumers actually denied them a benefit and so
contravened Community law

PROPORTIONALITY
As we saw in Rau, the national restriction justified by a mandatory requirement must be proportionate to the
aim pursued. We also saw in Chapter 5 that the principle of proportionality essentially comprises two tests:
a test of suitability and a test of necessity. In effect, it requires the Court to perform a balancing exercise
between the objectives pursued by the measure in issue and its adverse effects on the free movement of
goods. The Court's approach can be seen in Familiapress. A German company published a magazine,
'Laura', which was also distributed in Austria. An Austrian rival sought to restrain sales of 'Laura' on the
ground that the magazine included prize competitions (readers who correctly filled out a crossword puzzle
were entered for a prize draw; the first correct entry drawn received a cash prize) which contravened an
Austrian law on unfair competition. The justification for the Austrian rule was to preserve press diversity by
preventing large publishers from driving smaller publishers off the market owing to their ability to offer
larger prizes. Having accepted this justification in principle, the Court said it was for the national court to
determine whether the national prohibition was 'proportionate to the aim of maintaining press diversity and
whether that objective might not be attained by measures less restrictive of both intra-Community trade and
freedom of expression'. The Court then explained exactly how the national court should do this.
On the question of suitability, the Court said the national court had to commission a study to determine:
first, whether newspapers which offered the chance of winning a prize in competitions were actually in
competition with those small press publishers who were considered unable to offer comparable prizes; and,
secondly, whether the prospect of winning did constitute an incentive for potential consumers to purchase
magazines which was capable of bringing about a shift in demand. The Court continued that the national
court also had to assess the extent to which, from the consumer's standpoint, the product concerned could be
replaced by magazines which did not offer prizes. In making this assessment the national court had to take
into account all the circumstances which might influence the decision to purchase, such as the presence of
advertising on the front cover referring to the chance of winning a prize, the likelihood of winning, the
value of the prize or the extent to which winning depended on a test calling for a measure of ingenuity,
skill, or knowledge. The Court then turned to the question of necessity (whether the Austrian legislature
could have adopted measures less restrictive of free movement of goods than an outright prohibition on the
distribution of newspapers). It said the national court had to consider whether national law could have
required merely the removal of the page on which the prize competition appeared in copies intended for the

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Austrian market or the addition of a Statement that readers in Austria did not qualify for the chance to win a
prize.
Familiapress demonstrates that the application of the tests of suitability and necessity enables courts to
review not only the legality, but also to some extent the merit, of legislative and administrative measures.
As Tridimas says, for this reason proportionality is often perceived as a far-reaching ground of review.
However, much depends on how strictly a court (in theory the national court, in practice often the Court of
Justice itself) applies the tests of suitability and necessity, and how far it is prepared to defer to the interests
of the decision-maker. In Familiapress the Court adopted a rigorous approach to the proportionality
question but in other cases it has demonstrated a much lighter touch. For example, in Safety Hi-Tech, the
Court simply said that a prohibition on the use and marketing of HCFCs to help protect the ozone layer
could not be regarded as 'disproportionate to the aim pursued', without undertaking any of the analysis
outlined in Familiapress.
.......

FUNDAMENTAL HUMAN RIGHTS


As we have seen in Schmidberger, fundamental rights can be invoked defensively as a mandatory
requirement to justify a restriction on trade. However, if another mandatory requirement (e.g. consumer
protection, plurality of the press) is invoked then fundamental rights can be used to limit the scope of that
justification (see fig 6.2). As the Court said in Familiapress, where a Member State relies on overriding
requirements to justify rules which may obstruct the exercise of free movement of goods, 'such justification
must also be interpreted in the light of the general principles of law and in particular of fundamental rights',
including freedom of expression. The Court said that the Austrian prohibition on prize competitions in
magazines could 'detract from freedom of expression', albeit that Article 10 of the European Convention
does permit derogations for the purposes of maintaining press diversity, in so far as they are prescribed by
law and are necessary in a democratic society. The Court then said that it was for the national court to
determine whether the national law was proportionate to the aim of maintaining press diversity and whether
the objective could be attained by measures less restrictive of both intra-Community trade and freedom of
expression. The introduction of the Charter will help to strengthen the role of the fundamental rights
regime. Nevertheless, the balancing exercise is by no means straightforward. As the Court has said on a
number of occasions, the economic freedom, free movement of goods, is deemed to be a fundamental right
in just the same way as more traditional civil and political fundamental rights. The hierarchy between the
rights is less obvious than in national systems.

BLURRING THE DISTINCTION BETWEEN DISTINCTLY AND INDISTINCTLY APPLICABLE


MEASURES
In the case law considered so far the Court has taken a two-stage approach. First, it has classified the
measure as distinctly or indistinctly applicable and found a breach of Article 28, and then it has considered
whether, in the case of distinctly applicable measures, one of the Article 30 derogations exists, or whether,
in the case of indistinctly applicable measures, a mandatory requirement or an Article 30 derogation applies
(see fig. 6.1). However, in some more recent cases the Court has dropped this two-stage approach and,
harking back to the Dassonville formula, simply noted that the national measure impedes inter-state trade,
making little or no reference to the question of discrimination, and simply considers whether a mandatory
requirement or an Article 30 derogation applies. For example, in Bluhme, concerning the Danish law
permitting only the Ls brown bee to be imported on to the island of Ls, the Court simply said that,
since the prohibition on the import of all other species of bee applied both domestically and to importers, it
was capable of hindering inter-state trade and so constituted an MEE. The Court then examined the
health/environmental justification for the measure.

...............
TECHNICAL REGULATIONS AND ITS NOTIFICATION...
...............................
In Unilever the Court also shed a little more light on the controversial question of 'horizontal' direct effect
of Directive 98/34. While reasserting the orthodox rule laid down in Faccini Dori that there is no horizontal
direct effect of directives, it carved out an exception to this rule in cases involving substantial procedural
defects. It distinguished between two types of directives. On the one hand, it said there are directives

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regulating relations between individuals, such as the Package Holiday Directive which was at issue in
Faccini Dori. These sorts of directives approximate national laws and confer rights and obligations on
individuals. The orthodox rule (no horizontal direct effect) applies to these directives. On the other hand, it
said there are directives involving institutional/Member State relations, like Directive 98/34, which is not
intended to approximate laws but to protect free movement of goods by means of a preventive control
mechanism. Since Directive 98/34 merely requires notifications, it creates neither rights nor obligations for
individuals. As a result, it does not define the substantive scope of the legal rule on the basis of which the
national court must decide the case before it and so the orthodox rule (no horizontal direct effect) does not
apply.
The Court has imposed some limits on the CIA/Unilever rule of the inapplicability of national legislation in
the event of non-notification: in Lemmens it made clear that the CIA rule applies only to legislation which
affects trade between Member States. Lemmens was charged with driving a vehicle under the influence of
alcohol. Under domestic law, the breathalyser used had to comply with certain standards of quality,
performance, and test methods. Lemmens argued that since the technical regulations in which those
standards were set out had not been properly notified to the Commission under Directive 98/34, the results
of the breathalyser test could not be used against him. The Court disagreed. It said that while failure to
notify technical regulations rendered the national regulations inapplicable inasmuch as they hindered the
marketing of a product which was not in conformity with the regulations (CIA), it did not have the effect of
rendering unlawful any use of a product which was in conformity with unnotified regulations. It continued
that the use of the breathalyser was not liable to create an obstacle to trade which could have been avoided
if the notification procedure had been followed and therefore the Directive did not preclude the use of the
evidence.

Despite the limits imposed by Lemmens, the immediate practical effect of CIA on national governments
was dramatic. For example, the Dutch government drew up a list of 400 national regulations which should
have been notified under the Directive. It unilaterally withdrew ninety-six technical regulations and
subsequently withdrew a further seventy-seven following discussions with the Commission. It then formally
notified 227 texts, of which seventy were not considered significant, but the rest contained provisions
contrary to Community law which needed to be rectified. This tale demonstrates the value of the Directive
98/34 procedure: without it 330 technical regulations would have formed part of Dutch law and would have
needed to have been addressed by Article 226 proceedings or individual challenge.

The ramifications of CIA extended beyond the Netherlands. The number of notifications increased
generally from twenty-nine in 1984 to 439 in 1995 and 751 in 2000, as did the range of countries actually
making notifications. In 1995 Germany, France, the Netherlands, and the UK accounted for the majority of
notifications. By 2000 all Member States were regularly notifying draft regulations, including Ireland and
Luxembourg which had taken little action in the past. The Commission largely attributes this increase to the
judgment in CIA, which prompted Member States to apply the Directive with greater care. As with Cassis
de Dijon, the old allies -- the Commission and the Court -- worked together to ensure the effective
application of Community law, with the Court drawing on the Commission's 1986 Communication and with
the Commission pro-actively following up the Court's judgment. There was a subsequent decline in
notifications but they picked up again in 2005 (the first year after the 10 new states acceded to the EU) with
notifications up to 800 (30% up on 2004 but including nearly 200 from the accession states), with the UK
topping the table with 98 notifications. The Commission responded to about a third of the notifications and
the Member States to about 16%.

CONCLUSIONS
The decision in Cassis has done much to open up the market for goods. According to the principle of
mutual recognition, goods lawfully produced in one Member State can now be sold in another without
restriction. In reaching this conclusion, the Court has removed the need for much harmonization, thereby
reinforcing the role of the decentralized model of regulation. Consumers in the Member States now have the
choice of a wider range of goods produced according to different regulatory regimes.
However, it would be a mistake to conclude that in Cassis the Court favoured free trade to the detriment of
broader interests which are valued at national level. The development of mandatory requirements not only
places a brake on any possible destructive regulatory competition (race to the bottom) but also recognizes

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that the European Constitution is not merely economic but pluralistic, a Constitution which embraces social
and cultural values. However, the broad scope of the Dassonville formula has forced the Court to recognize
ever more mandatory requirements to preserve a wide variety of national legislation. That said, in the
majority of cases the Court either rejects the mandatory requirement put forward by the Member State on
the facts or finds that the steps taken by the State to realize the objective are not proportionate. For these
reasons, governments and commentators became increasingly concerned that the Court's interpretation of
Article 28 was in fact leading to wide-scale destruction of national regulation, including rules which were
non-discriminatory and which had little impact on cross-border trade. This led to the ruling in Keck where
the Court carved out an area of national regulation, certain selling arrangements, and made it clear that
Article 28 did not apply to it, even in principle.

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The Substantive Law of the EU (2nd Edition)


The Four Freedoms
Catherine Barnard

Chapter 9 (Extracts)

INTELLECTUAL PROPERTY AND THE FREE MOVEMENT OF GOODS

INTRODUCTION
Intellectual property rights (IPRs) present a particular challenge to the EU. On the one hand, they serve to
encourage innovation; on the other, the territorial nature of IPRs means that their exercise can constitute a
significant barrier to inter-state trade. The special position of IPRs was recognized by Article 30 which lists
'the protection of industrial and commercial property' as one of the express derogations from Article 28.
However, the Court has had to reconcile this derogation with the more general principles of free trade. For
the purposes of this book, the case law on IPRs presents an interesting study of the Court's desire to
facilitate market integration in the field of goods while at the same time protecting the legitimate interests of
entrepreneurs. We therefore focus on the case law under Articles 28 and 30 rather than the various
harmonisation measures which have been adopted (which themselves have to be interpreted in the light of
the Treaty), although reference is made to the harmonisation measures where appropriate. However, we
begin by examining the key features of IPRs and their value to the Community.

THE CONCEPTS, RULES, AND PRINCIPLES


THE ROLE OF IPRs IN NATIONAL AND COMMUNITY LAW
There are a number of different intellectual property rights. In this chapter we shall discuss the most
significant: patents, trade marks, copyright, and design rights. Patents are intended to protect inventions:
they are granted by states in return for the investment put in by inventors to create a new product. Trade
marks are intended to protect symbols used by traders to distinguish their goods from competing goods.
They reward those who have invested in producing a quality product. Copyright is rather different. It is
intended to protect literary and artistic works against copying and to reward ability and/or skill which will
enhance the cultural life of the community. Design rights protect the shape or design of industrial products.
They have an element of both copyright and patents, rewarding both skill and innovation.
All IPRs share three common features: they are territorial in nature, conferring protection on the IPR
holder in a particular Member State; they are exclusive; and, as their name suggests, they concern property
rights. Some IPRs effectively give monopoly protection, albeit for a limited period. Patents are the obvious
example: for a specific period (usually twenty years) only the patent holder can manufacture and market the
patented product in that territory. During this period the patent is good even against an independent deviser.
After that, the patent specification can be used by producers. Design rights also confer a quasi-monopoly on
the right holder, albeit for a shorter period. Trade marks are different again: they are not time-limited
because their function is different from that of other IPRs in that they are intended to protect the consumer
(rather than the trade mark holder) by guaranteeing the origin of the goods and their quality. Copyright also
differs from the other IPRs because the protection it offers is more limited: it merely confers on the owner
the exclusive right to authorize reproduction. For this reason it does not confer a true monopoly and so has a
long term (usually life plus seventy years).
For many years it has been national--not Community--law which has regulated IPRs, albeit against the
backcloth of various international agreements. The different national rules have created 'obstacles both to
the free movement' of the protected products and to competition within the common market'. While there
has been some harmonization of IPR law, in particular Directive 89/104 on the approximation of the laws of
the Member States relating to trade marks, the basic point still remains good: given their exclusive and
territorial nature, intellectual property rights represent a serious challenge to the creation of a single market.

THE RELEVANT TREATY PROVISIONS


The Treaty provisions affecting IPRs appear difficult to reconcile. On the one hand, Article 295 says '[t]he
Treaty shall in no way prejudice the rules in Member States governing the system of property ownership'.
This is supported by the derogation in the first sentence of Article 30 concerning 'the protection of industrial

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and commercial property'. Both these provisions reinforce the maintenance of national IPRs. On the other
hand, Article 28 provides for the free movement of goods. Because this is a fundamental freedom any
derogation is narrowly construed. The derogations in Article 30 are also subject to the caveat in the second
sentence: derogations 'shall not constitute a means of arbitrary discrimination or a disguised restriction on
trade between Member States'. These provisions would point to the setting aside of national IPRs since, by
invoking its IPR to keep imported goods out, the IPR holder's action would constitute a quantitative
restriction on trade or a measure having equivalent effect.
In addition to the rules on free movement of goods, the Treaty provisions on competition may also affect
the exercise of intellectual property rights. In particular, Article 81 prohibits anti-competitive behaviour
(agreements between undertakings which prevent, restrict, or distort competition) and Article 82 prohibits
abuse of a dominant position. These Treaty provisions are beyond the scope of this book and will not be
considered in detail.

THE GENERAL PRINCIPLES: EXISTENCE AND EXERCISE OF IPRs, THE SPECIFIC


SUBJECT MATTER OF IPRs, AND THE DOCTRINE OF EXHAUSTION OF RIGHTS
The task has largely fallen to the Court to reconcile both the different Treaty provisions with the IP laws of
the Member States and the interests of IPRs holders with the interests of market integration. It began this
process in early competition cases, such as Consten and Grundig and Parke Davis, where it distinguished
between the existence of an IPR and its exercise. It said that, following Article 295, Community law did not
affect the existence of an IPR recognized by the law of a Member State, but it did regulate its exercise. This
means that the Treaty rules do not affect the conditions and procedures under which the IPR is granted in
the Member State because this relates to the existence of the right. However, if there is an agreement,
decision, or concerted practice between the IPR holder and those economically or legally dependent on the
holder (e.g. licensees), this involves the exercise of the IPR and so the agreement may fall under Article 81;
if there is an abuse of a dominant position in the exercise of the IPR, then Article 82 will apply.
Subsequently the Court extended the distinction between existence and exercise to the field of free
movement of goods in cases involving the relationship between the IPR holder and third parties. For
example, in Deutsche Grammophon, a case concerning copyright, the Court said:
although the Treaty does not affect the existence of rights recognized by the legislation of a Member State
with regard to industrial and commercial property, the exercise of such rights may nevertheless fall within
the prohibitions laid down by the Treaty. Although it permits prohibitions or restrictions on the free
movement of products, which are justified for the purpose of protecting industrial and commercial property,
Article [30] only admits derogations from that freedom to the extent to which they are justified for the
purpose of safeguarding rights which constitute the specific subject-matter of such property.
The Court continued that if an IPR holder could invoke its IPR to prevent the marketing in State B (see fig.
9.1) of products distributed by the right holder with his consent on the territory of State A, on the sole
ground that such distribution did not take place in State B, this would 'legitimize the isolation of national
markets, [which] would be repugnant to the essential purpose of the Treaty, which is to unite national
markets into a single market'.

Deutsche Grammophon demonstrates the compromise made by the Court. It said that the existence of an
IPR is a matter for national law, following Article 295 (and, to a lesser extent, the first sentence of Article
30), but that the exercise of the IPR is a matter for Community law. It then balances the different elements
of Articles 28 and 30. It says that the first sentence of Article 30 allows the IPR holder to protect the
specific subject matter of the IPR. The specific subject matter of the IPR varies according to the type of
intellectual property at issue but, in essence, it is the exclusive right of the IPR holder (or another
undertaking with its consent) to the first marketing of the product. This gives the IPR holder the opportunity
both to gain monopoly profits from putting a product on the market for the first time and to take action
against any infringement. In this respect, the first sentence of Article 30 prevails over the second sentence
of Article 30 and Article 28. However, once the product has been put on the market anywhere in the
European Economic Area (EEA), the IPR holder is deemed to have exhausted its rights. As the Court
explained in HAG II, this means that:
The owner of an industrial property right protected by the legislation of a Member State cannot rely on that
legislation to prevent the importation or marketing of a product which has been lawfully marketed in
another Member State by the owner of the right himself, with his consent or a person economically or

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legally dependent on him.


At this point, the principle of free movement of goods in Article 28 and the need to avoid arbitrary
discrimination and disguised restrictions on trade as required by the second sentence of Article 30 prevail
over the first sentence of Article 30 and so any conflicting national law must be set aside. Read together, the
principles of specific subject matter and exhaustion of rights ensure some reward for the IPR holder while at
the same time reducing the market partitioning effects of the national IPR rules.
In the light of this discussion we can now apply the principles established by the Court to the following
example. XCo, the inventor of Wonderdrug, registers its patent in State A where it manufactures and
markets the drug. If XCo decides to manufacture and market the drug in State A only, then Community law
does not apply and national IPR protection prevails. Using national patent law, XCo can prevent anyone
else from manufacturing, marketing, or importing the drug.

However, if XCo decides to take advantage of the greater economies of scale offered by EEA-wide sales it
would patent Wonderdrug in State B and manufacture and market itself the drug there itself or through a
licensee, YCo,. In the absence of any Community law, XCo (or its licensees) would use the protection
conferred by national patent law to ensure exclusivity in the production and marketing of the drug in each
State. In other words, the holders of parallel patents, such as XCo and its licensees, would use their patents
to prevent anyone else from selling Wonderdrug in those States, thereby ensuring a monopoly on the market
with the resulting price benefits - and rewards - this entails. However, using the IPR in this way ensures
absolute territorial protection for the patent holder, partitioning the market on national lines, and insulating
each national market from so-called 'parallel' imports from other Member States. Parallel importing occurs
when PCo (a middleman) buys Wonderdrug from XCo in State A and imports it into State B, thereby
removing the patent holder's monopoly and introducing some price competition.
The ECJ is keen to encourage parallel importing and so the moment that XCo breaks onto the market of
another state, Community law - and the doctrine dos specific subject matter and exhaustion - applies. The
application of Community law means that XCo continues to have the exclusive right to manufacture
Wonderdrug and put it on the market for the first time in State A since this is an aspect of the specific
subject matter of XCo's patent which is protected by EC law. However, once it has put the product on the
market in State A, EC law says that XCo has exhausted its rights in that batch of the drug in respect of the
entire EEA. This means that if PCo, a parallel importer, buys Wonderdrug in State A where prices are low
and parallel imports it into State B where the prices are high, YCo, which is marketing Wonderdrug in State
B with XCo's consent, cannot invoke its patent to keep PCo's goods out of State B (see fig. 9.2(b)). The
arrival of PCo's goods in State B introduces intra-brand competition which should reduce the price
differences for the drug between States A and B, to the benefit of State B's consumers. Ultimately this will
result in the IPR holder setting the price in all countries at that charged by the IPR holder in the cheapest
State. So, parallel importing has the effect of ironing out price differences across the EEA.

Although the example in fig. 9.2(b) is based on the fact that YCo in State B is XCo's licensee, the position
would be the same, as the Court pointed out in HAG II, if XCo held the patent in State B (as well as in
State A) or if YCo was a separate person but 'legally or economically dependent' on XCo. In Ideal Standard
the Court said that companies would be economically linked where products were put into circulation by
the same undertaking, by a licensee, by a parent company, by a subsidiary of the same group, or by an
exclusive distributor. At the heart of this case law lies consent: XCo has consented to YCo putting
Wonderdrug on the market.

So far we have concentrated on the situation where there is consent on the part of the IPR holder, XCo, to
YCo's marketing of Wonderdrug in State B. The consent is based on the fact that YCo is legally dependent
on XCo through the licensing agreement. However, if there is no consent between the parties, then there
will be no exhaustion of rights. If, for example, XCo holds the patent for Wonderdrug in State A and ZCo
holds the patent for Wonderdrug in State C and there is no consent (i.e. no economic or legal links between
the two companies--they are independent competitors in trade), then ZCo can continue to use the
intellectual property law of State C to keep PCo's goods imported from State A out of State C (see figure.
9.1(c)).

Having examined the general principles, we shall now turn to consider the application of the free

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movement of goods rules to the different types of intellectual property. ....


....................................

COPYRIGHT AND DESIGNS


COPYRIGHT
Introduction
Copyright is the right given against the copying of defined types of cultural, informational, and
entertainment productions, typically literary and artistic works. Copyright is rather different from the other
types of IPR in that it includes moral rights (e.g. the right of the author to claim authorship of the work and
to object to any distortion, mutilation, or other alteration of the work) as well as commercial rights. In
GEMA the Court recognized the functional differences between copyright and the other IPRs but said that,
given the economic aspect of copyright (e.g. the right to exploit the marketing of the protected work
commercially), there was no reason to make a legal distinction between copyright and other IPRs. Despite
this, the Court has experienced more difficulty defining the specific subject-matter of copyright than for
patents and trade marks because of the different uses to which it can be put.

Nevertheless, in Warner Brothers it said that the specific subject matter of copyright contained two
essential rights of the author--the exclusive rights of reproduction and of performance. We shall examine
these in turn.
Rights in the reproduction and sale of products incorporating copyright material
The Court has recognized that the copyright holder enjoys the exclusive right to reproduce the protected
work but, as with patents and trade marks, once the copyright holder has enjoyed this exclusive right, its
rights are then exhausted. As the Court said in Deutsche Grammophon:
it would be in conflict with the provisions prescribing the free movement of products within the common
market for a manufacturer of sound recordings to exercise the exclusive right to distribute the protected
articles, conferred upon him by the legislation of a Member State, in such a way as to prohibit the sale in
that State of products placed on the market by him or with his consent in another Member State solely
because such distribution did not occur within the territory of the first Member State.

The implications of the doctrine of exhaustion of rights were spelt out in GEMA.
GEMA, a German copyright management society, contended that the parallel importation into Germany by
Musik-Vertrieb of sound recordings manufactured and marketed in various Member States, including the
UK, with the consent of the copyright holder constituted an infringement of the copyrights which it was
responsible for protecting in the name of the owners of those rights. It therefore claimed payment of the
(higher) royalties permitted under German law on these sound recordings less the amount of the (lower)
royalties already paid in respect of distribution in the UK (see fig. 8.10). The Court refused to let it claim
the difference.
It said:
an author, acting directly or through his publisher, is free to choose the place, in any of the Member States,
in which to put his work into circulation. He may make that choice according to his best interests, which
involve not only the level of remuneration provided in the Member State in question but other factors such
as, for example, the opportunities for distributing his work and the marketing facilities which are further
enhanced by virtue of the free movement of goods within the Community.

Thus, as we saw with Merck I, the IPR holder has a choice and must accept the consequences of its choice.
If it chooses to put the product onto the market in only one Member State it will be protected against
parallel imports but will have a smaller market for its goods. If, on the other hand, it puts the product onto
the market in more than one Member State it has a larger market for its goods but suffers the risk of parallel
imports. GEMA also shows that the copyright holder must carefully select the Member States in which it
puts its product because, in the absence of harmonization, different royalties are payable in different States
and such disparities cannot be used to impede the free movement of goods in the EU. For this reason
GEMA could not claim payment of the additional fees because this would have amounted to allowing a
private undertaking to impose a charge on the import of sound recordings which were already in free
circulation in the EC. This, the Court concluded, would have 'the effect of entrenching national markets
which the Treaty seeks to abolish.

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The corollary of this ruling is that in the absence of consent there is no exhaustion and the copyright holder
can invoke its copyright to prohibit the sale of the imported goods.

This can be seen in EMI Electrola. EMI Electrola held the German reproduction and distribution rights in
the musical works of Cliff Richard. In Denmark the period of copyright protection had expired and so a
Danish company, which was not the one to which EMI had assigned rights, produced sound recordings
containing some of Cliff Richard's work. Patricia then parallel imported those recordings into Germany.
The Court said that EMI Electrola could invoke its copyright to keep Patricia's goods out of Germany.
Unlike the situation in GEMA, there was no exhaustion of rights because the sound recordings were
lawfully marketed in Denmark, not because of an act or the consent of the copyright owner or his licensee
but because of the expiry of the copyright protection period provided for by Danish law. For this reason
restrictions on intra-Community trade in sound recordings could be justified under Article 30 if they were
the result of differences between the rules governing the period of protection which was 'inseparably linked
to the very existence of the exclusive rights'.

Rights in performance and other temporary use


Not only does copyright guarantee the exclusive right to reproduce, but it also involves the exclusive right
of performance of, for example, films and sound recordings. As the Court said in Coditel:
A cinematographic film belongs to the category of literary and artistic works made available to the public
by performances which may be infinitely repeated. In this respect the problems involved in the observance
of copyright in relation to the requirements of the Treaty are not the same as those which arise in connexion
with literary and artistic works the placing of which at the disposal of the public is inseparable from the
circulation of the material form of the works, as in the case of books or records.
In other words, because films can be shown repeatedly, first in the cinema and then on television, the
copyright owner's interest would not be protected by receiving just one fee. For this reason the Court said
that the owner of the copyright and his assigns had a 'legitimate interest' in calculating the fees due in
respect of the authorization to exhibit the film on the basis of the actual or probable number of
performances, which formed part of the essential function of copyright in this type of literary and artistic
work. The Court therefore concluded that Community law did not prevent the parties to a contract of
assignment from agreeing to limit the area over which the film could be shown in order to protect the author
and his assignees, even where those limits coincided with national territories.

This interest in collecting fees for repeat performances of a film was emphasized in Warner Brothers.
Warner, the British owner of the copyright of the film 'Never Say Never Again', assigned the management
of the video production rights in Denmark to Metronome. In the UK Warner Brothers put the film out on
video. Christiansen, the manager of a video shop in Copenhagen, bought a copy of the video in London,
with a view to hiring it out in Denmark. In so doing, he avoided the obligations under Danish law both to
obtain the consent of the author or producer for the film to be hired out and to pay royalties each time the
video was rented. Christiansen argued that Warner had exhausted its rights and, following GEMA, that
film-makers had to accept the consequences of where they placed the goods on the market.

The Court disagreed. It said that if royalties were payable only on sales of videos and not on their hiring-
out, this would not guarantee film-makers adequate remuneration reflecting the number of times the video
was rented. It continued that where national legislation conferred on authors a specific right to hire out
videos, that right would be rendered worthless if its owner were not in a position to authorize the operations
for doing so. The Court refused to accept that the marketing by a film-maker of a video containing one of
his works in a Member State which did not provide specific protection for the right to hire it out (the UK)
should have repercussions on the right conferred on that same film-maker by the legislation of another
Member State (Denmark) to restrain the rental of that video in Denmark.

Conclusions
The cases discussed in this section illustrate the complex nature of copyright. They demonstrate that the
doctrine of exhaustion of rights applies only to the right to control distribution (resale, export, or import). It
does not apply to the right to rent, perform, or show a (copyright) work in public where the specific subject

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matter of the right allows the owner to control each and every use (for it is through charging for each use
that the essential function of the right is achieved). This distinction was incorporated into Directive
92/100/EC on rental and lending rights and was confirmed by the Court in Metronome Musik and
Laserdisken.

The Community has also adopted other harmonization legislation where disparities between the laws of the
Member States in the area of copyright protection were a disincentive to exercising rights in some countries.
For example, the Copyright Directive 93/98/EEC harmonizing the term of protection of copyright (in
essence, life of the author plus seventy years) avoids the problem that arose in EMI Electrola in which the
parallel importer was not allowed to take advantage of the fact that the copyright had expired in Denmark
while still existing in Germany, where EMI held the copyright to Cliff Richard's works.

................
QUASI-IP CASES
The IPRs considered above are all examples of industrial and commercial property under Article 30.
However, as Cornish puts it, at a certain moment, IP shades off into surrounding forms of civil liability
which in the UK includes non-statutory liability for passing off and breach of confidence and, in
Continental thought, some aspects of unfair competition law. In this area the Court tends to apply its Cassis
line of case law, considering the quasi-IP issues under the mandatory requirements of consumer protection
or unfair commercial practice rather than through the principles it has developed under Article 30.
Sometimes the Court finds that the consumer protection justification is made out. For example, in Beele
the Court said that national case law prohibiting the precise imitation of someone else's product which is
likely to cause confusion could protect consumers. More usually, however, the Court finds no public-
interest justification, as Pall demonstrates. Dahlhausen marketed blood filters in Germany which it had
imported from Italy. The Italian producer put the trade mark 'Miropore' on the filters and packaging. It also
added the symbol indicating that 'Miropore' was a registered trade mark. Pall, a competitor, objected to
this, arguing that the symbol constituted misleading advertising contrary to German rules on unfair
competition on the ground that 'Miropore' was not registered in Germany. The Court noted that a national
rule enabling a trader to prevent the marketing of a product bearing the symbol , where the product had
not been registered in Germany, was an indistinctly applicable measure which, like the other repackaging
case law, forced Dahlhausen to change the presentation of its products. The German rule therefore
breached Article 28. On the question of justification on the ground of consumer protection, the Court said
that Pall had not established that the symbol was generally understood as indicating that the trade mark
was registered in the country in which the goods were marketed. Even assuming that some consumers might
have been misled, it said that such a risk could not justify such an obstacle to the free movement of goods,
since consumers were more interested in the qualities of the product than in the place of the registration of
the trade mark.

While the Court has dealt with most of the cases concerning these quasi-IP issues under the consumer
protection mandatory requirement, in Dansk Supermarked the Court considered the mandatory requirement
of unfair commercial practice. A Danish company, Imerco, commissioned a British manufacturer to
produce some commemorative crockery. This crockery was to be sold only by Imerco, although the British
company could market any substandard pieces on condition that they were not exported to Denmark. Dansk
Supermarked obtained various sets of the crockery from the UK and sold them in Denmark more cheaply
than Imerco. Imerco tried to prevent this, relying on Danish trade mark and copyright laws and laws on
approved marketing usage. In respect of the protection of copyright and trade marks, the Court applied the
doctrine of exhaustion of rights. The Court then considered whether the Danish law could be invoked to
prevent 'improper or unfair commercial practice'. It said not, arguing that the actual import of goods which
had been lawfully marketed in another Member State could not be considered as an improper or unfair act.
The mandatory requirement of unfair competition applied only at the marketing stage and not, as here, at
the import stage.

CONCLUSIONS
This examination of the case law on IPRs demonstrates how the Court has valiantly struggled to balance the
competing interests of the right holder and the consumer. By initially drawing what some considered a

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rather artificial distinction between the existence of IPRs and their exercise, the Court gave itself a basis
both to demarcate the area over which its jurisdiction would lie and to develop the key principles of specific
subject matter and exhaustion. In subsequent cases the Court quietly dropped the initial distinction,
concentrating instead on refining the content of the specific subject matter of the various IPRs.

Inevitably, the case law has ebbed and flowed. In its earliest decisions the Court promoted market
integration over the protection of the IPR holder's rights, with decisions such as HAG I and Merck I
representing the high point of consent to marketing as the basis for the exhaustion of IPRs. More recently,
in cases such as HAG II, Silhouette, and Davidoff, the Court has pulled back, demonstrating an increasing
awareness of the interests of IPR holders. On the other hand, the result of the Court's detailed rulings in
Bristol-Myers Squibb and Upjohn should facilitate parallel importation by careful importers, and so open
up the notoriously partitioned medicine market, to the benefit of consumers. From this perspective the
Court's case law on repackaging, with its emphasis on (effective) access for the parallel importers to the
host State's market, sits firmly within the De Agostini /Alpine Investments mould. Yet, in reaching its
conclusions in these cases the Court has been obliged to undertake such a detailed analysis of the factual
basis of each case that its judgments more closely resemble a national court ruling than a decision of a
supreme court.

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Cases and Materials on EU Law (8th Edition)


Stephen Weatherill
OUP 2007

Chapter 11: Physical and Technical Barriers to Trade (Articles 28-30)


pps 342-362 (extracts)

Examples of the application of Article 28 follow. The consistent theme is the breadth of Article 28 as a prohibition on national
measures which have an effect which is restrictive of trade between Member States. In reading these cases, remember that
prior to the re-numbering effected by the Amsterdam Treaty, what is now Article 28 EC was, with minor amendment, Article
30; and what is now Article 30 EC was Article 36.

Schloh v Auto Controle Technique (Case 50/85)


[1986] ECR 1855, Court of Justice of the European Communities
Mr Schloh bought a Ford Granada estate car in Germany. He obtained from a Ford dealer in Belgium a certificate of
conformity with vehicle types approved in Belgium. In Belgium he was required to submit his car to two roadworthiness tests,
for which fees were charged. He challenged the tests on the basis of Article 30 (now 28), the fees on the basis of Article 13
(now deleted). (See Chapter 10 on fiscal charges.) The matter reached the European Court by way of a preliminary
reference from a Belgian court (see Chapter 7). The Court summed up the questions referred as follows:

[9] It is apparent from the terms of those questions that the Court is being asked in substance:
(a) first, whether it is in accordance with Article 30 of the Treaty for a car imported from another Member State and
carrying a certificate of conformity to the vehicle types approved in the importing Member State to be subject to a
roadworthiness test for the purposes of registration in the latter State;
(b) secondly, whether it is in accordance with Article 30 of the Treaty for the same car to be subject to a second
roadworthiness test carried out a few days after the first test;
(c) thirdly, whether it is in accordance with Article 13 of the Treaty for a fee to be levied at the time of each roadworthiness
test.

The first roadworthiness test


[10] The Danish Government and the Commission take the view that national measures whereby a new imported vehicle
carrying a certificate of conformity to the safety standards of the importing Member State is subject to a roadworthiness test
constitute measures having an effect equivalent to quantitative restrictions contrary to Article 30 of the Treaty; moreover,
they are not justified by any of the imperative requirements referred to in the judgments of the Court or any of the reasons
enumerated in Article 36 of the Treaty. However, the Danish Government states that where the vehicle is imported in a used
condition a roadworthiness test may be justified by the need to check at least its state of repair.
[11 ] It should be noted first of all that, although Council Directive 77/143/EEC of 29 December 1976 (Official Journal 1977, L
47, p.47) laid down a number of measures for the harmonization of roadworthiness tests for motor vehicles, the terms of
Annex I to the directive make it inapplicable to vehicles in the category to which the plaintiff's vehicle belongs. At this stage in
the development of Community law it is therefore for the Member States - provided that they comply with the provisions of
the Treaty - to lay down rules for the roadworthiness testing of vehicles in that category in order to ensure road safety.
[12] Under the terms of Article 30 of the Treaty, quantitative restrictions on imports and all measures having equivalent effect
are prohibited between Member States. Roadworthiness testing is a formality which makes the registration of imported
vehicles more difficult and more onerous and consequently is in the nature of a measure having an effect equivalent to a
quantitative restriction.
[13] Nevertheless, Article 36 may justify such a formality on grounds of the protection of human health and life, provided that
it is established, first, that the test at issue is necessary for the attainment of that objective and, secondly, that it does not
constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.
[14] As far as the first condition is concerned, it must be acknowledged that roadworthiness testing required prior to the
registration of an imported vehicle may, even though the vehicle carries a certificate of conformity to the vehicle types
approved in the importing Member State, be regarded as necessary for the protection of human health and life where the
vehicle in question has already been put on the road. In such cases roadworthiness testing performs a useful function
inasmuch as it makes it possible to check that the vehicle has not been damaged and is in a good state of repair. However,
such testing cannot be justified on those grounds where it relates to an imported vehicle carrying a certificate of conformity
which has not been placed on the road before being registered in the importing Member State.
[15] As far as the second condition is concerned, it must be stated that the roadworthiness testing of imported vehicles
cannot, however, be justified under the second sentence of Article 36 of the Treaty if it is established that such testing is not
required in the case of vehicles of national origin presented for registration in the same circumstances. If that were the case

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it would become apparent that the measure in question was not in fact inspired by a concern for the protection of human
health and life but in reality constituted a means of arbitrary discrimination in trade between Member States, it is for the
national court to verify that such non-discriminatory treatment is in fact ensured.
[16] It must therefore be stated in reply to the juge de paix of Schaerbeek that Article 30 of the Treaty must be interpreted as
meaning that a national measure which requires a roadworthiness test for the purpose of registering an imported vehicle
carrying a certificate of its conformity to the vehicle types approved in the importing Member State constitutes a measure
having an effect equivalent to a quantitative restriction on imports. Nevertheless, such a measure is justified under Article 36
of the Treaty in so far as it relates to vehicles put on the road before such registration and applies without distinction to
vehicles of national origin and imported vehicles.
The second roadworthiness test
[17] The Commission, which was alone in presenting observations on this point, takes the view that the second test, being
imposed for the purpose of exempting the vehicle from regular annual testing for the first four years, constitutes a measure
having equivalent effect contrary to Article 30 of the Treaty and not justified by Article 36. In that connection the Commission
notes that an exemption from regular annual tests could have been obtained simply by means of a declaration concerning
the use of the vehicle made on the occasion of the first roadworthiness test.
[18] It should be pointed out that, as the Court has consistently held, national rules cannot benefit from an exception provided
for by Article 36 of the Treaty if the objective pursued by that exception can be as effectively realised by measures which do
not restrict intra-Community trade so much.
[19] It must consequently be accepted that Article 36 does not provide justification for roadworthiness testing whose purpose
is to obtain from the owner of the imported vehicle a written declaration certifying that the use of the vehicle qualifies it for
exemption from annual testing. That purpose may be achieved simply by requiring the owner to supply that written
declaration, without its being necessary for the vehicle to be presented to an approved vehicle testing agency.
[20] It must therefore be stated in reply to the question put by the juge de paix of Schaerbeek that Articles 30 and 36 of the
Treaty must be interpreted as meaning that, where the roadworthiness testing of an imported vehicle has the purpose of
obtaining a written declaration from the owner of the vehicle, it constitutes a measure having an effect equivalent to a
quantitative restriction on imports contrary to the Treaty.

The Court held the fees unlawful where the test itself violated Article 30 (now 28), but capable of accommodation within a
general system of taxation compatible with Article 95 (now 90) where the inspection itself was lawful under Article 36 (now
30).
NOTES
1. Notice how (para 11) the Court observes that the matter is untouched by the Community's harmonization programme and
that therefore the Treaty alone supplies the basis for judging the permissibility of Member State action. The legal
assessment would be different if (as is increasingly common in many sectors) the field had been entered by Community
secondary legislation; p.376 below.
2. See also Case C-55/93 Criminal Proceedings against Johannis Gerrit Cornells van Schaik [1994] ECR 1-4837, in which
the Court held that neither primary Treaty provisions including Article 28 nor Directive 77/143 preclude legislation of a
Member State which does not permit test certificates in respect of cars registered in that State to be issued by garages
established in another Member State.

International Fruit Company v Produktschap voor Croenten en Fruit (No 2) (Cases 51-54/71)
[1971 ] ECR 1107, Court of Justice of the European Communities
The Court was asked to consider whether Article 30 of the EC Treaty (now, after amendment, Article 28 EC) applies to
'national legislative provisions prohibiting imports and exports without a licence but which in fact are not applied because
exemptions are granted from the prohibition and, where this is not so, because the licence is always issued on request'.
[6] The question put refers both to the system of quantitative restrictions on intra-Community trade and the system of such
restrictions on trade with third countries.
[7] It is however clear from the scheme of the Treaty that those two systems must be distinguished.
[8] Under Articles 30 and 34(1) of the Treaty quantitative restrictions and measures having equivalent effect are prohibited
between Member States both with regard to imports and exports.
[9] Consequently, apart from the exceptions for which provision is made by Community law itself those provisions preclude
the application to intra-Community trade of a national provision which requires, even purely as a formality, import or export
licences or any other similar procedure.

NOTE: The Court concluded its judgment by taking a more permissive view of the lawfulness of controls over trade with third
countries outside the Community.

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In Commission v Italy (Case 159/78) the Court accepted the opportunity to declare its view of the application of Article 30
of the EC Treaty (now, after amendment, Article 28 EC) to customs formalities at frontiers which impede intra-Community
trade.

Commission v Italy (Case 159/78)


[1979] ECR 3247, [1980] 3CMLR446, Court of Justice of the European Communities
[7] As regards intra-Community trade, since all customs duties on imports and exports and all charges having equivalent
effect and all quantitative restrictions on imports and exports and measures having equivalent effect had to be abolished,
pursuant to Title I of the Treaty, by the end of the transitional period at the latest, it should be emphasised that customs
controls properly so-called have lost their raison d'etre as regards such trade. Frontier controls remain justified only in so far
as they are necessary either for the implementation of the exceptions to free movement referred to in Article 36 of the Treaty;
or for the levying of internal taxation within the meaning of Article 95 of the Treaty when the crossing of the frontier may
legitimately be assimilated to the situation which, in the case of domestic goods, gives rise to the levying of the tax; or for
transit controls; or finally when they are essential in order to obtain reasonably complete and accurate information on
movement of goods within the Community. These residuary controls must nevertheless be reduced as far as possible so that
trade between Member States can take place in conditions as close as possible to those prevalent on a domestic market.

NOTE: The final sentence is to some extent a statement of the Community's overall objective.
The completion of, initially, an internal market and, subsequently, a common market (Chapter 9) requires the creation of
common Community rules to deal with problems of this nature without the need to impose impediments to cross-frontier
trade. The realisation of Article 14's 'area without internal frontiers' demands a deeper intrusion into national competence
than is envisaged in the above extract. Community legislation of this nature will be discussed further below.
Most of the cases considered so far involve controls imposed at frontiers. Such barriers are by definition applicable only to
imports and therefore discriminatory. However, there is a further large category of discriminatory measures also caught by
Article 28. These are measures which involve discrimination against imports once they have reached the market of the State
of destination. The discrimination may apply at a different stage in the marketing chain, but the restrictive effect on inter-State
trade is equally apparent.

Commission v Ireland (Case 113/80)


[1981 ] ECR 1625, [1982] 1 CMLR 706, Court of Justice of the European Communities
[1] By an application lodged at the Court Registry on 28 April 1980, the Commission instituted proceedings under Article 169
of the EEC Treaty, for a declaration that Ireland had failed to fulfil its obligations under Article 30 of the EEC Treaty by
requiring that the imported goods falling within the scope of the Merchandise Marks (Restriction on Sale of Imported
Jewellery) Order 1971 (SI No 306, Iris Oifigiuil of 21 November 1971) and the Merchandise Marks (Restriction on Importation
of Jewellery) Order 1971 (SI No 307, Iris Oifigiuil of 21 November 1971) bear an indication of origin or the word 'foreign'.
[2] According to the explanatory notes thereto, Statutory Instrument No 306 (hereinafter referred to as 'the Sale Order')
prohibits the sale or exposure for sale of imported articles of jewellery depicting motifs or possessing characteristics which
suggest that they are souvenirs of Ireland, for example an Irish character, event or scene, wolfhound, round tower, shamrock
etc. and Statutory Instrument No 307 (hereinafter referred to as 'the Importation Order') prohibits the importation of such
articles unless, in either case, they bear an indication of their country of origin or the word 'foreign'. ,
[3] The articles concerned are listed in a schedule to each order. However, in order to come within the scope of the orders
the article must be made of precious metal or rolled precious metal or of base metal, including polished or plated articles
suitable for setting.
[4] In the Commission's opinion, the restrictions on the free movement of the goods covered by the two orders constitute
measures having an effect equivalent to quantitative restrictions on imports, contrary to the provisions of Article 30 of the
EEC Treaty; it also observes that according to Article 2(3)(f) of Directive 70/50/EEC of 22 December 1969, based on the
provisions of Article 33(7) of the Treaty, on the abolition of measures which have an effect equivalent to quantitative
restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty (Official Journal,
English Special Edition 1970 (I), p.17) 'measures which lower the value of an imported product, in particular by causing a
reduction in its intrinsic value, or increase its costs' must be regarded as measures having an effect equivalent to quantitative
restrictions, contrary to Article 30 of the EEC Treaty.
[5] The Irish Government does not dispute the restrictive effects of these orders on the free movement of goods. However, it
contends that the disputed measures are justified in the interests of consumer protection and of fairness in commercial
transactions between producers. In this regard, it relies upon Article 36 of the Treaty which provides that Articles 30 to 34
shall not preclude prohibitions or restrictions on imports justified on grounds of public policy or the protection of industrial and
commercial property.
[6] The defendant is, however, mistaken in placing reliance on Article 36 of the Treaty as the legal basis for its contention.

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[7] In fact, since the Court stated in its judgment of 25 January 1977 in Case 46/76 Bauhuis [1977] ECR 5 that Article 36 of
the Treaty 'constitutes a derogation from the basic rule that all obstacles to the free movement of goods between Member
States shall be eliminated and must be interpreted strictly', the exceptions listed therein cannot be extended to cases other
than those specifically laid down.
[8] In view of the fact that neither the protection of consumers nor the fairness of commercial transactions is included
amongst the exceptions set out in Article 36, those grounds cannot be relied upon as such in connexion with that article.
[9] However, since the Irish Government describes its recourse to these concepts as 'the central issue in the case', it is
necessary to study this argument in connexion with Article 30 and to consider whether it is possible, in reliance on those
concepts, to say that the Irish orders are not measures having an effect equivalent to quantitative restrictions on imports
within the meaning of that article, bearing in mind that, according to the established case-law of the Court, such measures
include 'all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or
potentially, intra-Community trade' (judgment of 11 July 1974 in Case 8/74 Dassonville [1974] ECR 837).
[10] In this respect, the Court has repeatedly affirmed (in the judgments of 20 February 1979 in Case 120/78 REWE [1979]
ECR 649, 26 June 1980 in Case 788/79 Gilli and Andres [1980] ECR 2071, 19 February 1981 in Case 130/80 Kelderman
[1981 ] ECR) that 'in the absence of common rules relating to the production and marketing of the product in question it is for
Member States to regulate all matters relating to its production, distribution and consumption on their own territory subject,
however, to the condition that those rules do not present an obstacle ... to intra-Community trade' and that 'it is only where
national rules, which apply without discrimination to both domestic and imported products, may be justified as being
necessary in order to satisfy imperative requirements relating in particular to ... the fairness of commercial transactions and
the defence of the consumer that they may constitute an exception to the requirements arising under Article 30'.
[11] The orders concerned in the present case are not measures which are applicable to domestic products and to imported
products without distinction but rather a set of rules which apply only to imported products and are therefore discriminatory in
nature, with the result that the measures in issue are not covered by the decisions cited above which relate exclusively to
provisions that regulate in a uniform manner the marketing of domestic products and imported products.
[12] The Irish Government recognises that the contested measures apply solely to imported articles and render their
importation and sale more difficult than the sale of domestic products. However, it maintains that this difference in the
treatment awarded to home-produced articles and to imported articles does not constitute discrimination on the ground that
the articles referred to in the contested orders consist mainly of souvenirs; the appeal of such articles lies essentially in the
fact of their being manufactured in the place where they are purchased and they bear in themselves an implied indication of
their Irish origin, with the result that the purchaser would be misled if the souvenir bought in Ireland was manufactured
elsewhere. Consequently, the requirement that all imported 'souvenirs' covered by the two orders must bear an indication of
origin is justified and in no way constitutes discrimination because the articles concerned are different on account of the
differences between their essential characteristics.
[13] The Commission rejects this reasoning. In reliance on the judgment of 20 February 1975 in Case 12/74 Commission v
Federal Republic of Germany [1975] ECR 191, it submits that it is unnecessary for a purchaser to know whether or not a
product is of a particular origin, unless such origin implies a certain quality, basic materials or process of manufacture or a
particular place in the folklore or tradition of the region in question; since none of the articles referred to in the orders display
these features, the measures in question cannot be justified and are therefore 'overtly discriminatory'.
[14] It is therefore necessary to consider whether the contested measures are indeed discriminatory or whether they
constitute discrimination in appearance only.

[15] The souvenirs referred to in the Sale Order and in the Importation Order are generally articles of ornamentation of little
commercial value representing or incorporating a motif or emblem which is reminiscent of an Irish place, object, character or
historical event or suggestive of an Irish symbol and their value stems from the fact that the purchaser, more often than not a
tourist, buys them on the spot. The essential characteristic of the souvenirs in question is that they constitute a pictorial
reminder of the place visited which does not by itself mean that a souvenir, as defined in the orders, must necessarily be
manufactured in the country of origin.
[16] Furthermore, leaving aside the point argued by the Commission - with regard to the articles covered by the contested
orders - that it would not be enough to require a statement of origin to be affixed to domestic products also, it is important to
note that the interests of consumers and fair trading would be adequately safeguarded if it were left to domestic
manufacturers to take appropriate steps such as affixing, if they so wished, their mark of origin to their own products or
packaging.
[17] Thus by granting souvenirs imported from other Member States access to the domestic market solely on condition that
they bear a statement of origin, whilst no such statement is required in the case of domestic products, the provisions
contained in the Sale Order and the Importation Order indisputably constitute a discriminatory measure.
[18] The conclusion to be drawn therefore is that by requiring all souvenirs and articles of jewellery imported from other
Member States which are covered by the Sale Order and the Importation Order to bear an indication of origin or the word
'foreign', the Irish rules constitute a measure having equivalent effect within the meaning of Article 30 of the EEC Treaty.
Ireland has consequently failed to fulfil its obligations under the article.

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Commission v UK (Case 207/83)


[1985] ECR 1202, [1985] 2 CMLR 259, Court of Justice of the European Communities
[1] By an application lodged at the Court Registry on 15 September 1983 the Commission of the European Communities
brought an action before the Court under Article 169 of the EEC Treaty for a declaration that, by prohibiting the retail sale of
certain goods imported from other Member States unless they are marked with or accompanied by an indication of origin, the
United Kingdom has failed to fulfil an obligation incumbent on it under Article 30 of the EEC Treaty.
[2] The national legislation challenged by the Commission is the Trade Descriptions (Origin Marking) (Miscellaneous Goods)
Order 1981 (Statutory Instrument 1981 No 121) which entered into force on 1 January 1982.
[3] Article 2 of that Order provides that no person may supply or offer to supply by retail the goods listed in the Schedule to
the Order, other than second-hand goods and goods supplied in certain special circumstances, unless the goods are marked
with or accompanied by an indication of origin. In a case in which the goods are exposed for supply and the indication of
origin would not be conveyed until after delivery, such an indication must also be displayed near the goods. The indication of
origin must be clear and legible; it must not in any way be hidden or obscured or reduced in conspicuousness by any other
matter, whether pictorial or not.
[4] According to Article 1 of the Order, the 'origin' of goods means 'the country in which the goods were manufactured or
produced'.
[5] The Schedule to the Order lists the goods to which the Order applies. Those goods are divided into four categories:
clothing and textile goods, domestic electrical appliances, footwear and cutlery.
[]
[13] The United Kingdom's defence is in substance limited to developing the two arguments which it has already put forward
during the procedure prior to the application to the Court. First, it contends that the Order is a national measure which applies
to imported and national products alike and the effect of which on trade between Member States is uncertain, if not non-
existent. Secondly, it maintains that, in the case of the goods to which the Order applies, the requirements relating to
indications of origin meet the requirements of consumer protection since consumers regard the origin of the goods which
they buy as an indicator of their quality or true value.
[14] Those two arguments must be examined in turn.
[15] As regards the possible effect of the contested Order on trade, the United Kingdom points out that the requirements laid
down in Article 2 of the Order concern the retail sale of all the goods covered by the Order, whether imported or not. Some of
those goods, for example woollen knitwear and cutlery, are produced in the United Kingdom in substantial quantities.
[16] It should first be observed, with regard to that argument, that in order to escape the obligations imposed on him by the
legislation in question the retailer will tend, as the Commission has rightly pointed out, to ask his wholesalers to supply him
with goods which are already origin-marked. That tendency has been confirmed by complaints received by the Commission.
Thus, it emerges from the documents before the Court that the Groupement des industries franchises des appareils dequipe-
ment menager [French Domestic Appliance Manufacturers' Association] informed the Commission that French
manufacturers of domestic appliances who wish to sell their products on the United Kingdom market have had to mark such
products systematically in response to pressure brought to bear on them by their distributors. The effects of the contested
provisions are therefore liable to spread to the wholesale trade and even to manufacturers.
[17] Secondly, it has to be recognised that the purpose of indications of origin or origin-marking is to enable consumers to
distinguish between domestic and imported products and that this enables them to assert any prejudices which they may
have against foreign products. As the Court has had occasion to emphasise in various contexts, the Treaty, by establishing a
common market and progressively approximating the economic policies of the Member States seeks to unite national
markets in a single market having the characteristics of a domestic market. Within such a market, the origin-marking
requirement not only makes the marketing in a Member State of goods produced in other Member States in the sectors in
question more difficult; it also has the effect of slowing down economic interpenetration in the Community by handicapping
the sale of goods produced as the result of a division of labour between Member States.
[18] It follows from those considerations that the United Kingdom provisions in question are liable to have the effect of
increasing the production costs of imported goods and making it more difficult to sell them on the United Kingdom market.
[19] The second argument advanced by the United Kingdom is in effect that the contested legislation, applicable without
distinction to domestic and imported products, is necessary in order to satisfy imperative requirements relating to consumer
protection. It states that a survey carried out amongst United Kingdom consumers has shown that they associate the quality
of certain goods with the countries in which they are made. They like to know, for example, whether leather shoes have been
made in Italy, woollen knitwear in the United Kingdom, fashion-wear in France and domestic electrical appliances in
Germany.
[20] That argument must be rejected. The requirements relating to the indication of origin of goods are applicable without
distinction to domestic and imported products only in form because, by their very nature, they are intended to enable the
consumer to distinguish between those two categories of products, which may thus prompt him to give his preference to
national products.
[21] It must also be observed that the fact that United Kingdom consumers associate a product's quality with its national
origin does not appear to have been a consideration which prompted the United Kingdom Government when it suggested to

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the Commission that, as far as the Member States of the Community were concerned, it was prepared to accept the
indication 'Made in the European Community'. Besides, if the national origin of goods brings certain qualities to the minds of
consumers, it is in manufacturers' interests to indicate it themselves on the goods or on their packaging and it is not
necessary to compel them to do so. In that case, the protection of consumers is sufficiently guaranteed by rules which enable
the use of false indications of origin to be prohibited. Such rules are not called in question by the EEC Treaty.
[22] Those considerations lead to the conclusion that Article 2 of the Order constitutes a measure which makes the marketing
of goods imported from other Member States more difficult than the marketing of domestically-produced goods and for which
Community law does not recognise any ground of justification. That provision therefore falls within the prohibition laid down in
Article 30 of the EEC Treaty.
[23] It must therefore be declared that, by prohibiting the retail sale of certain goods imported from other Member States
unless they are marked with or accompanied by an indication of origin, the United Kingdom has failed to fulfil an obligation
incumbent on it under Article 30 of the EEC Treaty.

NOTE: Notice that para 17 of the judgment in this case envisages a rather extended notion of discrimination.
In Commission v UK (Case 207/83), the UK had at an earlier stage in its negotiations with the Commission suggested that
it would be prepared to amend its law in order to allow a choice between indicating national origin or marking the item 'Made
in the European Community'. The Commission was not dissuaded by this suggestion from bringing the matter before the
Court. Paragraph 21 of the Court's judgment shows that this concession ultimately weakened the UK's case.
QUESTION
Could a Member State require all products marketed in its territory to carry a 'Made in the EC' label?

Commission v France (Case 21/84)


[1985] ECR 1356, Court of Justice of the European Communities
The Commission alleged that France had violated Article 30 of the EC Treaty (now, after amendment, Article 28 EC) by
refusing to approve postal franking machines from other Member States. The action arose out of a complaint to the
Commission by a British manufacturer which, despite repeated applications, had failed to secure the approval of the French
authorities, even after France had eliminated an earlier law which explicitly envisaged a preference for domestic machines.
[11] The fact that a law or regulation such as that requiring prior approval for the marketing of postal franking machines
conforms in formal terms to Article 30 of the EEC Treaty is not sufficient to discharge a Member State of its obligations under
that provision. Under the cloak of a general provision permitting the approval of machines imported from other Member
States, the administration might very well adopt a systematically unfavourable attitude towards imported machines, either by
allowing considerable delay in replying to applications for approval or in carrying out the examination procedure, or by
refusing approval on the grounds of various alleged technical faults for whicr no detailed explanations are given or which
prove to be inaccurate.
[12] The prohibition on measures having an effect equivalent to quantitative restrictions would lost much of its useful effect if
it did not cover protectionist or discriminatory practices of that type.
[13] It must however be noted that for an administrative practice to constitute a measure prohibitec under Article 30 that
practice must show a certain degree of consistency and generality. Tha generality must be assessed differently according to
whether the market concerned is one on whicl there are numerous traders or whether it is a market, such as that in postal
franking machines, 01 which only a few undertakings are active. In the latter case, a national administration's treatment of,
single undertaking may constitute a measure incompatible with Article 30.

[14] In the light of those principles it is clear from the facts of the case that the conduct of the French postal administration
constitutes an impediment to imports contrary to Article 30 of the EEC Treaty.
[15] It must therefore be concluded that by refusing without proper justification to approve postal franking machines from
another Member State, the French Republic has failed to fulfil its obligations under Article 30 of the EEC Treaty.
NOTE: Read a case-note by L. Gormley (1985) 10 EL Rev 449. QUESTIONS
1. What is a measure, what is a mere isolated act, for the purposes of the application of Article 28? Why did the Court
consider the structure of the market relevant in the case of the refusal to authorize postal franking machines (para 13)?
2. Consider whether the following are capable of falling within Article 28:

(a) The determined policy adopted by an official at Dover as a result of personal prejudice to obstruct wherever possible
the importation of goods originating in Greece. Would it make any difference if the officer's superiors turned a blind
eye to these practices?
(b) A party political broadcast on behalf of the Government declaring an intent 'to protect British interests by stopping
importers of foodstuffs thinking they can enjoy a free-for-all on the UK marketplace'.

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NOTE: In the next case, the Court is astute to maintain a broad approach in defining the 'measure' susceptible to control
under Article 28. The dispute related to the alleged passive approach of the French authorities in the face of actions such as
the interception of lorries transporting imported fruit and vegetables in France and the destruction of their loads, violence
against lorry drivers, and threats against French supermarkets selling imported agricultural products.

Commission v France (Case C-265/95)


[1997] ECR 1-6959, Court of Justice of the European Communities
[24] In order to determine whether the Commission's action is well founded, it should be stressed from the outset that the
free movement of goods is one of the fundamental principles of the Treaty.
[25] Article 3(c) of the EC Treaty provides that, for the purposes set out in Article 2, the activities of the Community are to
include an internal market characterized by the abolition, as between Member States, of, inter alia, obstacles to the free
movement of goods.
[26] Pursuant to the second paragraph of Article 7a of the EC Treaty, the internal market is to comprise an area without
internal frontiers in which the free movement of goods is ensured in accordance with the provisions of the Treaty.
[27] That fundamental principle is implemented by Article 30 et seq. of the Treaty.
[28] In particular, Article 30 provides that quantitative restrictions on imports and all measures having equivalent effect are
prohibited between Member States.
[29] That provision, taken in its context, must be understood as being intended to eliminate all barriers, whether direct or
indirect, actual or potential, to flows of imports in infra-Community trade.
[30] As an indispensable instrument for the realisation of a market without Internal frontiers, Article 30 therefore does not
prohibit solely measures emanating from the State which, in themselves, create restrictions on trade between Member
States. It also applies where a Member State abstains from adopting the measures required in order to deal with obstacles
to the free movement of goods which are not caused by the State.

[31] The fact that a Member State abstains from taking action or, as the case may be, fails to adopt adequate measures to
prevent obstacles to the free movement of goods that are created, in particular, by actions by private individuals on its
territory aimed at products originating in other Member States is just as likely to obstruct intra-Community trade as is a
positive act.
[32] Article 30 therefore requires the Member States not merely themselves to abstain from adopting measures or engaging
in conduct liable to constitute an obstacle to trade but also, when read with Article 5 of the Treaty, to take all necessary and
appropriate measures to ensure that that fundamental freedom is respected on their territory.
[33] In the latter context, the Member States, which retain exclusive competence as regards the maintenance of public order
and the safeguarding of internal security, unquestionably enjoy a margin of discretion in determining what measures are
most appropriate to eliminate barriers to the importation of products in a given situation.
[34] It is therefore not for the Community institutions to act in place of the Member States and to prescribe for them the
measures which they must adopt and effectively apply in order to safeguard the free movement of goods on their territories.
[35] However, it falls to the Court, taking due account of the discretion referred to above, to verify, in cases brought before it,
whether the Member State concerned has adopted appropriate measures for ensuring the free movement of goods.

The Court proceeded from this statement of legal principle to determine that the violent acts had created obstacles to intra-
Community trade; and that France had failed to meet its legal obligations to respond. In reaching this conclusion, the Court
referred to:
the duration of the incidents (which had been occurring regularly for more than 10 years);
failure of the French police to attend, despite the fact that in certain cases the competent authorities had been warned
of the imminence of demonstrations by farmers, or, even if present, to intervene, even where they far outnumbered the
perpetrators;
the fact that although a number of acts of attacks by identifiable individuals were filmed by television cameras, a very
small number of persons had been identified and prosecuted.

[52] In the light of all the foregoing factors, the Court, while not discounting the difficulties faced by the competent authorities
in dealing with situations of the type in question in this case, cannot but find that, having regard to the frequency and
seriousness of the incidents cited by the Commission, the measures adopted by the French Government were manifestly
inadequate to ensure freedom of intra-Community trade in agricultural products on its territory by preventing and effectively
dissuading the perpetrators of the offences in question from committing and repeating them.
[53] That finding is all the more compelling since the damage and threats to which the Commission refers not only affect the
importation into or transit in France of the products directly affected by the violent acts, but are also such as to create a
climate of insecurity which has a deterrent effect on trade flows as a whole.

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[54] The above finding is in no way affected by the French Government's argument that the situation of French farmers was
so difficult that there were reasonable grounds for fearing that more determined action by the competent authorities might
provoke violent reactions by those concerned, which would lead to still more serious breaches of public order or even to
social conflict.

[55] Apprehension of internal difficulties cannot justify a failure by a Member State to apply Community law correctly (see, to
that effect, Case C-52/95 Commission v France [1995] ECR I-4443, paragraph 38).
[56] It is for the Member State concerned, unless it can show that action on its part would have consequences for public
order with which it could not cope by using the means at its disposal, to adopt all appropriate measures to guarantee the full
scope and effect of Community law so as to ensure its proper implementation in the interests of all economic operators.
[57] In the present case the French Government has adduced no concrete evidence proving the existence of a danger to
public order with which it could not cope.
[58] Moreover, although it is not impossible that the threat of serious disruption to public order may, in appropriate cases,
justify non-intervention by the police, that argument can, on any view, be put forward only with respect to a specific incident
and not, as in this case, in a general way covering all the incidents cited by the Commission.

The Court concluded by declaring that 'by failing to adopt all necessary and proportionate measures in order to prevent the
free movement of fruit and vegetables from being obstructed by actions by private individuals, the French Republic has failed
to fulfil its obligations under Article 30 of the EC Treaty, in conjunction with Article 5 of that Treaty, and under the common
organizations of the markets in agricultural products'.
NOTES
1. The Court's ruling in this case provided a stimulus to the adoption of Regulation 2679/98 [1998] OJ L337/8 on the
functioning of the internal market in relation to the free movement of goods. The Commission is equipped with special
powers to act in cases of serious obstacles to free movement, and the Regulation expressly includes inaction by public
authorities, not simply action, within its scope for these purposes.
2. Article 2 of Regulation 2679/98 on the functioning of the internal market in relation to the free movement of goods
provides that 'This Regulation may not be interpreted as affecting in any way the exercise of fundamental rights as
recognised in Member States, including the right or freedom to strike. These rights may also include the right or freedom
to take other actions covered by the specific industrial relations systems in Member States'. So where a Member States
does not take action to break a lawful strike that is causing an impediment to cross-border trade, it will not fall foul of the
Regulation. But would it fall foul of Article 28 (ex 30)? How far does the Court's reasoning in Case C-265/95 reach in
placing obligations on
Member States to suppress private practices such as industrial action or broader forms of public protest that might have
an effect hostile to trade integration? The issue is a potential collision between what the Court describes as a
'fundamental freedom' to trade (para 32 above) and other fundamental freedoms, such as the right to strike or, more
generally, the right of assembly or freedom of expression.

Eugen Schmidberger, Internationale Transporte und Planzuge v Austria (Case C-112/00)


[2003] ECR I-5659, Court of Justice of the European Communities
The Brenner motorway, a crucial transalpine route, was closed to traffic for almost 30 hours in June 1998. The cause was a
demonstration organized by an environmental group. The public authorities in Austria had decided not to ban the demon-
stration, considering it lawful under Austrian law. Schmidberger's business was transporting timber between Italy and
Germany via Austria, and it argued the closure of the motorway interfered with trade in breach of EC law, specifically Articles
5 and 30 (now, after amendment, Articles 10 and 28) EC. A preliminary ruling was sought from Luxembourg. The Court
referred to the 'spirit of cooperation which must prevail in preliminary ruling proceedings' but found no reason to accept
Austria's submission that hypothetical or irrelevant questions were at stake (see Chapter 7). The first question for the Court
was whether a measure within the meaning of Article 28 had been adopted by the Austrian public authorities. The Court
repeated its statement in Case C-265/95 Commission v France that 'the free movement of goods is one of the fundamental
principles of the Community'. And it cited paragraph 30 of that judgment (above) in support of the proposition that Article 28
(ex 30) is apt to apply where a Member State abstains from adopting measures required in order to deal with obstacles to the
free movement of goods which are not caused by the State. It stated crisply:
[62] It follows that, in a situation such as that at issue in the main proceedings, where the competent national authorities are
faced with restrictions on the effective exercise of a fundamental freedom enshrined in the Treaty, such as the free
movement of goods, which result from actions taken by individuals, they are required to take adequate steps to ensure that
freedom in the Member State concerned even if, as in the main proceedings, those goods merely pass through Austria en
route for Italy or Germany.
[63] It should be added that that obligation of the Member States is all the more important where the case concerns a major
transit route such as the Brenner motorway, which is one of the main land links for trade between northern Europe and the
north of Italy.

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[64] In the light of the foregoing, the fact that the competent authorities of a Member State did not ban a demonstration which
resulted in the complete closure of a major transit route such as the Brenner motorway for almost 30 hours on end is capable
of restricting intra-Community trade in goods and must, therefore, be regarded as constituting a measure of equivalent effect
to a quantitative restriction which is, in principle, incompatible with the Community law obligations arising from Articles 30
and 34 of the Treaty, read together with Article 5 thereof, unless that failure to ban can be objectively justified.

The question whether the State has taken a 'measure' within the scope of Article 28 is logically distinct from the subsequent
inquiry into whether any measure is justified. However, the way in which a measure is adopted is relevant to assessing its
justifiability. Assessment of possible justification detained the Court only briefly in Commission v France given the egregious
circumstances, but the more sensitive issues raised in Eugen Schmidberger demanded a much fuller appraisal of competing
claims to fundamental rights. The Court insisted that 'the interests involved must be weighed having regard to all the
circumstances of the case in order to determine whether a fair balance was struck' (para 81). The question of justification will
be considered in the next Chapter (p.410).
NOTE: The next case also raises the question of what constitutes a measure for the purposes of defining the MEQR caught
by Article 28. The decision confirms that even a State's course of conduct which is merely designed to induce discriminatory
practices among private individuals can be held in violation of Article 28. Neither the absence of binding character nor the
absence of sanctions for refusal to comply with the State's policy necessarily deprive the act of the required quality. The
Court avoids a formalistic assessment of the legal status of the act and concentrates instead on its purpose and effect.
However, in addition to its interpretation of the concept of a measure, the 'Buy Irish' case has much to commend it as a
broader illustration of the scope of Article 30 of the EC Treaty (now, after amendment, Article 28 EC).

Commission v Ireland (Case 249/81)


[1982] ECR 4005, [1983] 2 CMLR 104, Court of Justice of the European Communities
[1] By an application lodged at the Court Registry on 15 September 1981 the Commission of the European Communities
brought an action before the Court under Article 169 of the EEC Treaty for a declaration that by organizing a campaign to
promote the sale and purchase of Irish products in its territory Ireland has failed to fulfil its obligations under the Treaty.
I - The subject-matter of the application
[2] In a reasoned opinion addressed to Ireland on 25 February 1981 concerning the 'Buy Irish' campaign, the Commission
noted that in January 1978 the Irish Government had introduced a three-year programme to help to promote Irish products.
The campaign was launched on 18 January 1978 in a speech delivered by the Irish Minister for Industry, Commerce and
Energy. The Minister declared on that occasion that the aim of the campaign was to achieve 'a switch from imports to Irish
products equivalent to 3% of total consumer spending' and that the campaign was 'a carefully thought out set of initiatives
that add up to an integrated programme for promoting Irish goods, with specific proposals to involve the producer, distributor
and consumer'.
[3] The Irish Government, it was said, had taken and was continuing to take a series of measures designed to promote Irish
products in accordance with the terms of that speech. The reasoned opinion cited the following measures:
(a)The organization of a free information service for consumers wishing to know which products in a particular category of
goods are made in Ireland and where they may be obtained (the Shoplink Service);
(b)The provision of exhibition facilities, exclusively for exhibiting Irish products, in a large exhibition centre in Dublin run by
the Irish Goods Council, which is, it is claimed, a public authority;
(c)The encouragement of the use of the 'Guaranteed Irish' symbol for products made in Ireland together with the
organization by the Irish Goods Council of a special system for investigating complaints about products bearing that
symbol;
(d)The organization of a big publicity campaign by the Irish Goods Council in favour of Irish products, involving in
particular the publication and distribution by that institution of literature encouraging consumers to buy only domestic
products.
[4] The Commission notes in the application that the activities connected with the Shoplink Service and the exhibition
facilities in Dublin have now been abandoned by the Irish Government. However, the other two activities have continued,
even after the expiry of the three-year period for which the campaign was to last. Moreover, the publicity campaign has been
gradually extended, in particular by means of widespread advertising in favour of Irish products in the press and on
television.
[5] The Irish Government admits that there was a three-year programme in favour of buying Irish products in Ireland. It says
that since the Shoplink Service and the exhibition facilities in Dublin were abandoned at the request of the Commission the
programme consists merely of an advertising campaign, by means of the press and television, the publication of posters and
pamphlets and the use of the 'Guaranteed Irish' symbol, designed to make Irish consumers better acquainted with products
made in Ireland and to stimulate awareness in the Irish public of the link between the marketing of such products in Ireland
and the unemployment problem in that country.
[6] As far as the advertising campaign is concerned, the Irish Government confirms that it forms part of the activities of the
Irish Goods Council. However, that institution cannot be regarded as a public authority; it is merely an arrangement whereby
the various industries in Ireland may cooperate for their common good. The activities of the Irish Goods Council are not
based on any official enactment and the involvement of the Government consists exclusively of financial aid and moral

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support.
[7] The Commission maintains that the actions of the Irish Goods Council are unquestionably attributable to the Irish
Government. It points out, in particular, that the members of the Management Committee of the Council are appointed, under
the Articles of Association of that body, by the Minister for Industry, Commerce and Energy.
[8] The Commission is of the opinion that the campaign to promote the sale and purchase of Irish products in Ireland must be
regarded as a measure having an effect equivalent to a quantitative restriction on imports. Ireland contends, first, that the
Irish Government has never adopted 'measures' within the meaning of Article 30 of the Treaty and, secondly, that the
financial aid given to the Irish Goods Council must be judged in the light of Articles 92 and 93 of the Treaty, and not Article
30.
[9] Before assessing the merits of those arguments the position of the Irish Goods Council must be considered.
II - The Irish Goods Council
[10] The Irish Goods Council was created on 25 August 1978, a few months after the disputed campaign was launched, in
the form of a company limited by guarantee and not having a share capital; it was registered in accordance with Irish
company law (Companies Act 1963). The Council is in fact the result of the amalgamation of two bodies, the National
Development Council, a company limited by guarantee and registered under the Companies Act, and the Working Group on
the Promotion and Sale of Irish Goods.
[11 ] The Irish Government maintains that the Irish Goods Council was created under the sponsorship of the government in
order to encourage Irish industry to overcome its own difficulties. The Council was established for the purpose of creating a
framework within which the various industries could come together in order to cooperate for their common good.
[12] The Management Committee of the Irish Goods Council consists, according to the Articles of Association of that
institution, of 10 persons appointed in their individual capacities by the Minister for Industry, Commerce and Energy; the
same Minister appoints the chairman from among the members of the Management Committee. The members and the
chairman are appointed for a period of three years, and their appointments may be renewed. In practice, the members of the
Management Committee are selected by the Minister in such a manner as to represent the appropriate sectors of the Irish
economy.
[13] It appears from the information supplied by the Irish Government at the request of the Court that the activities of the Irish
Goods Council are financed by subsidies paid by the Irish Government and by private industry. The subsidies from the State
and from the private sector amounted, respectively to IRL 1 005 000 and IRL 175 000 for the period between August 1978
and December 1979; IRL 940 000 and IRL 194 000 for 1980; and IRL 922 000 and IRL 238 000 for 1981.
[14] The Irish Government has not denied that the activities of the Irish Goods Council consist in particular, after the
abandonment of the Shoplink Service and the exhibition facilities offered to Irish manufacturers in Dublin, in the organization
of an advertising campaign in favour of the sale and purchase of Irish products, and in promoting the use of the 'Guaranteed
Irish' symbol.
[15] It is thus apparent that the Irish Government appoints the members of the Management Committee of the Irish Goods
Council, grants it public subsidies which cover the greater part of its expenses and, finally, defines the aims and the broad
outline of the campaign conducted by that institution to promote the sale and purchase of Irish products. In the circumstances
the Irish Government cannot rely on the fact that the campaign was conducted by a private company in order to escape any
liability it may have under the provisions of the Treaty.
III - The applicability of Articles 92 and 93 of the Treaty
[16] The Irish Government maintains that, even if the purpose or the effect of the campaign was to discourage imports from
other Member States, it must be judged on the basis of Articles 92 and 93 of the Treaty, which deal with State aids. The
applicability of those provisions excludes the applicability of Article 30 of the Treaty, upon which the Commission has based
its case.
[17] The Irish Government states that the campaign has in fact been conducted by the Irish Goods Council and that the role
of the government has been restricted to moral support and financial assistance. If, as the Commission maintains, the
campaign was liable to hinder the free movement of goods within the Community by promoting domestic products at the
expense of imported ones that circumstance is attributable solely to a single government decision, namely the decision to
subsidize the Irish Goods Council.
[18] It must be observed, however, that the fact that a substantial part of the campaign is financed by the Irish Government,
and that Articles 92 and 93 of the Treaty maybe applicable to financing of that kind, does not mean that the campaign itself
may escape the prohibitions laid down in Article 30.
[19] In any case, if the Irish Government considered that such financing amounted to aid within the meaning of Articles 92
and 93 it ought to have notified the aid to the Commission in accordance with Article 93 (3).

IV - The application of Article 30 of the Treaty


[20] The Commission maintains that the 'Buy Irish' campaign and the measures taken to prosecute the campaign must be
regarded, as a whole, as measures encouraging the purchase of domestic products only. Such measures are said to be
contrary to the obligations imposed on the Member States by Article 30. The Commission refers to Article 2(3)(k) of
Commission Directive No 70/50/EEC of 22 December 1969, based on the provisions of Article 33(7), on the abolition of

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measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions
adopted in pursuance of the EEC Treaty (Official Journal, English Special Edition 1970 (I), p.17). According to Article 2(3)(k),
measures which encourage the purchase of domestic products only must be regarded as contrary to the prohibitions
contained in the Treaty.
[21 ] The Irish Government maintains that the prohibition against measures having an effect equivalent to quantitative
restrictions in Article 30 is concerned only with 'measures', that is to say, binding provisions emanating from a public
authority. However, no such provision has been adopted by the Irish Government, which has confined itself to giving moral
support and financial aid to the activities pursued by the Irish industries.
[22] The Irish Government goes on to emphasise that the campaign has had no restrictive effect on imports since the
proportion of Irish goods to all goods sold on the Irish market fell from 49.2% in 1977 to 43.4% in 1980.
[23] The first observation to be made is that the campaign cannot be likened to advertising by private or public undertakings,
or by a group of undertakings, to encourage people to buy goods produced by those undertakings. Regardless of the means
used to implement it, the campaign is a reflection of the Irish Government's considered intention to substitute domestic
products for imported products on the Irish market and thereby to check the flow of imports from other Member States.
[24] it must be remembered here that a representative of the Irish Government stated when the campaign was launched that
it was a carefully thought-out set of initiatives constituting an integrated programme for promoting domestic products; that the
Irish Goods Council was set up at the initiative of the Irish Government a few months later; and that the task of implementing
the integrated programme as it was envisaged by the government was entrusted, or left, to that Council.
[25] Whilst it may be true that the two elements of the programme which have continued in effect, namely the advertising
campaign and the use of the 'Guaranteed Irish' symbol, have not had any significant success in winning over the Irish market
to domestic products, it is not possible to overlook the fact that, regardless of their efficacity, those two activities form part of
a government programme which is designed to achieve the substitution of domestic products for imported products and is
liable to affect the volume of trade between Member States.
[26] The advertising campaign to encourage the sale and purchase of Irish products cannot be divorced from its origin as
part of the government programme, or from its connection with the introduction of the 'Guaranteed Irish' symbol and with the
organization of a special system for investigating complaints about products bearing that symbol. The establishment of the
system for investigating complaints about Irish products provides adequate confirmation of the bdegree of organization
surrounding the 'Buy Irish1 campaign and of the discriminatory nature of the campaign.
[27] In the circumstances the two activities in question amount to the establishment of a national practice, introduced by the
Irish Government and prosecuted with its assistance, the potential effect of which on imports from other Member States is
comparable to that resulting from government measures of a binding nature.
[28] Such a practice cannot escape the prohibition laid down by Article 30 of the Treaty solely because it is not based on
decisions which are binding upon undertakings. Even measures adopted by the government of a Member State which do not
have binding effect may be capable of influencing the conduct of traders and consumers in that State and thus of frustrating
the aims of the Community as set out in Article 2 and enlarged upon in Article 3 of the Treaty.
[29] That is the case where, as in this instance, such a restrictive practice represents the implementation of a programme
defined by the government which affects the national economy as a whole and which is intended to check the flow of trade
between Member States by encouraging the purchase of domestic products, by means of an advertising campaign on a
national scale and the organization of special procedures applicable solely to domestic products, and where those activities
are attributable as a whole to the government and are pursued in an organized fashion throughout the national territory.
[30] Ireland has therefore failed to fulfil its obligations under the Treaty by organizing a campaign to promote the sale and
purchase of Irish goods within its territory.

NOTE: A delicate but important distinction from the 'Buy Irish' case was made in Apple and Pear Development Council v
Lewis (Case 222/82). The case involved the submission that the fruit promotions undertaken by the Council, a body set up in
the UK under statutory instrument, infringed inter alia Article 30 of the EC Treaty (now, after amendment, Article 28 EC) in so
far as they concerned the promotion of varieties typical of English and Welsh production.

Apple and Pear Development Council v Lewis (Case 222/82)


[1983] ECR 4083, [1984] 3 CMLR 733, Court of Justice of the European Communities
[17] As the Court held in its judgment of 24 November 1982 in Case 249/81 (Commission v Ireland [1982] ECR 4005), a
publicity campaign to promote the sale and purchase of domestic products may, in certain circumstances, fall within the
prohibition contained in Article 30 of the Treaty, if the campaign is supported by the public authorities. In fact, a body such as
the Development Council, which is set up by the government of a Member State and is financed by a charge imposed on
growers, cannot under Community law enjoy the same freedom as regards the methods of advertising used as that enjoyed
by producers themselves or producers' associations of a voluntary character.
[18] In particular, such a body is under a duty not to engage in any advertising intended to discourage the purchase of
products of other Member States or to disparage those products in the eyes of consumers. Nor must it advise consumers to
purchase domestic products solely by reason of their national origin.

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[19] On the other hand, Article 30 does not prevent such a body from drawing attention, in its publicity, to the specific
qualities of fruit grown in the Member State in question or from organizing campaigns to promote the sale of certain varieties,
mentioning their particular properties, even if those varieties are typical of national production.
[20] In the observations which it submitted to the Court, the Commission stated that campaigns to promote certain varieties
might result in the exclusion of other varieties from the market and make it necessary, either in the Member State in question
or in other Member States which export the latter varieties, to apply the intervention measures provided for in the common
organization of the market in relation to those varieties.
[21] Although it is true that such a distortion of the conditions of competition, which would be incompatible with the proper
functioning of the common organization of the markets, might occur in a market where the publicity measures related
exclusively or essentially to certain varieties to the exclusion of the others, that consideration cannot justify the prohibition of
all publicity campaigns whereby an organization such as the Development Council draws attention to the properties of certain
varieties and indicates the uses for which those varieties are specifically suitable.

QUESTIONS
1. Could a campaign which involved the use of a national flag as a campaign logo fall on the lawful side of the line?
2. In both the 'Buy Irish' and the Apple and Pear Council cases (Cases 249/81 and 222/82), the Court dismissed arguments
that the acts complained of were those of a private body insufficiently closely aligned to the State to fall within the scope
of Article 30 of the EC Treaty (now, after amendment, Article 28 EC). What factors persuaded the Court that the State
was sufficiently involved in the practices of the Irish Goods Council and the Apple and Pear Development Council?
See also Case C-325/00 Commission v Germany [2002] ECR1-9977.
3. Would discrimination by a private body on grounds of nationality fall foul of Community law? Consider, for example, a
policy decision by a UK supermarket chain to stock only British-made goods; or only French-made goods. You should
make reference to the scope of Article 12; and Articles 81 and 82. For Article 39, see Case C-281/98 Roman Angonese
[2000] ECR 1-4139 (Chapter 13). Consider also the issue of obligatory compliance with national standards. The Commis-
sion expressed its view in Written Question 835/82 [1983] OJ C93/1; Written Question 862/83 [1983] OJ C315/15.
4. What other areas of Community law demand close attention to the extent of State involvement (see p.142 on the direct
effect of Directives)? Are the tests used identical? If not, why not? Read D. Curtin, 'The Province of Government', (1990)
15 EL Rev 195.

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Could Article 30 impose obligations on individuals?


European Law Review 1987
Nicholas MacGowan
Mary Quinn

Introduction
In Ianneli v. Meroni 1 the European Court held that a prohibition in Article 30 EEC on quantitative
restrictions and measures having equivalent effect creates rights which national courts must protect. It is
clear, therefore, that Article 30 imposes obligations on Member States. This article attempts to address the
issue of whether Article 30 imposes obligations on private parties.2 Article 30 of the EEC Treaty provides:
" Quantitative restrictions on imports and on all measures having equivalent effect shall, without prejudice
to the following provisions, be prohibited between Member States." It is suggested that a strict
interpretation of the above text does not preclude the imposition of obligations on private parties. However,
we propose to examine Article 30 in further detail to see whether this matter can be clarified. Firstly, we
will examine Article 30 with regard to the other articles of the Treaty concerned with the free movement of
goods and unrestricted competition. Secondly, we will examine the nature of the prohibition contained in
Article 30.

Article 30 viewed in the context of Article 3(a) of the Treaty


Article 30 embodies a prohibition fundamental to the establishment and proper functioning of the common
market. It is found in the first title to Part Two of the Treaty entitled " Foundations of the Community." The
fundamental nature of the objectives of Article 30 is affirmed by reference to Article 3(a) found in Part One
of the Treaty, entitled " Principles." Article 3(a) states as the first-mentioned activity of the Community:
" For the purposes set out in Article 2, the activities of the Community shall include, as provided in this
Treaty and in accordance with the timetable set out herein. (a) The elimination, as between Member States,
of customs duties and of quantitative restrictions on the import and export of goods, and of all other
measures having equivalent effect."
It could be said that, since the elimination of customs duties and of quantitative restrictions and of all
measures having equivalent effect is so essential for the establishment and functioning of the common
market, every obstacle to the free *E.L.R. 164 movement of goods, regardless of its source, is prima facie
prohibited. It is suggested that the text of Article 3(a) in referring to " all other measures having equivalent
effect," is referring to all types of measures other than customs duties and quantitative restrictions per se,
rather than to all measures regardless of their source.

Article 30 in the context of Articles 30-37


Article 30, when viewed in the context of the other articles on the free movement of goods (Articles 30-37
EEC) seems to be addressed to Member States. Therefore, it might be argued that Article 30 imposes
obligations only on Member States and on public authorities in Member States. It is submitted that this
argument must be rejected having regard to the judgment of the European Court in Walrave. 3 In
considering the interpretation to be given to Article 59 EEC, the European Court made it clear that such an
interpretation was to be made only by reference to the terms of the Article itself,4 and not by reference to
the other articles dealing with services.

The nature of the prohibition in Article 30


In Commission v. Italy 5 the European Court stated that the provisions of Title I of Part Two of the Treaty
(Articles 9 to 37) introduced the fundamental principle of the elimination of all obstacles to the free
movement of goods between Member States by the abolition of quantitative restrictions and measures
having equivalent effect, and that exceptions to this fundamental rule must be strictly construed.
Furthermore, the European Court took the view that the chapter to which Articles 30 to 34 belong forms
part of the chapter relating to the elimination of quantitative restrictions between Member States. The
European Court stated that:
" The subject of that chapter is State intervention in intra-Community trade by measures in the nature of
prohibitions, total or partial, on import, export or transit, according to the circumstances."
This would seem to limit the application of that chapter, and in particular Article 30, to acts of Member

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States. This view is given support by Advocate General Warner in the GEMA case6 when he states: " One
must first bear in mind that, when Article 30 refers to a ' measure,' it means a measure taken by a Member-
State; it does not mean a measure taken by a private person "
It could be argued that the provisions contained in Article 30 are in general terms, applicable to all acts
regardless of their source and accordingly to those of Member States and private parties. In this regard
Article 30 may be compared to those provisions of the Treaty which have been held by the European Court
to create obligations binding on private parties, namely, Articles 7, 48 and 59 of the Treaty. In Walrave the
European Court ruled that the prohibition on discrimination based on nationality contained in Articles 7, 48
and 59 EEC does not only apply to the action of public authorities but extends likewise to rules of any other
nature aimed at collectively regulating gainful employment and services.
In the Second Defrenne case the European Court held that since the provisions of Article 119 are
mandatory, the prohibition on discrimination in pay between men and women contained in Article 119,
applies not only to the action of public authorities, but extends to all agreements which are intended to
regulate paid labour collectively, as well as to contracts between individuals. Article 30 is similar to Article
119 insofar as it is mandatory in nature.
Although Article 30 is mandatory and in general terms and therefore to that extent, is comparable to
Articles 7, 48, 59 and 119 EEC, it differs significantly from those articles as regards its respective " sphere
of application." It is clear from Walrave that the activities to which Articles 7, 48 and 59 apply, necessarily
include, to a great extent, the activities of private parties. From the European Court's judgment in the
Second Defrenne case it is apparent that the prohibition on direct and overt discrimination between men and
women in the area of pay, contained in Article 119, must apply, of necessity, to both the public and private
sectors of employment.

It is suggested that the European Court in the Walrave and the Second Defrenne cases had compelling
reasons for deciding that the relevant Articles of the Treaty imposed obligations on public authorities and
private parties alike. To have decided otherwise would have deprived the said Articles of much, if not all, of
their force since much employment and the provision and receipt of services takes place within the private
sector. It is suggested that there are no similar compelling reasons for interpreting Article 30 so as to impose
obligations on private parties as well as on Member States.

Most " measures" prohibited by Article 30 will emanate from the actions of the governments of the
Member States or of quasi-governmental bodies. Most " measures" emanating from private parties are
already adequately provided for by other articles of the Treaty, in particular those dealing with the
competition rules. Consequently, it is suggested that the majority of instances (or a significant proportion of
them) to which the prohibition contained in Article 30 will apply, will not of necessity relate to the activities
of private parties.

The sphere of application of Article 30 is for the most part concerned with the activities of Member States,
both legislative and administrative. In that respect, its sphere of application differs considerably from those
of Articles 7, 48, 59 and 119 EEC. Whilst it is admitted that Article 30 can be construed as imposing
obligations on private parties, it is suggested that there are sound policy reasons why Article 30 should not
be so interpreted, merely to cover those few " measures" which emanate from private parties which are not
presently covered by other Treaty provisions.

The meaning of " measures"


If Article 30 imposes obligations which are binding on private parties, then, of necessity, the word "
measures" in Article 30 would have to be construed as including the acts of private parties. It is suggested
that the word " measures" has been construed as relating to legislative and administrative acts and other
measures adopted by state bodies. In Dassonville 17 the following classic statement appears at
consideration 5 of the judgment of the European Court: " All trading rules enacted by a Member State
which are capable of hindering, directly or indirectly, actually or potentially, intra-community trade are to
be considered as measures having an effect equivalent to quantitative restrictions."
It is suggested that the European Court has recognised, at least by implication, the distinction between
measures which are of " public origin" and " private origin." In Commission v. Ireland 18 the European
Court in assessing the legality of the " Buy Irish" campaign under Article 30 stated that:

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" The first observation to be made is that the campaign cannot be likened to advertising by private or public
undertakings, or by a group of undertakings, to encourage people to buy goods produced by those
undertakings. Regardless of the means used to implement it, the Campaign is a reflection of the Irish
government's considered intention to substitute domestic pro *E.L.R. 167 ducts for imported products on
the Irish market and thereby to check the flow of imports from other Member States."

A similar point is made in the Apple and Pear Development Council v. Lewis case. In these two cases the
European Court stated that certain publicity campaigns to promote the sale of domestic products may, in
certain circumstances, fall within the prohibition contained in Article 30, if the campaign is supported by
public authority or amounts to a " national practice," whereas greater freedom as regards methods of
advertising is afforded to producers themselves or producer associations of a voluntary character. There is
the implication that, were private parties to engage in a similar type of advertising campaign they would not
be bound by the prohibition of Article 30.

Relationship between Article 30 and Articles 85 and 86


It is suggested that were the European Court to rule that Article 30 imposed obligations on private parties, it
would upset the scheme of the Treaty as intended by its drafters. In particular such a judgment would have
the effect of undermining the relationship between Article 30 and Articles 85 and 86 of the Treaty.
In his opinion in Van Tiggele, Advocate General Capotorti made an important statement in this regard:
" There is a distinction between Articles 30 and 34 on the one hand and Articles 85 and 86 on the other, not
only with regard to those subject to the prohibitions but also with regard to the nature of the behaviour
which is prohibited; we need only reflect that measures restricting trade between Member States are by
their very nature incompatible with the Treaty because of the impediment which they caused to intra-
Community trade, whilst agreements between undertakings are incompatible within the Common Market in
so far as the dual conditions of a detrimental effect on trade between Member States and of the object or
effect of restricting competition is fulfilled; and abuse of a dominant position in its turn entails abuse over
and above the element of detriment to trade between Member States."
It is suggested that when the Treaty was drafted the intention was that State measures which hinder inter-
state trade should be abolished. On the other hand, the actions of private parties were only prohibited to the
extent that they fell foul of the provisions of the Treaty relating to competition. In other words, a lacuna
came about in the application of Community law. We shall be returning to this point in relation to industrial
relations.
The reason why there is a less severe regime in Articles 85 and 86 as against private parties than there is in
Article 30 as against Member States is because measures, whether emanating from official or semi-official
sources, which hinder inter-state trade have a more directly harmful effect on such trade than does the anti-
competitive behaviour of private parties. It is undoubtedly true to say that importers who find themselves in
competition with national cartels will find it more difficult to penetrate a new market than would otherwise
be the case. An effective national or Community competition policy will prevent this occurring and so will
bring indirect benefits for inter-state trade. However, such activities by private parties are considered to be
undesirable in themselves, regardless of their effect on inter-state trade.
The implication of what Advocate General Capotorti said is that were Article 30 to be interpreted by the
European Court so as to impose obligations on private parties, such a judgment would render Articles 85
and 86 to a large extent superfluous. Article 30, so interpreted, would have a much wider application than
Articles 85 and 86. If Article 30 was so applied, private parties would then be under an obligation not to
hinder trade between Member States, regardless of whether the conditions for the applicability of Articles
85 and 86 were fulfilled. But Article 30, as interpreted, would also have a wider application than Articles 85
and 86 in that there is no de minimis rule in operation as regards the application of Article 30, whereas there
is such a rule in operation as regards the application of Articles 85 and 86.

Furthermore, the Commission pursuant to Article 85(3) and Council Regulation 1724 has sole power to
exempt certain agreements, decisions of associations or concerted practices which, although prohibited by
Article 85(1) and (2), nevertheless are of such a nature that they should escape the full rigours of
Community law.
Of course, there is nothing to prevent the parallel application of Article 30 and Articles 85 and 86 in
individual cases, depending on their facts; but Article 30 so interpreted would apply not only in every

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competition case, but in many more situations where, at present it cannot be said that Community law is
applicable.
If the Commission were to purport to grant an exemption, using its powers pursuant to Article 85(3), and
Council Regulation 17, a private party which, for example, violated a clause of an exempted agreement
which imposed a prohibition on an active sales policy in the territory of another licensee, could raise the
point at a later stage that such a prohibition was contrary to Article 30 if the territory of the licensee
coincided with national boundaries, as they so often do.

The point is not an academic one as a conflict between the Commission's policy of granting individual or
group exemptions for agreements which contain prohibitions or an active sales policy (or even a passive
sales policy in certain exceptional circumstances) in the territory of other licensees and the case law of the
European Court on Article 30 has occurred on a previous occasion.

Of course, the implications or consequences of so interpreting Article 30 would be far more far-reaching
than were the repercussions of the Caf Hag judgment of the European Court, since the effect of that
judgment was confined to cases where the same trademark in different Member States shared a common
origin but ended up in different hands due to an act of public sequestration.

It is not suggested in any way that the Commission's policy should take precedence over judgments of the
European Court. We merely seek to point out the implications of so interpreting Article 30 for a power
which was devolved to the Commission pursuant to Article 85(3) of the Treaty and Council Regulation 17.
The Commission has no comparable regulatory powers under Articles 30 to 36. It is suggested that if it
were intended that Article 30 could impose obligations on private parties, then the Commission would have
been given a supervisory role in administering the application of Article 36 in tandem with its power of
exemption pursuant to Article 85(3), and Council Regulation 17, in conformity with it pivotal role as
guardian of the Treaty pursuant to Article 155 of the Treaty.

Pursuant to Article 169 EEC, the Commission can, of course, bring proceedings against a Member State for
failing to fulfil its obligations under the Treaty. But this Article makes no provision for proceedings against
private parties.

Another important consequence of so interpreting Article 30 would be that unilateral acts of private parties
would be liable to fall foul of Article 30. At present, the unilateral acts of private parties fall outside the
ambit of Article 85 altogether, unless there are contractual relations in existence between the parties, when
it may justify the Commission's refusing an exemption.30 Such acts only fall foul of Article 86 if the
perpetrator of such acts has a dominant position over the relevant " product" and geographic markets within
the meaning of this Article and if the acts in question constitute an abuse of that position.

It is suggested that such a lacuna in the application of Community law was obviously intended for otherwise
the consequences would be bordering on the ridiculous. In the context of industrial relations the
consequences would be potentially disastrous. One can well imagine the reception a judgment of the
European Court would receive were such a judgment to rule that a strike which was lawful according to
national law was contrary to Article 30 if the strike affected inter-state trade by hindering imports or
exports. It would be hoped that the European Court would exercise caution in this regard and would avoid
at all costs such a potential source of friction in relations between the Communities and the Member States.
Such an unwarranted intrusion into the internal affairs of the Member States would be likely to be deeply
resented by the Member States and would be seen by them as an attempt by the European Court to extend
its tentacles to reach every nook and cranny of the domestic legal systems. It is a question of balance and
the European Court must be seen to draw the line somewhere.

National measures on price-fixing


The judgment of the European Court in Van de Harr clearly emphasised the distinct and separate nature of
the rules relating to the free movement of goods and the rules relating to free competition. Nevertheless the
effect of the case law of the European Court in relation to national measures on price-fixing is that Member
States may, under certain circumstances, be governed by Articles 85 and 86. This conclusion is arrived at

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by interpreting Article 85 in the light of Article 3(f) and Article 5(2). For example, Member States may not
enact measures that would have the same effect as collective price resale maintenance agreements, thus
enabling private parties to escape the constraints imposed by Article 85. Here the prohibition, which is
directed at private parties, homes in on the Member State concerned because that Member State has
attempted to shield the private party from the full rigours of Community law.

Article 85, in conjunction with Article 3(f) and Article 5(2) of the Treaty, in certain exceptional
circumstances, may impose obligations on Member States. While this blurs the autonomy of Article 30 in
relation to Article 85, nevertheless it does not necessarily follow that, correspondingly, Article 30 may
impose obligations on private parties. Article 5 does not impose obligations on private parties and therefore
Article 30 cannot be interpreted, in the light of Article 5, so as to impose obligations on private parties, in
circumstances under which a Member State permits or facilitates the taking of a course of action which
would be illegal in the hands of the Member State itself. Since by virtue of Article 5(1) Member States have
a positive obligation arising out of the Treaty and are under an obligation to facilitate the achievement of
the tasks of the Community, it is suggested that action could be taken by the Commission against the
Member States concerned under Article 169 EEC for failure to fulfil those obligations. In such
circumstances there would be no lacuna in the application of Community law.

This is illustrated by the judgments of the European Court in Dassonville and De Peijer. Both cases
concerned circumstances which amounted to what was in effect a monopoly on the marketing of goods
conferred on certain private parties. In both cases those private parties were the only persons who could
satisfy the requirements of national law. The European Court ruled, in both cases, that the national law
concerned infringed Article 30 and was not justified by Article 36. But it was not the behaviour of the
individuals concerned that constituted the infringement of Article 30.
In both cases the parallel importer was put in the invidious position of having to rely on the co-operation of
a manufacturer or concessionaire in order to market his goods lawfully in accordance with the national law
at issue in the proceedings. Not surprisingly, such co-operation was not forthcoming, but again it was the
national law and not the behaviour of the private parties which the European Court ruled had infringed
Article 30. The European Court further held that the Member State concerned was under an obligation to
take active steps to prevent this type of situation arising in the first place.

This suggests that Member States will infringe Article 30 and will therefore be liable to be subjected to
Article 169 proceedings where the Member State concerned creates a general legislative environment in
which private parties are given the effective power to prohibit parallel imports.

In such a situation, it is suggested that Article 169 proceedings could be brought against a Member State for
failure to fulfil its obligations under Article 30, as interpreted in the light of Article 5 of the Treaty. In such
circumstances, therefore, it would not be necessary to interpret Article 30 in such a way that it conferred
obligations on private parties. In any event, if the problem arises in the context of a contractual relationship
or an association of undertakings, Article 85 will, of course, be relevant. Article 86 would apply if there is
an abuse of a dominant position within the meaning of that Article.

Intellectual and allied property rights


The problem that the European Court confronted in some of the cases dealing with national price-fixing
laws or laws conferring a statutory monopoly on a manufacturer or his concessionaire is the same as that
which the European Court confronted in cases involving intellectual and allied property rights and unfair
competition and passing-off rules. This is the question whether private parties may seek to rely on or to
abuse the rights conferred on them by national law in order to prevent parallel imports from other Member
States.

As Article 30 applies in such situations this could be construed as meaning that the behaviour of private
parties constitutes, of itself, a " measure" within the meaning of Article 30 or, in other words, that Article
30 imposes obligations on individuals. The behaviour would consist of the bringing of a court action in
order to enforce rights conferred by national law. Alternatively, this could be construed as meaning that the
Member State concerned has failed to fulfil its obligations pursuant to Article 30 by having on its statute

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books a law which makes possible such actions by private parties, or this could be construed as meaning
that the courts themselves would be in contravention of Article 30 when applying such laws in individual
cases that arise before them. The objection to the latter construction would be that the national judge has no
control over which cases come up before him, and he has no choice but to apply the law in such cases.
However, he would, of course, be obliged to take into account the direct effect of Article 30. The European
Court has ruled that individual court decisions which apply the law are also " measures" within the
meaning of Article 30.

Be that as it may, it is suggested that the fundamental problem is the rights conferred on private parties by
the national law concerned, without which they would be powerless to prevent imports. This is highlighted
by the fact that, within the context of intellectual property rights, it is the national law definition of such
concepts as " exhaustion of rights" that give rise to problems, as such definitions also delimit the scope of
the rights derived from them.

Likewise, if the trade mark laws of a Member State give a wide definition of the notion of " confusion,"
this would tend to hinder imports, since such goods would be particularly prone to being confused with
domestic goods. In his Opinion in Terrapin v. Terranova Advocate General Mayras expressed the view that
it would be open to the Commission to initiate Article 169 proceedings against a Member State with such a
law on its statute books. It is suggested that this is all the more so when Article 30 is interpreted in the light
of Article 5. Any settlement out of court of such a dispute could constitute an agreement for the purposes of
Article 85. The ultimate solution to the problem must await Community wide harmonisation or
uniformisation of the law relating to intellectual property rights.

The judgment of the Court in Terrapin does present problems for the approach suggested in the preceding
paragraphs, since it does appear to imply a subjective rather than an objective test in deciding whether the
exercise of intellectual property rights constitutes a " measure" within the meaning of Article 30 that is not
justified by Article 36; because it constitutes a disguised restriction on trade or an arbitrary discrimination: "
It is for the national court to ascertain in particular whether the rights in question are in fact exercised by the
proprietor with the same strictness whatever the national origin of any possible infringer."

It would appear that a private party is obliged under Article 30 to exercise his right in a non-discriminatory
way. It would also seem to suggest that there must be an intention on the part of the right-holder to
discriminate against importers, for the exercise of intellectual property rights to constitute a " measure"
within the meaning of Article 30, not justified by Article 36. It would therefore appear to be an attempt by
the European Court to introduce a less severe test than would be a straightforward objective test that
examined whether the exercise of such rights in fact discriminated against imported goods.

A subjective test is incompatible with the suggestion that the problem with the exercise of intellectual
property rights are the rights conferred by the national law rather than the behaviour of the right-holder
himself. The Terrapin judgment appears to go so far as to leave open the question whether it may not even
be necessary for the right-holder to exercise his right in the sense of taking a court action, but may infringe
Article 30 by threatening to do so: " the answer given below does not prejudice the question whether an
allegation by one undertaking as to the similarity of products originating in different Member States and
the risk of confusion of trade marks or commercial names legally protected in these States may perhaps
involve the application of Community law with regard in particular to the second sentence of Article 36 of
the Treaty."

If the mere threat of the exercise of these rights could be sufficient to constitute a " measure" within the
meaning of Article 30, then there could be no doubt but that Article 30 could impose obligations on private
parties. It is suggested that no judgment of the Court has so ruled nor is likely to do so.
The problem of the subjective test still remains. The only other judgments of the European Court which
implies such a subjective test in this field is Centrafarm v. American Home Products Corporation.
" In this connection it should be observed that it may be lawful for the manufacturer of a product to use in
different Member States different marks for the same product. Nonetheless it is possible for such a practice
to be followed by the proprietor of the marks as part of a system of marketing intended to partition the

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markets artificially. In such a case the prohibition by the proprietor of the unauthorised affixing of a mark
by a third party constitutes a disguised restriction on intra-Community trade for the purposes of the above-
mentioned provision. It is for the national court to settle in each particular case whether the proprietor has
followed the practice of using different marks for the same product for the purpose of partitioning the
markets."

In discussing this case, Advocate General Capotorti in his Opinion in Pfizer noted that the Court laid down
a subjective test of intention to divide markets for the exercise of rights to prevent a parallel importer from
repackaging goods to constitute a " disguised restriction of trade" within the meaning of Article 36. He
concluded that the reason for this was that, given the territorial nature of the national trade mark right,
where a manufacturer affixed different marks to the same goods when marketed in different Member States
there must of necessity be a partitioning of national markets. The Advocate General was of the view that to
condemn such a practice regardless of the intention of the right-holder would have been too harsh under the
circumstances and so it was necessary to introduce an additional subjective test in order to lessen the
severity of a purely objective one.

In its judgment in Hoffman-La Roche v. Centrafarm, the European Court ruled that, in the context of a
parallel importer repackaging goods without having to affix a different trade mark, since the same trade
mark was used by the manufacturer in both Member States, for a manufacturer to avail himself of the right
inherent in the trade mark to prevent repackaging might, of itself, constiute a " disguised restriction on
trade" within the meaning of Article 36. There was no suggestion in this case of a subjective test.
Accordingly, it is suggested that the fundamental problem here is the right, conferred by national law, to
prevent the repackaging of goods and not the acts of the private party concerned.

It is suggested that Advocate General Capotorti in his Opinion in Pfizer was correct when he distinguished
American Home Products Corporation Case on the facts and that, under normal circumstances, the test is an
objective one; namely, whether the exercise of rights conferred by national law constitutes a " measure"
within the meaning of Article 30, not justified by Article 36. Furthermore, it is suggested that doubt has
been cast on the Terrapin judgment by these subsequent cases in so far as it lays down a subjective test.

Alternatively, it is suggested that because of the territorial nature of intellectual property rights which
therefore present a particular problem to the principle of the free movement of goods between Member
States, these cases constitute a separate line of case law which is not of general application in other fields,
and so cannot be taken to imply that Article 30 imposes obligations on individuals.

It is suggested that the thread running through the case law of the European Court in relation to intellectual
property and allied rights is that if there is a restrictive agreement Article 85 will be relevant or if there is an
abuse of a dominant position, Article 86 will be relevant. Whether or not there are infringements of either
Article 85 or 86, Article 30 will also be relevant, if there is an attempt to partition national markets by the
exercise of those rights. It is suggested that the European Court has never ruled in any of these cases that
Article 30 imposes obligations on individuals, but rather that the exercise of those rights may be a "
measure" within the meaning of Article 30 as against a Member State, or where there is a restrictive
agreement or an abuse of a dominant position, as against a private party pursuant to Articles 85 and 86. It is
suggested that this distinction must not become blurred if the equilibrium of the Treaty is to be maintained.

The application of Article 30 to private parties


It is suggested that if Article 30 applies to the actions of private parties, then such an application will be
more extensive and strict in nature than the application of the said Article to the actions of Member States
(and public authorities), as private parties will not be able to derogate from the provisions of Article 30 to
the same extent as Member States, having recourse to all the provisions for derogation in Article 36 of the
Treaty. Article 36 provides: " The provisions of Articles 30 to 34 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 archaelogical value; or the protection of industrial and
commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary

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discrimination by or a disguised restriction on trade between Member States."

It is suggested that the above exceptions of public morality, public policy and public security could not be
used by private parties as these matters are of general and national interest and therefore properly the sole
concern of the Member States. Private parties could avail themselves of the exception concerning the
protection of industrial and commercial property, at least for the purpose of safeguarding rights that
constitute the specific subject matter of such property. In this regard see the cases of intellectual property
rights already cited in particular the Sterling Drug Case, Terrapin v. Terranova and Hoffman La Roche v.
Centrafarm, although these cases could be interpreted as meaning that private parties are merely effectively
enjoying the benefits of derogations availed of by the Member States in enacting the relevant national law.
Private parties may possibly avail of the remaining grounds of exceptions.

There is a further way in which the application of Article 30 to private parties will be more extensive than
its application to Member States. This relates to the mandatory requirements exceptions found in Cassis de
Dijon. In that case, the European Court stated:
" Obstacles to movement within the Community resulting from disparities between the national laws
relating to the marketing of the products in question must be accepted insofar as those provisions may be
recognised as being necessary in order to satisfy mandatory requirements relating in particular to the
effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions,
and the defence of the consumer."

Although the list of mandatory requirements found in that case is not exhaustive, of those specified, it
would seem that probably private parties could only ever satisfy the mandatory requirements relating to the
fairness of commercial transactions and the defence of the consumer (and then, only where the private party
concerned has attempted to avail himself of the disparity in the appropriate national laws).
There is nothing in the text of Article 30 to prevent the imposition of obligations under this Article, even
where a private party is acting unilaterally, or even in a non-legally binding way. However, such an
interpretation of the Article would have serious consequences. It is suggested, therefore, that in applying
Article 30 to the " measures" taken by private parties, the European Court should adopt the approach it has
taken in the cases where it was decided that articles of the Treaty which are addressed to Member States
may impose obligations on private parties. In one of these cases, Walrave, the European Court emphasised
that the obligations imposed by the Community law in issue, could only be imposed with regard to legal
relationships that were located within the Community and where the party on whom the obligation was
being imposed engaged in an economic activity.

Besides restricting the application of Article 30 to situations where there is a legal relationship and where an
economic activity is being pursued, there is a further possible restriction on the application of Article 30 to
private parties in the absence of implementing measures at Community or national level. This would be to
restrict the application to measures which amount to a " direct and overt discrimination," by adopting the
approach taken by the European Court in the Second Defrenne case. However, it is suggested that this
possible restriction has been ruled out by the judgment of the European Court in the Cassis de Dijon case,
which held that Article 30 applied to indistinctly applicable measures without the need for any
implementing legislation. However, Cassis de Dijon drew a distinction between distinctly applicable
measures and indistinctly applicable measures in that it established a less severe regime for the latter by
means of the mandatory requirements. This distinction need not be maintained were the European Court to
interpret Article 30 so as to impose obligations on private parties. It would be open to the European Court
not to follow the Cassis de Dijon case in conjunction with its judgment in the Irish Souvenirs case, since
those cases, in common with all the other cases on Article 30, only concerned " measures" taken by
Member States and not by private parties.

Therefore, the European Court could hold that recourse could be had to the mandatory requirements in
relation to distinctly applicable measures taken by private parties and not by Member States. It is suggested,
however, that it is unlikely that the European Court would ever extend the principle of mandatory
requirements to distinctly applicable measures merely to restrict the application of Article 30 to private
parties, as there are other means of restricting such an application without undermining the prohibitions of

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Article 30 and the principles laid down in the European Court's case law to date in relation thereto.

It is suggested that as Article 30's application to private parties is potentially wider in scope than its
application to Member States the said Article should only impose obligations on a private party vis vis
another party where:
(a) a legal relationship exists between the parties;
(b) the " measures" of the party intended to be bound by the provisions of Article 30, are legally binding
acts,
(c) the " measures" of the party intended to be bound by Article 30 are taken in pursuance of an economic
activity,
This would mean that Article 30 would only apply to the following types of measures:
(a) legally binding acts of Member States/public authorities,
(b) non-legally binding acts of Member States/public authorities,
(c) legally binding acts of private parties.
Non-legally binding measures taken by private parties would not constitute measures within the meaning of
Article 30.
In addition, a further limitation on the application of Article 30 to measures taken by private parties is
suggested. Article 30 should only be applied where no other Treaty provision is applicable. There should be
no parallel application of Article 30 and other Treaty provisions to the actions of private parties. It is
submitted that this limitation would preserve the scheme, purpose and balance of the Treaty, without
leaving a lacuna in Community law.

Conclusion
In conclusion, it is suggested that there are compelling policy considerations which should make the
European Court extremely reluctant to interpret Article 30 as imposing obligations on private parties. Even
if the European Court does so interpret Article 30, the Court would be likely to do so in a most restrictive
way. The European Court is likely to take a cautious rather than a teleological approach to the interpretation
of Article 30 given the present day political realities facing the Communities, and despite the fact that the
result is likely to be less communautaire than otherwise might be hoped for.
E.L. Rev. 1987, 12(3), 163-178
________________________________________
2008 Sweet & Maxwell and its Contributors

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The Substantive Law of the EU (2nd Edition)


The Four Freedoms
Catherine Barnard

Chapter 14 (Extracts)

FREEDOM TO PROVIDE AND RECEIVE SERVICES

INTRODUCTION
Articles 49 and 50 EC lay down the principle of freedom to provide services on a temporary basis by a
person established in one Member State to a recipient established in another. Article 50 defines services and
applies the principle of equal treatment to the service provider. Thus, the structure of Articles 49 and 50
does not differ very much from the Treaty provisions on workers and establishment. Yet for many years
services were seen as the poor relation to the other freedoms because Article 50 suggested that the services
provisions were subordinate to the other freedoms:

Services shall be considered to be 'services' within the meaning of this Treaty . . . insofar as they are not
governed by the provisions relating to freedom of movement for goods, capital and persons.

However, in reality growth in the economy has essentially been driven by services, which now account for
70 per cent of GDP and employment in the majority of the Member States and this has been reflected in the
case law: an increasing number of cases were decided under Articles 49 and 50 in the 1990s, leading the
Court to say in Fidium Finanz that Article 50 did not establish any order of priority between the freedom to
provide services and other freedoms; it merely related to the definition of the notion of services. The Court
will therefore look to see to what extent the exercise of those fundamental liberties is affected and whether
one Treaty provision prevails over another. In principle it will examine the dispute under the one primary
Treaty provision.

However, services pose intellectual and practical problems not experienced with the other freedoms.
Services covers a vast range of situations: service providers can move from one state to another to provide
professional services (as lawyers, accountants or architects) or various trades (the infamous Polish
plumber); services receivers might move between states in search of healthcare, tourism or education; and,
of increasing importance, neither provider nor receiver moves but the service itself does (over the web, such
as internet gambling). With this variety of situations it is difficult to have a 'one size fits all' model for
regulation. This helps to explain why adopting a single 'Services' Directive has presented intractable
problems (considered below).

For the Court, the variety of services situations has also posed problems. As Advocate General Jacobs
pointed out in Sger, where the provider of the service spends a substantial period of time in the Member
State where the service is provided (e.g., an architect supervising the execution of a large building project)
there is a fine line between services and establishment. There is also a potential overlap with the free
movement of goods, where the person providing the service transmits it in the form of a product (eg the
provider of an educational service posts a series of books and CDs). Nevertheless, this chapter will
nevertheless follow the structure of those on workers and establishment: it will consider who is entitled to
benefit from the services provisions and the rights they enjoy.

WHO CAN RELY ON ARTICLES 49 AND 50?


THE SCOPE OF ARTICLES 49 AND 50
The freedom to provide services
The first paragraph of Article 49 provides that:
restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals
of Member States who are established in a State of the Community other than that of the person for whom
the services are intended.
Article 49 therefore envisages the situation where the service provider established in State A holding the
nationality of one of the Member States (but not necessarily that of State A) provides services in State B

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and then returns to State A once the activity is completed.

Article 49 can be used to challenge rules laid down by both the host State (State B) and the home State
(State A) which obstruct the provision of services. Most cases concern barriers raised by the host State
(state B). For example, in Van Binsbergen a Dutch national challenged a Dutch rule requiring legal
representatives to be established in the Netherlands before they could represent a person in the Dutch
courts. Kortmann, who was representing Van Binsbergen's case before a Dutch social security court, moved
from the Netherlands to Belgium during the proceedings. He was then told that he could no longer argue his
client's case. The Court found that in principle the Dutch rule breached Article 49. Similarly, in
Commission v. France (performing artists) the Court said that French law which presumed artists had
'salaried status', resulting in them being subject to the social security scheme for employed workers
constituted a restriction on freedom to provide services. The Court said that the French system was 'likely
both to discourage the artists in question from providing their services in France and discourage French
organisers of events from engaging such artists'.

An increasing number of cases concern obstacles to the provision of services created by the home State,
State A. For example, in Ciola the Court said that an Austrian company which provided moorings for boats
on Lake Constance to boat owners resident in other Member States could rely on Article 49 against the
Austrian authorities when they limited the number of moorings available for boat owners resident abroad.
In Gourmet the Court went further and said that a national rule preventing undertakings established in State
A from offering advertising space in their publications to potential advertisers established in other Member
States could be challenged in State A as contrary to Article 49.

Perhaps the most remarkable decision in this line of case law is Carpenter where a Filipino national
married to a British husband successfully challenged British immigration rules which were going to result
in her deportation on the ground that this would be detrimental to Mr and Mrs Carpenters' family life and,
therefore, to the conditions under which Mr Carpenter exercised the freedom to provide services. Mr
Carpenter ran a business selling advertising space in medical and scientific journals. Although the business
was established in the UK, where the publishers of the journals were based, much of his work was
conducted with advertisers established in other Member States. The Court found that such services fell
within Article 49, 'both in so far as the provider travels for that purpose to the Member State of the recipient
and in so far as he provides cross-border services without leaving the Member State in which he is
established'. The Court said, '[t]hat freedom could not be fully effective if Mr Carpenter were to be deterred
from exercising it by obstacles raised in his country of origin to the entry and residence of his spouse'. Read
together, Ciola, Gourmet, and Carpenter not only demonstrate that service providers can invoke Articles 49
and 50 against their home States but they also show that the Court has gone a long way towards eroding the
principle that Community law does not apply to wholly internal situations in the field of services.

The freedom to travel to receive services


The text of Articles 49 and 50 is confined to giving rights for service providers only. However, if service
providers can travel to the State of the recipient, then logic suggests that the recipient should also be able to
travel to the State of the provider. The Council took this view in Directive 73/148 where Article 1(b)
required the abolition of restrictions on the movement and residence of 'nationals wishing to go to another
Member State as recipients of services'. Subsequently, the Court confirmed that the Treaty applied to this
situation in Luisi and Carbone. Two Italians were fined for taking more money out of Italy than the (then)
currency regulations permitted in order to go to other Member States as tourists and to receive medical
treatment. The Court said that the freedom to receive services from a provider established in another
Member State was the 'necessary corollary' of the freedom to provide services. Therefore the Court said that
tourists, individuals receiving medical treatment, and those travelling for the purpose of (private) education
or business should have the right of free movement without being obstructed by restrictions, even in relation
to payments. This decision paved the way for various attempts at medical tourism, with a view to gaining
access to treatment not available in the home State or, at least, gaining access more quickly (see Boxes 1
and 3).

Neither provider nor recipient travels

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The Court has also said that Articles 49 and 50 apply where neither the provider nor the recipient of the
service travels but the service itself moves (e.g., by telephone, fax, email, the internet, or cable). Two cases
illustrate this, Alpine Investments and Bond. In Alpine Investments the Dutch Ministry of Finance
prohibited a Dutch company from telephoning individuals in the Netherlands or in other Member States to
offer them various financial services (cold calling) unless they had the prior written consent of the clients.
The Court ruled that Article 49 covered services which the provider offered by telephone to potential
recipients established in other Member States without moving from the Member State in which the service
provider was established.
Bond demonstrates just how complex the case law on services can be. Dutch law prohibited the distribution
by cable of radio and television programmes transmitted from other Member States which contained
advertising aimed at the Dutch public (see fig. 14.1). The Court noted that the transmission of programmes
across frontiers involved two distinct, cross-frontier services: (1) the service provided by the cable
companies in the receiving State (the Netherlands) to the broadcasting companies in the transmitting State
(e.g., Luxembourg) by retransmitting programmes to their subscribers; and (2) the service provided by the
broadcasting companies in the transmitting State to advertisers in the receiving State (the Netherlands) in
broadcasting adverts aimed at potential customers in the Netherlands. The Court also noted that both
services were provided for remuneration. First, the cable network operators were paid in the form of fees
which they charged their subscribers for the service they provided to the broadcasters. The Court said that it
was irrelevant that the broadcasters did not generally pay the cable network operators for relaying their
programmes because Article 50 did not require the service to be paid for by those for whom it was
performed. Secondly, the broadcasters were paid by the advertisers for the service of broadcasting the
adverts.

PERFORMANCE OF A SERVICE FOR REMUNERATION


What activities constitute 'services'?
Having considered who can rely on the services provisions, the next question is what is a service? Article
50(1) provides that services shall be considered 'services' within the meaning of the Treaty where they are
'normally provided for remuneration'. Article 50 therefore has two element (1) services; and (2)
remuneration. We shall look at these in turn.
Article 50(1) gives examples of what constitutes a service, including activities of craftsmen and the
professions and activities of an industrial and commercial character. The case law has significantly
expanded on this (rather anachronistic) list. From Luisi and Carbone we have already seen how tourism and
medical, financial, business, and educational activities constitute services. We have also seen that the
transmission of a television signal and a signal by cable television constitutes a service. In other cases the
Court has said that the provision of people by an employment agency, debt-collection work, lotteries, bank
building loans, insurance, and sporting activities are all services. Given the breadth of the subject matter
included within the definition of services and the scope of the Treaty provisions, few (temporary) migrants
are excluded from its protection.

Services are 'normally provided for remuneration'


(a) The need for an economic link
The requirement in Article 50(1) that services are 'normally provided for remuneration' was introduced to
exclude gratuitous services from the scope of the Treaty. However, the Court has used this rule to exclude
services without a direct economic link between the provider and the recipient from the scope of the Treaty,
as SPUC v. Grogan demonstrates. Handbooks prepared and distributed by various Irish students' unions
included information about the availability of legal abortion in the UK and the identity and location of a
number of abortion clinics in the UK. The Society for the Protection of the Unborn Child (SPUC), an anti-
abortion group, argued that the distribution of such information contravened the Irish ban on abortion (see
Box 1) and so sought an injunction against Grogan, the President of the students' union, seeking to restrain
the distribution of the handbooks. In his defence Grogan argued that because he was providing information
about the availability of a service the injunction constituted an obstacle to the freedom to provide services
contrary to Article 49.
Setting the moral debate about abortion to one side, the Court agreed that abortion performed in accordance
with the law of a particular Member State did constitute a service within the meaning of Article 50.
However, it said that Community law did not apply to the provision of information about the identity and

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location of clinics in another Member State providing abortions because the information was not distributed
on behalf of an economic operator established in another Member State. The Court concluded that the
information constituted a manifestation of freedom of expression and of the freedom to impart and receive
information which is independent of the economic activity carried on by clinics in another Member State.
This conclusion enabled the Court to avoid deciding a case where EC fundamental economic rights
(freedom to travel to receive a service) appeared to collide with a fundamental tenet of a national
constitution (the right to life of the unborn). Eventually the European Court of Human Rights and the
Member States in an IGC were left to resolve some of the issues arising from the case (see Box 1).

This judgment has been much criticized because the Court's reasoning turned on the absence of an
economic link between the information provider (Grogan) and the service provider (the abortion clinics).
Had the abortion clinics paid the students' union--even a small sum--for providing the information the
outcome would have been different. And even on the facts as they stood there was an indirect economic link
in the relationship: although the clinics did not pay the students' union for distributing the information, the
pregnant women who received the information would have paid the abortion clinics in England and Wales
for the termination. According to (the admittedly more commercial case) Bond, that might have been
sufficient to bring the matter within the scope of Community law because the Court said that it was not
relevant that 'some of those services are not paid for by those for whom they are performed'.

With the benefit of hindsight, a better way of understanding the case might be to view it as a Graf-type
situation, where the effect of the injunction on Community law was too remote and so did not create a
sufficiently substantial impediment to access to the market. The Court said as much, noting that the link
between Grogan and the abortion clinics in other Member States was 'too tenuous for the prohibition on the
distribution of information to be regarded as a restriction' falling within Article 49.

The Advocate General in the case, Tesauro, adopted a different approach from the Court, albeit one that led
to the same outcome. He thought that the rule developed in the goods case, GB-INNO (where consumers'
freedom to shop in another Member State was compromised if they were deprived of access to advertising
in their own State), should apply to services. He considered that the Irish ban on abortion constituted a non-
discriminatory impediment to intra-Community trade in services, contrary to Article 49, but one that could
be justified under Article 46 on the ground of public policy because it related to 'a policy choice of a moral
and philosophical nature the assessment of which is a matter for the Member States'. He also considered
that the steps taken to pursue the objective of protecting the unborn life were proportionate and compatible
with fundamental human rights.

.......................
The temporary nature of services
The key factor distinguishing services from establishment is duration: while a person who stays in the host
State permanently is likely to be covered by the rules relating to establishment, a person staying there on a
'temporary' basis is likely only to be providing services. As the Court said in Gebhard, the temporary nature
of the activities has to be determined 'in the light, not only of the duration of the provision of the service but
also of its regularity, periodicity or continuity'. Nevertheless, service providers can still equip themselves
with some form of infrastructure in the host Member State (e.g., an office, chambers, or consulting rooms),
provided it is necessary to perform the services. In Schnitzer the Court recognised that there was no magic
formula for determining whether the rules on services or those on establishment applied: it had to be
decided by the national court on a case-by-case basis. However, in Trojani the Court made clear that an
activity carried out on a permanent basis, or at least without a foreseeable limit to its duration, would not
fall within the services provisions.
.
..................
RIGHTS OF ACCESS TO THE MARKET IN SERVICES IN OTHER MEMBER STATES
The previous section considered the right to enter the host state for the purposes of the provision or receipt
of services. The next section concentrates on access to the market in services.
Discriminatory measures
(a) Distinctly applicable measures

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Article 50 provides that 'the person providing the service may . . . temporarily pursue his activity in the
State where the service is provided, under the same conditions as are imposed by that State on its own
nationals'. It therefore prohibits discrimination on the ground of nationality against those wishing to
provide/receive services. The problem with applying the principle of non-discrimination is the choice of
comparator. The obvious candidate is a person providing equivalent services who is established in the host
State. However, establishment connotes more permanence than the provision of services; and the service
provider already has a place of establishment - in the home State. Recognizing this problem, the Court
noted in Sger that a:
Member State may not make the provision of services in its territory subject to compliance with all the
conditions required for establishment and thereby deprive of all practical effectiveness the provisions of the
Treaty whose object is, precisely, to guarantee the freedom to provide services.
Against this background, the Court spelt out the meaning of the principle of direct discrimination in Gouda:
10. . . . Article [49] of the Treaty entails, in the first place, the abolition of any discrimination against a
person providing services on the grounds of his nationality or the fact that he is established in a Member
State other than the one in which the service is provided.
11. . . . [N]ational rules which are not applicable to services without discrimination as regards their origin
are compatible with Community law only in so far as they can be brought within an express exemption,
such as that contained in Article 46 of the Treaty.
Thus, Article 49 prohibits (direct) discrimination not only on the grounds both of nationality as with the
other Treaty provisions but also on the grounds of the place of establishment (see fig 14.2). In respect of
discrimination on the ground of nationality, Gouda shows the Court reaffirming the orthodox position that
direct discrimination breaches Article 49 and can be saved only by reference to one of the express
derogations. FDC provides an example of such discrimination. Under Spanish law, film distributors would
be granted a licence to dub foreign (mainly US) films on condition that they also distributed a Spanish film
at the same time. The Court said that this rule breached Article 49 because it gave preferential treatment to
the producers of Spanish films over producers established in other Member States, since only Spanish
producers had a guarantee that their films would be distributed. The Spanish government then tried to
justify the rule for reasons of cultural policy, but this was rejected by the Court on the ground that cultural
policy was not one of the exhaustive list of derogations in Article 46.
In respect of discrimination based on the fact that the service provider is established in another Member
State, the Court said in Gouda that such discrimination could also be saved only by reference to the express
derogations found in Article 46. However, the case law is not consistent on this point. If the national rule is
drafted in terms of requiring a service provider to be established and/or to have a residence in the host State,
the mirror image of a rule discriminating against those established in another Member State, then the Court
treats this version of the rule as being indirectly discriminatory on the ground of nationality. Such
discrimination also breaches Article 49 but can be justified by the broader public interest requirements.
However, given the serious consequences for the provision of services of a national rule requiring
establishment, the Court will carefully scrutinize any justification offered. Therefore, in van Binsbergen the
Court recognized that a Dutch rule requiring representatives before tribunals to be resident in the
Netherlands could be justified on the ground of professional rules of conduct connected with the
administration of justice (relating to organization, qualifications, professional ethics, supervision, and
liability). However, it found the residence requirement to be disproportionate because the administration of
justice could be satisfactorily ensured by measures less restrictive on the freedom to provide services, such
as choosing an address for service.

(b) Indistinctly applicable measures


In Gouda the Court also confirmed that unjustified indistinctly applicable measures were prohibited by
Article 49. It said:
12. In the absence of harmonisation of the rules applicable to services, or even of a system of equivalence,
restrictions on the freedom guaranteed by the Treaty in this field may arise in the second place as a result
of the application of national rules which affect any person established in the national territory to persons
providing services established in the territory of another Member State who already have to satisfy the
requirements of that State's legislation.
13. . . . [S]uch restrictions come within the scope of Article [49] if the application of the national legislation
to foreign persons providing services is not justified by overriding reasons relating to the public interest or

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if the requirements embodied in that legislation are already satisfied by the rules imposed on those persons
in the Member State in which they are established.

In other words, those measures which impose an additional burden on foreign service providers (including
dual burden measures) breach Article 49 unless they can be justified by overriding reasons relating to the
public interest (see fig.14.2).
Commission v. Germany (the insurance cases) provides a good example of this approach. The Court found
that German rules requiring insurance companies wishing to provide insurance in Germany to be both
established and authorized in Germany breached Articles 49 and 50 because the rules increased costs for
those providing services in Germany, especially when the insurer conducted business there only
occasionally. These requirements therefore constituted 'the very negation of the fundamental freedom to
provide services. On the question of justification the Court noted the sensitivity of the insurance sector,
given the number of policy-holders affected, the difficulty facing anyone taking out insurance to judge the
financial viability of an insurance company, and the fact that insurance was based on future and often
unpredictable events. For these reasons the Court considered that the German restrictions on the freedom to
provide services could be justified on the ground of consumer protection and that those interests were not
adequately protected in the State of establishment. However, while it found that the authorization
requirement was proportionate it said the residence requirement was not.

(c) Non-discriminatory measures


The cases considered so far have all involved some form of discrimination. As with the early case law on
establishment, there was a period when the Court said that a national measure which was genuinely non-
discriminatory did not breach Article 49. For example, in Debauve it said that a national ban on transmitting
advertisements by cable television did not breach Articles 49 and 50
. . . if those rules are applied without distinction as regards the origin, whether national or foreign, of those
advertisements, the nationality of the person providing the services, or the place where he is established.
However, as the Court's case law increasingly took market access into account, it recognized that non-
discriminatory measures did in principle breach Article 49 if they were liable to prevent or substantially
impede access to the market. We saw this in Alpine Investments, considered in Chapter 11, and again in
Schindler. The Schindlers were agents of SKL, a public body responsible for organizing lotteries on behalf
of four Lnder in Germany. They sent advertisements and application forms to the UK inviting people to
participate in the German lottery, and were prosecuted for breaching the (then) national law banning
lotteries. The Court said that the national legislation prohibiting the holding of large lotteries was a non-
discriminatory obstacle to the freedom to provide services contrary to Article 49. However, the Court said
that, bearing in mind the moral, religious, and cultural aspects of gambling, the restriction could be justified
on the ground of preventing the lottery from becoming 'a source of private profit', as well as avoiding 'the
high risk of crime or fraud' and 'the incitement to spend which may have damaging individual and social
consequences'. More generally, the Court talked of protecting players and maintaining order in society.

However, as we saw in Chapter 11, where the measure is non-discriminatory but the affect on market
access is slight, then there is no breach of Article 49. Therefore, in Viacom the Court found that a
municipal tax on outdoor advertising, applied on a non-discriminatory basis and fixed at a level considered
'modest in relation to the value of the services provided' then there was no breach of Article 49 since 'the
levying of such a tax is not on any view liable to prohibit, impede or otherwise make less attractive the
provision of advertising services to be carried out in the territory of the municipalities concerned'. Thus, the
Court suggested that the measure was capable of affecting free movement of services but not sufficiently to
warrant the application of the Treaty. In Mobistar the Court showed signs of going back to its original
approach to non-discrimination in Debauve. It found that a municipal tax on transmission pylons, masts and
antennae for GSM, which applied 'without distinction to national providers of services and to those of other
Member States and affects in the same way the provision of services within one Member State and the
provision of services between Member States' did not breach Article 49.

It is, however, striking in these cases that the Court did not try to introduce an equivalent to the goods'
certain selling arrangements. Advocate General Stix-Hackl had already counselled against any such
development in Omega. She said:

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transposition of the distinction made in the Keck and Mithouard case to freedom to provide services is
unpersuasive because, where there are sufficient international implications, a rule on arrangements for the
provision of any service - irrespective of location - must constitute a restriction of relevance to Community
law simply because of the incorporeal nature of services, without any distinction at all being permissible in
this respect between rules relating to arrangements for the provision of services and rules that relate
directly to the services themselves.

Commission v. Italy lends support to the Advocate General's view. Belgian law prevented vendors from
making a 'linked offer', through its customer loyalty programme, of products and services dissimilar to
those principally sold. While the Court dismissed the Article 226 application on the grounds that the
Commission had failed to establish a breach of Article 49, at no stage did the Court suggest that Article 49
would not apply because the national rule affected selling arrangements. That said, in the Preamble to the
Services Directive, the legislature appears to be trying to draw an equivalent distinction between those rules
which do fall within the scope of the Directive and those which do not.
It says:
This Directive applies only to requirements which affect the access to, or the exercise of, a service activity.
Therefore, it does not apply to requirements, such as road traffic rules, rules concerning the development or
use of land, town and country planning, building standards as well as administrative penalties imposed for
non-compliance with such rules which do not specifically regulate or specifically affect the service activity
but have to be respected by providers in the course of carrying out their economic activity in the same way
as by individuals acting in their private capacity.
The Directive does not, however, make clear whether the market access test or a test based on
discrimination should apply to restrictions on interstate provision of services. Certainly, the key provision
(Article 16 headed 'Freedom to provide services') makes no reference to any quantitative or qualitative
threshold before Article 16 is triggered.

Measures 'liable to prohibit or otherwise impede' the activities of a service provider


Despite the recent developments in cases such as Viacom II and Mobistar, the basic thrust of the services
case law has been in the direction of the market access test. The shift towards a market access test had
already been signalled by the Court in the early case of Van Binsbergen where it talked of xxxx and
confirmed in its seminal decision of Sger where it said that Article 49 requires:
not only the elimination of all discrimination against a person providing services on the grounds of his
nationality but also the abolition of any restriction even if it applies without distinction to national
providers of services and to those of other Member States, when it is liable to prohibit or otherwise impede
the activities of a provider of services established in another Member State where he lawfully provides
similar services.

Sger concerned a German law requiring those monitoring patents to have a licence. This licence was
granted on condition that the individual held certain professional qualifications (e.g., as a lawyer or patent
agent). Dennemayer, a British company, monitored patents on behalf of clients, particularly in Germany,
and informed them when the fees for renewing the patents became due. The commission charged by
Dennemayer was lower than that charged by German patent agents who complained that Dennemeyer was
trading without a licence; Dennemayer argued that the German law breached Article 49. The Court found
that the German rule prevented undertakings established abroad from providing services to patent holders
established in the national territory, and prevented patent holders from freely choosing the manner in which
their patents were to be monitored. The rule therefore breached
Article 49 unless it could be justified (see fig. 14.2).

The Sger formulation, which the Court has applied in most of the recent services cases, avoids the
intellectual somersaults involved in deciding whether particular national rules are indistinctly applicable or
non-discriminatory (direct discrimination is still usually treated separately as fig. 14.2 shows although, as
we shall see, even here the position is showing signs of changing). This Sger approach can be seen in
Commission v. Italy, another case about patent agents, where Italian law required patent agents established
in another Member State to be entered on the Italian register of patent agents before providing a service
there. Registration was conditional on having a residence or place of business in Italy. Instead of

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considering whether registration and residence requirements discriminated in some way, due to the
additional expense and administrative and economic burdens for businesses established in another Member
State, the Court merely observed that the Italian rules constituted 'a restriction within the meaning of Article
49'. The focus then shifted to questions of justification and proportionality. Authorisation requirements, like
the registration requirement in Commission v. Italy, also constitute a restriction on the freedom to provide
services. Therefore, in Commission v. Netherlands the Court said that Dutch law requiring private security
firms, detective agencies and their managers to be authorised breached Article 49. These cases also
demonstrate the simplification of the Sger formulation: it is sufficient that the measure constitute a
'restriction' on the free movement of services to be caught by Article 49, thereby reflecting the opening
language of Article 49.

These are not the only restrictions prohibited by Article 49. In Anomar the Court said that Portuguese rules
restricting the right to operate games of chance or gambling solely to casinos in permanent or temporary
gaming areas breached Article 49, as did the Greek prohibition on the installation of computer games in
venues other than casinos in Commission v. Greece. In Commission v. Belgium (tax fraud) the Court said
that a Belgian rule requiring a contractor to withhold for the Belgian authorities a sum equivalent to 15% of
the price charged by an unregistered service provider constituted a restriction on the freedom to provide
services because it effectively deprived the provider of the ability immediately to have at its disposal a part
of its income which it could recover only at the conclusion of a specific administrative procedure.

Advertising restrictions also breach Article 49. So, in Gourmet the Court said that a measure such as the
prohibition on advertising, even if non-discriminatory, had a particular effect on the cross-border supply of
advertising of advertising space, given the international nature of the advertising market. It therefore
constituted a restriction on the freedom to provide services. Similarly, in Bacardi the Court found the
French 'loi Evin' prohibiting direct and indirect television advertising of certain alcoholic drinks breached
Article 49 because (1) the owners of the advertising hoardings had to refuse any advertising for alcoholic
beverages if the sporting event was likely to be retransmitted in France; (2) the French rules impeded the
provision of broadcasting services for television programmes because French broadcasters had to refuse all
retransmission of sporting events in which hoardings bearing advertising for alcoholic beverages marketed
in France might be visible; and (3) the organisers of sporting events taking place outside France could not
sell the retransmission rights to French broadcasters if the transmission of the television programmes of
such events was likely to contain indirect television advertising for those alcoholic beverages. The Court
said that such restrictions could, however, be justified on the grounds of public health and the steps taken
were proportionate.

Justification
(a) Approaches to Justification
In Sger the Court said that:
the freedom to provide services may be limited only by rules which are justified by imperative reasons
relating to the public interest and which apply to all persons or undertakings pursuing an activity in the
State of destination, in so far as that interest is not protected by the rules to which the person providing the
services is subject in the Member State in which he is established.

In Gouda the Court listed a number of examples of imperative reasons in the public interest, including
consumer protection and worker protection. We shall considered these public interest grounds in more
detail in Chapter 16. For now it is sufficient to note that the Court has applied these public interest
requirements with a considerable degree of flexibility. In some cases it is prepared to engage in a detailed
scrutiny of the justifications advanced by the Member States, as the broadcasting cases considered below
indicate (see Box 2), and/or in the question of proportionality. In other cases, particularly those touching
upon sensitive socio-cultural issues, it has afforded Member States a considerable margin of appreciation.
Schindler is the prime example of this. There the Court accepted without question all the justifications
advanced by the UK government about the social ills of gambling, despite the fact that the Court knew that
the National Lotteries Act 1993 had gone through Parliament permitting the creation of the very type of
lottery which the UK had so forthrightly condemned in Schindler.

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The Court's extreme leniency in Schindler was not repeated in Zenatti. The case concerned an Italian law
prohibiting the taking of bets on sporting competitions except through specially appointed bodies which
then used the funds to promote sporting activities, especially in deprived areas. The Court said that such a
limitation on who could take bets was acceptable only if, from the outset, it reflected a concern to bring
about a genuine diminution in gambling opportunities and if the financing of social activities constituted
only an incidental beneficial consequence and not the real justification for the restrictive policy. If the real
aim of the limitation was to fund social activities, that motive could not in itself be regarded as an objective
justification for restrictions on the freedom to provide services.

(b) Home State Control


As Sger made clear, when considering whether the host State's action could be justified, the national court
had to take into account the action already taken by the home State to protect that particular interest (see
fig.14.2). This is a reflection of the principle of home state control or country of origin. The importance of
this principle can be seen in Guiot. The Court said that a national law requiring an employer providing a
service in the host Member State to pay employer's contributions to the social security fund of the host
Member State, in addition to the contributions paid to the social security fund in the a state in which the
employer was established, placed an additional financial burden on the employer which was liable to
restrict the freedom to provide services. It then considered whether the national legislation could be justified
by the public interest relating to the 'social protection of workers in the construction industry'. Then,
reflecting the country of origin principle, the Court said that if the workers enjoyed the same protection, or
essentially similar protection, by virtue of employer's contributions already paid by the employer in the
Member State of establishment, which was a matter for the national court to decide, then the justification
was not made out.

The requirement that the host State take account of the measures put in place by the home State to protect
the relevant interest is important because, in respect of services, the primary regulator is the home State and
the host State can impose only supplementary controls. In this regard, the services case law follows that on
goods where, in cases such as Biologische Producten, the Court ruled that the host State could require the
product to undergo a fresh examination but had to take into account the results of tests already carried out
by the State of origin. By contrast, the rule does not apply to Articles 39 and 43 on the free movement of
workers and establishment where the primary regulator is the host State and so the controls imposed by the
home State are of little relevance. The country of origin principle lay at the heart of the debate about the
Services Directive which is considered below.

Proportionality
Finally, the Court requires that the steps taken to protect the public interest must be proportionate, i.e.,
appropriate for securing the attainment of the objective which they pursue and must not go beyond what is
necessary in order to attain it. Once again it is possible to see how the intensity of the Court's review varies
according to the sensitivity of the subject matter. Where national rules do not raise politically difficult
issues, the Court's scrutiny tends to be quite intrusive. For example, in Sger the Court found that the
licensing requirements for those monitoring patents exceeded what was necessary to protect the public
interest because the services were straightforward (alerting clients when fees were due), the service provider
gave no advice to the clients (who were themselves experts in the field), and there was no risk to clients if
those monitoring the patents failed in their task (the German patent office itself also sent out official
reminders).

Similarly, in the Tourist Guide cases the Court found that while the requirement that tourist guides possess
a licence could in principle be justified by 'the general interest in consumer protection and in the
conservation of the national historical and artistic heritage', such a requirement was disproportionate. The
Court noted that the rule had the effect of reducing the number of tourist guides, leading tour operators to
use local guides, with the drawback that the tourists 'do not have a guide who is familiar with their
language, their interests and their specific expectations'. The Court added that the profitable operation of
such group tours depended on the commercial reputation of the operator, who faced competitive pressure
from other tour companies. These factors compelled companies to be selective in employing tourist guides
and to exercise some control over the quality of their services.

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The Court also offered a careful analysis of the proportionality of the withholding obligation in
Commission v. Belgium (tax liability As regards the withholding obligation, the Court said that a less
restrictive means than that of depriving service providers of a not inconsiderable portion of their earnings
would have been to put in place a system, based on an exchange of information between principals and
contractors, their contracting partners and the Belgian tax authorities, allowing for example, principals and
contractors to find out about any tax debts of their contracting partners or introducing an obligation to
inform the Belgian tax authorities of any contract concluded with unregistered contracting partners or any
payment made to them.

Where cases do involve more politically sensitive issues the Court can adopt a much lighter touch. For
example, in Schindler the Court did not consider proportionality at all; in Lr it did examine
proportionality but its approach was remarkably hands-off. The case concerned a Finnish law granting
exclusive rights to run the operation of slot machines to a public body, with the revenue raised going into
the public purse. This rule had the effect of preventing a British company from operating its slot machines
in Finland. The Court said that the Finnish legislation involved no discrimination on grounds of nationality
and applied without distinction to operators who might be interested in that activity, whether they were
established in Finland or in another Member State. However, it said that while such legislation constituted
an impediment to freedom to provide services because it directly or indirectly prevented operators in other
Member States from making slot machines available to the public, it could be justified on the grounds laid
down in Schindler, and the steps taken were proportionate. The Court said that it was for the Member States
to decide whether to prohibit the operation of such machines or only to restrict them.

This judicial deference towards the Member States may partly be explained by the fact that, in these cases
involving an activity which is legal in one State but illegal in another, the Court is wary of imposing the
values of the majority of the States (where lotteries are lawful, albeit highly regulated) on the minority
(where lotteries are unlawful). Another explanation is that these cases concern the situation of a service
which moves but the provider and recipient do not. In these situations traditional frontier controls imposed
on migrants to protect the interests of the State do not function, and for this reason the Court may be more
willing to allow Member States greater scope to protect their own interests. Only if the value judgements of
the Member State appear manifestly unfounded will the measure breach EC law. This might help to explain
why, in Gambelli, the Court indicated that an Italian law imposing criminal penalties, including
imprisonment, on private individuals in Italy who collaborated over the web with a British bookmaker to
collect bets, an activity normally reserved to the Italian state monopoly CONI, was disproportionate. The
Court said the national court had to consider whether the criminal penalty was disproportionate in the light
of the fact that involvement in betting was encouraged in the context of games organised by licensed
national bodies and that the British supplier was already regulated in the UK.

A week later the Court ruled in Lindman that a Finnish law which taxed lottery wins when the lottery took
place in another Member State but not when they occurred in Finland was not appropriate to achieve the
objective of preventing wrongdoing and fraud, the reduction of social damage caused by gaming, the
financing of activities in the public interest and ensuring legal certainty. The Court said that the file
transmitted by the referring court disclosed 'no statistical or other evidence which enables any conclusion as
to the gravity of the risks connected to playing games of chance or, a fortiori, the existence of a particular
causal relationship between such risks and participation by nationals in lotteries organised in other
Member States'. These lottery cases also demonstrate a further noteworthy feature: even though the national
law was apparently directly discriminatory, the Court allowed the Member States to justify the
discrimination by reference to the broad public interest requirements laid down in Schindler, not just the
express derogations, as the orthodox jurisprudence might suggest (see fig. 14.3).

Box 2 BROADCASTING, ADVERTISING, AND THE FREEDOM TO PROVIDE SERVICES


The application of the rules on justification and proportionality is clearly demonstrated by the case law on
the compatibility with Article 49 of restrictive (primarily Dutch and Belgian) national laws on regulating
broadcasting, retransmission of programmes, and advertising. For example, in Bond the Court found that a
Dutch law, the Kabelregeling, banning advertising intended specially for the Dutch public, breached Article

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49 (see fig. 14.1). Even if it could be justified on the ground of maintaining 'the non-commercial and
thereby pluralistic nature' of the Dutch broadcasting system, the Court found that the ban was not
proportionate because there were less restrictive ways of achieving the objective by, for example,
prohibiting the advertising of certain products or on certain days and limiting the duration and frequency of
advertisements.
The successor regulations to the Kabelregeling, the Mediawet, were also condemned by the Court in
Gouda. Under the Mediawet only those broadcasters having a non-commercial structure could advertise.
The law also imposed the limits on advertising which the Court had indicated in Bond would be legitimate
(concerning quantity, placement, and timing). The requirement relating to non-commercial structure was
justified by the Dutch government on the ground of cultural policy. This argument was rejected by the
Court because it thought that there was no connection between cultural policy and the structure of foreign
broadcasting bodies. By contrast, the Court thought that the condition relating to advertising could in
principle be justified on the grounds of consumer protection and cultural policy. However, it found on the
facts that the rules did operate to limit competition in advertising and so breached Article 49.

The Mediawet also required national broadcasting bodies to use the technical resources of the Dutch public
studio to make 75 per cent of their programmes. In Commission v. Netherlands the Court found that
because this rule prevented or limited national broadcasters from using the services of undertakings
established in other Member States it breached Article 49. Once again the Dutch government relied on a
justification based on cultural policy, and again the Court rejected it on the ground of proportionality: the
measure was not suitable to achieve the objective.
The result of these cases was to favour the right of the broadcaster in the transmitting State to provide
services. In this respect the case law on broadcasting fits within the general principle laid down in Sger of
home State control: the home State primarily regulates the activities of the broadcaster transmitting from its
territory. The host (receiving) State can impose controls on broadcasters from other Member States but such
controls are supplementary. And, as Bond, Gouda, and Commisison v. Netherlands demonstrate, in practice
the Court is unwilling to accept any interference with the broadcaster's freedom to provide service by the
host State. The Court's approach is reflected in Directive 89/552, the so-called Television without Frontiers
Directive, which is intended to secure the freedom to provide television services. It is based on the
'transmitting State' principle which means, according to De Agostini, that the transmitting State has the
primary responsibility for ensuring that broadcasters established in that State comply with national rules co-
ordinated by the Directive on the 'organisation and financing of broadcasts and the content of programmes'.

The corollary of the transmitting State principle is that the receiving State must allow programmes received
from the transmitting State to be shown in its territory without restriction. Therefore, the principle of mutual
recognition underlies Directive 89/552: a television programme legitimately broadcast in one Member State
can be rebroadcast in another without restriction. Even if the receiving Member State considers that the
transmitting State is not exercising proper control, the receiving State cannot unilaterally adopt corrective or
protective measures but must bring infringement proceedings under Article 227 or request the Commission
to take action under Article 226.

Article 2a(2) lists the circumstances in which the receiving State can derogate from the rule of home State
control. It provides that if a television broadcast comes from another Member State which 'manifestly,
seriously and gravely' infringes Article 22 concerning programmes which might seriously impair the
physical, mental, or moral development of minors and/or Article 22a concerning broadcasts containing
'incitement to hatred on grounds of race, sex, religion or nationality' and the broadcaster has infringed
Article 22 and/or Article 22a on at least two occasions in the previous twelve months then the Member
State must notify the broadcaster and the Commission. If attempts at seeking an amicable settlement fail
then the receiving State can provisionally suspend retransmission until the Commission determines whether
the suspension is compatible with Community law. The UK has made more use of this provision than any
other Member State. In particular, it banned reception of the Red Hot Dutch channel, broadcast initially via
satellite from the Netherlands and then from Denmark. The UK also relied on it to suspend the transmission
of Eurotica Rendez-Vous by a Danish satellite television company. The Commission upheld the UK's
decision as being compatible with the Directive.

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....
Having concentrated on cases concerning broadcasting we turn now to advertising. Although the basic
rules are the same (i.e., the transmitting State principle still applies), the advertising provisions of Directive
89/552 are more prescriptive than those on broadcasting. While the broadcasting provisions say little about
content or quality (leaving that for the Member State where the broadcaster is established), the Directive
does lay down a number of more detailed rules concerning the content of television advertising, prescribing
the conditions under which advertisements can be broadcast, prohibiting the use of certain techniques, and
limiting the amount of broadcast time which can be devoted to advertising.

The provisions concerning both advertising and broadcasting are minimum requirements which, according
to Article 3(1), means that transmitting States can 'require television broadcasters under their jurisdiction to
comply with more detailed or stricter rules in the areas covered by the Directive'. This is, however, subject
to the free movement clause contained in Article 2a(1), which provides that Member States must not
'restrict retransmissions on their territory of television broadcasts from other Member States for reasons
which fall within the fields coordinated by this Directive'.

Therefore in Leclerc-Siplec a French government ban on advertising in the distribution sector was
compatible with Article 3(1) of the Directive, since it was applied by the transmitting State to broadcasters
under its jurisdiction and did not affect the freedom of broadcasters established in other Member States,
which met the minimum requirements laid down by the Directive, from providing services. Although a ban
seems inconsistent with the Directive's express aim of facilitating the provision of services, France could
legitimately impose such a rule because the Directive lays down only minimum standards. Apart from the
free movement clause, the only ceiling constraining Member States when enacting the stricter requirements
is compatibility with the Treaty provisions, in particular Articles 28 and 49. On the facts, the Court found
that the French rules did not breach Article 28 because they were classified as certain selling arrangements
and so, following the decision in Keck, fell outside Article 28.

The relationship between Directive 89/552 and the Treaty provisions was explored further in De Agostini,
this time concerning the rights of the receiving State to limit the activities of an advertiser. De Agostini, a
Swedish company belonging to an Italian group, advertised a children's magazine about dinosaurs on TV3
(broadcast to Scandinavia by satellite from the UK) and on TV4 (a Swedish television station). This
magazine was printed in Italy in a number of languages and it formed part of a series. With each issue came
one part of a model dinosaur: children buying the whole series would have collected all parts of the model.
The consumer ombudsman argued that this campaign contravened the Swedish ban on advertising aimed at
children. The case was joined with TV Shop. TV Shop, which specialized in teleshopping, broadcast
'infomercials' for Body de Lite skincare products and the detergent Astonish on TV3 and on a Swedish
home-shopping channel. This time the consumer ombudsman sought to restrain misleading advertising for
these products.
The logic of Directive 89/552 suggests that, with the exception of the derogations laid down in the
Directive, the receiving State (Sweden) could not limit the advertisements broadcast by an out-of-state
service provider. The Court disagreed. It noted that the Directive, while co-ordinating national provisions
on television advertising and sponsorship, did so only partially. It continued that while the Directive
provided that Member States were to ensure freedom of reception and were not to impede retransmission on
grounds relating to television advertising and sponsorship (the areas which had been harmonized), 'it does
not have the effect of excluding completely and automatically the application of rules other than those
specifically concerning the broadcasting and distribution of programmes' (the area which had not been
harmonized). Therefore, the receiving State could apply its general rules on misleading advertising to
television advertisements broadcast from other Member States in order to ensure the overriding interest of
consumer protection.

They could do this provided that those national rules did not involve secondary control of television
broadcasts (i.e., in addition to the control which the broadcasting Member State had to carry out) and did
not prevent retransmission of television broadcasts coming from other Member States. In response to
arguments from the Commission and De Agostini that this ruling would undermine the transmitting State
principle, the Court pointed to Directive 84/450 on misleading advertising which would be 'robbed of its

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substance in the field of television advertising if the receiving Member State were deprived of all possibility
of adopting measures against an advertiser'.

The Court then considered whether the Swedish rules breached Article 28. As we saw in Chapter 7, the
Court adopted a more sophisticated analysis to its own Keck jurisprudence than it had done in Leclerc-
Siplec. While recognizing that a prohibition on television advertising aimed at children constituted a certain
selling arrangement, it found that an outright ban might have a greater impact on products from other
Member States (see fig.7.2). The ban therefore breached Article 28 and needed to be justified under either a
Cassis mandatory requirement or an Article 30 derogation. The Court reached a similar conclusion in
respect of Article 49 but by a different route. There was no mention of certain selling arrangements (it
seems clear that this formulation is confined to goods). Instead, by applying Bond and Gouda, it found that
the national rules prohibiting advertising constituted a restriction on the freedom to provide services, but
that a receiving State (Sweden) could take measures against an advertiser in relation to television
advertising, provided that those provisions were necessary for meeting overriding requirements of general
public importance or one of the Article 46 derogations, and that the steps taken were proportionate. The
Court then returned to the Directive and its application to the ban on advertising aimed at children. It said
that, given the provisions specifically devoted to the protection of minors in Articles 16 and 22 of the
Directive, Sweden could no longer apply rules specifically designed to control the content of advertising
with regard minors. In this field, at least, harmonization is total and the principle of transmitting State
control reasserted.

Leaving aside the ruling on the compatibility with the Directive of a ban on advertising aimed at children,
De Agostini produces a paradoxical result: the application of two harmonization Directives and two
fundamental Treaty provisions gives the green light to the Member States to hinder free movement in
advertising. Any such restrictions on advertising may infringe the freedom of expression under Article
10(1) ECHR but, as the Court pointed out in RTL Television, a case on the itnerpretaiton of the TWF
Directive, can be justified under Article 10(2). The restrictions pursue a legitimate aim involving the
protection of consumers as television viewers (citing Gouda), as well as their interest in having access to
quality programmes, and the seps taken wer proportionate. It seems that the case law before and after the
Directive is less different than would at first appear.

THE EXERCISE OF RIGHTS TO PROVIDE OR RECEIVE A SERVICE


Discriminatory measures
Having looked at rules which prevent or impede initial access to the services market in another Member
State we turn now to consider rules which impede the actual carrying out or the receipt of a service in the
host State. In the absence of a provision equivalent to Article 7(1) and (2) of Regulation 1612/68 on
workers, the Court has read Article 49 so as to require equal treatment in respect of the terms and conditions
on which the service is provided or received and equal treatment in respect of social and tax advantages.
This can be seen in Cowan which concerned a British tourist attacked and robbed outside a mtro station in
Paris. He was refused criminal injuries compensation because he was neither a French national nor was he
resident in France. The Court said that when Community law guarantees a person the right to go to another
Member State, the corollary of the right is that the individual be protected from harm on the same basis as
nationals and persons residing there. Consequently, the principle of non-discrimination applied to recipients
of services, even where the compensation was financed by the treasury.

For similar reasons, in Commission v. Spain the Court condemned a Spanish law providing for free
admission to State museums for Spanish nationals and foreigners resident in Spain but not to tourists. The
Commission pointed out that since visiting museums encourages tourists, as recipients of services, to go to
another Member State, there was a close link between freedom of movement and museum admission. The
Court found that the Spanish rules breached both Articles 12 and 49.

The cases considered so far have concerned discrimination in respect of social advantages. De Coster
provides an example of indirect discrimination in respect of taxation. A Belgian tax on satellite dishes
encouraged subscribers to receive their programmes by cable instead (no tax was levied on cable). Because
Belgian distributors had unlimited access to cable distribution, the Court found that this rule had a particular

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impact on broadcasters established in other Member States which could be received only by satellite. The
tax therefore breached Article 49 and could not be justified.

Measures liable to prohibit or impede the exercise of the freedom to provide or receive services
As we have seen elsewhere, the Court is moving away from the discrimination model, and this applies
equally to rules concerning the exercise of the provision of services. For example, in Sea-Land Service the
Dutch authorities levied a tariff to cover the cost of navigation services charged on sea-going vessels long
but not on inland waterway vessels. Sea-Land argued that the tariff was indirectly discriminatory because
the majority of those operating inland waterway vessels were Dutch. The Court found that while there was
no discrimination because the two means of transport were not comparable, the tariff imposed on sea-going
vessels was liable to 'impede or render less attractive' the provision of those services and so breached
Article 49. However, it ruled that the tariff could be justified on the ground of public security provided there
was a correlation between the amount of the tariff and the cost of the service from which the sea-going
vessels benefit. However, some doubt has been cast on this line of case law by the decisions in Viacom and
Weigel which suggest a return to a non-discriminaiton approach (see fig 11.2).
Most of the cases considered so far concern national rules which are intended to discourage service
providers of other Member States from exercising their rights in the host State. Yet, there is also a group of
cases concerning national rules intended to discourage potential national service recipients from going to
another Member State to receive that service. When considering the validity of these rules the Court
sometimes uses the language of discrimination. For example, in Bent Vestergaard Danish tax law
distinguished between professional training courses held at tourist resorts in other Member States and those
taking place in Denmark. While Danish law presumed that courses held abroad were an excuse for a
holiday (and so the costs were not tax-deductable), it did not apply the same presumption to courses held in
Denmark. The Court found that such a rule involved an unjustifiable difference in treatment based on the
place where the service was provided and therefore breached Article 49. Similarly, in Laboratoires Fournier
the Court said that French law restricting the benefit of a tax credit only to research carried out in France,
differentiated according to the place where the services are provided, contrary to Article 49.

In other cases the Court says that the national rules make the provision of services between Member States
more difficult than the provision of services within just one Member State also breach Article 49 (see the
so-called healthcare tourism cases discussed in Box 3). While the language used by the Court carries
overtones of direct discrimination the Court in fact seems to regard such rules as impeding (or constituting
an obstacle to) the exercise of the freedom to receive services because the Court allows the Member State to
justify the national rule on the grounds of public interest and not just by the express derogations laid down
in the Treaty.
.................
ABUSE OF RIGHTS
Although the Court has done much to encourage the provision of services, it is wary of the services rules
being abused by individuals who deliberately establish themselves in State A in order to provide services to
customers in State B, thereby avoiding State B's more restrictive rules. It therefore said in Commission v.
Germany (Insurance Cases) that a host State (State B) was allowed to take measures to prevent a person
from directing its activity entirely or principally towards its territory, but doing so by services rather than
establishment, simply to avoid the professional rules of conduct which would be applicable to him had he
been established in State B. The Court said that such a situation would be subject to judicial control under
the provisions on establishment rather than on services.

As we saw in Box 2 above, the Netherlands, with its restrictive broadcasting laws, has been particularly
affected by attempts to avoid its rules, with Dutch companies setting up commercial stations in
Luxembourg and, relying on the services provisions, using the Luxembourg station to broadcast
programmes back to the Netherlands. The Dutch government passed a law prohibiting broadcasting
organizations established in the Netherlands from investing in a broadcasting company established in
another Member State which provided services directed towards the Netherlands. In Veronica the Court
said that such a rule did not breach Article 49 where it had the specific effect of ensuring that those
organizations could not improperly evade the obligations deriving from the national legislation concerning
the pluralistic and non-commercial content of those programmes. It reached a similar conclusion in TV10.

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However, in VT4 the Court appeared to backtrack. VT4, a broadcaster established in the UK, made
programmes aimed at the Flemish public and transmitted the signals from the UK to Belgium. The Belgian
authorities thought VT4 had been established in the UK merely to circumvent the application of Flemish
law. The Court said that just because all the broadcasts and advertisements were aimed at the Flemish
public this did not mean that VT4 could not be regarded as being established in the UK. Without referring
to either Veronica or TV10 it continued that '[t]he Treaty does not prohibit an undertaking from exercising
the freedom to provide services if it does not offer services in the Member State in which it is established'.
Therefore the pendulum seems to have swung back towards the Court's original stance supporting the
provision of services. As Centros subsequently confirmed, there is nothing abusive about simply taking
advantage of the Treaty provisions on free movement.
.....
CONCLUSIONS
The case law discussed in this chapter helps to demonstrate the problems posed by the sheer variety, nature,
and duration of services. Another facet of the problem concerns the broad matrix of interests at stake: the
interests of the State of establishment and those of the State where the service is provided, both of which
may (or may not) want to encourage the export and import of the service; the interests of the potential
providers and recipients of the service, especially when the recipient travels to receive a service (e.g., tourist
and healthcare services), and the interests of those who might lose out when chasing scarce resources (e.g.,
those still on waiting lists). Given such a spectrum of interests, national regulation of services tends to be
more detailed and complex because, unlike goods, it is not just the service itself but also the service
provider, its staff, and equipment which are being regulated. This has posed a tremendous challenge to the
Court in balancing the Community interest in opening up the services market and the need to preserve the
often legitimate interests of the State. Because one size does not fit all the standard model of non-
discrimination on the grounds of nationality--possibly suitable in the early days of the Community when the
provision of services was less complex--does not readily resolve issues raised by the different barriers to the
provision and receipt of services. Increasingly the Court falls back on the Sger hindrance/obstacle model,
finds most national measures to breach Article 49, and then focuses on the question of justification. As the
healthcare cases demonstrate, the Court's analysis of justification can be extremely detailed, but in cases
where this proves to be too politically difficult it accepts the justification raised by the Member State
without question.

Both the Television Without Frontiers and healthcare case studies presented in this chapter demonstrate the
interrelationship between Article 49 on services and Article 28 on goods. Although the evolution of the case
law in these two fields has been very different--with the services case law increasingly using the Sger
hindrance/obstacle model to address ever more complex barriers to the free movement of services, while the
goods case law is still dominated by the discrimination model re-emphasized by Keck--the problems the
Court has had to address under each Treaty provision are becoming increasingly closely connected. For this
reason it comes as no surprise that the discrimination model is beginning to creak in the field of goods and
there are signs of spillover from the persons case law to that of goods. For example, in Gournet the
judgment resonated with a mix of both the discrimination model and the Sger/Gebhard formula when the
Court noted that 'a prohibition of all advertising directed at consumers . . . is liable to impede access to the
market by products from other Member States more than it impedes access by domestic products, with
which consumers are instantly more familiar', while in other cases the language of
obstacles/barriers/restrictions begins to creep in alongside more traditional notions of measures having
equivalent effect. Eventually the Court will have to decide what the Treaty provisions on free movement are
intended to achieve. Are they merely about eliminating discrimination, in which case barriers to movement
will continue to exist so long as they are not discriminatory, or, more radically, are they about removing any
obstacle to free movement which (substantially) hinders both access to the market and the exercise of the
freedom. While the latter approach does more damage to national regulatory autonomy, some of this can be
preserved through judicious and flexible use of the public interest requirements.

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Cases and Materials on EU Law (8th Edition)


Stephen Weatherill
OUP 2007
Chapter 14 (Extracts): Freedom of Establishment and the Free Movement of Services: Articles 43 and 49

SECTION 1: THE RIGHTS


Articles 43 and 49 extend the rights of free movement beyond 'workers' to include free movement of individuals who are self-
employed and wish to establish themselves in another Member State, or to provide services there. These rights are
granted not just to the natural person who wishes to migrate, but also to the legal person - i.e., the company.
ARTICLES 43 AND 49 EC
Article 43
Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State
in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting up of
agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.
Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and
manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the
conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions
of the Chapter relating to capital.
Article 49
Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be
prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the
person for whom the services are intended.
The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of the Chapter to
nationals of a third country who provide services and who are established within the Community.
NOTES
1. The Treaty of Amsterdam effected merely cosmetic changes to these provisions by removing references to the transitional period.
On re-numbering (p. 12 above), what are now Articles 43 and 49 replaced what were previously Articles 52 and 59. These
numerical games must be borne in mind in reading the pre-Amsterdam material in this Chapter. Should the Treaty establishing
a Constitution for Europe enter into force (p.23), modestly adjusted versions of Articles 43 and 49 will be located as Articles III-137
and III-144 respectively. The continuity of the Court's case law is guaranteed by Article IV-438(4). The distinction between Article 43,
the right of establishment, and Article 49, the right to provide services, is rather artificial. The former envisages a more
permanent presence in the host Member State than the latter, but at the margin it may be difficult to select the correct
classification (Case C-215/00 Bruno Schnitzer judgment of 11 December 2003). Broadly, however, the problem is unlikely to
arise in an acute form, because the Court has wisely recognized the common purpose of the provisions and has shown
itself prepared to interpret them in parallel fashion. Article 39 too joins in this shared purpose; see, e.g., Procureur du Roi v
Royer (Case 48/75) [1976] ECR 497; Walrave v Association Union Cydiste Internationale (Case 36/74) [1974] ECR 1405; Roux v
Belgian State (Case C-363/89) [1991] ECR 1-273.
The rights of the migrating individual to non-discriminatory treatment according to nationality were amplified by Directive
73/148 on the Abolition of Restrictions on Movement and Residence within the Community for Nationals of Member States
with regard to Establishment and the Provision of Services, Articles 1-8 [1973] OJ LI72/14. This measure was analogous to
Directive 68/360 applicable to workers. Both Directive 73/148 and Directive 68/360 are repealed with effect from 30 April 2006,
the deadline for Member State implementation of replacement Directive 2004/38 (p.430 above).
2. Directive 75/34 [1975] OJ L14/10 confers rights to remain in the host State. It was analogous to Regulation 1251/70,
mentioned at p.430 above. Here too replacement Directive 2004/38 (Chapter IV) should now be consulted.
Derogation from the rights is possible in a fashion comparable to Article 39 (p.425 above); see Articles 45, 46, and 55. This
complementarity was encountered in Donatella Calfa (Case C-348/96), p.441 above.
SECTION 2: NON-DISCRIMINATION
The following case illustrates the application of the principle of non-discrimination.

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Thieffry v Conseil de I'Ordre des Avocats a la Cour de Paris (Case 71/76)


[1977] ECR 765, [1977] 2 CMLR 373, Court of Justice of the European Communities
Thieffry, a Belgian advocate, held a Belgian diploma of Doctor of Laws, recognized by a French university as equivalent to the
French licenciate's degree in law. Despite this recognition of equivalence, he was refused entry to the Paris Bar because he
held no French diploma of the required level. Thieffry's challenge reached the Court via the preliminary reference
procedure (Chapter 7). The Court cited the General Programme for the abolition of restrictions on freedom of establishment,
adopted in 1961, and continued:
[15]. . . [F]reedom of establishment, subject to observance of professional rules justified by the general good, is one of the
objectives of the Treaty.
[16] In so far as Community law makes no special provision, these objectives may be attained by measures enacted by the
Member States, which under Article 5 of the Treaty are bound to take 'all appropriate measures, whether general or
particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of
the Community', and to abstain 'from any measure which could jeopardize the attainment of the objectives of this Treaty'.
[17] Consequently, if the freedom of establishment provided for by Article 52 can be ensured in a Member State either
under the provisions of the laws and regulations in force, or by virtue of the practices of the public service or of professional
bodies, a person subject to Community law cannot be denied the practical benefit of that freedom solely by virtue of the
fact that, for a particular profession, the directives provided for by Article 57 of the Treaty have not yet been adopted.
[18] Since the practical enjoyment of freedom of establishment can thus in certain circumstances depend upon national
practice or legislation, it is incumbent upon the competent public authorities -including legally recognised professional
bodies - to ensure that such practice or legislation is applied in accordance with the objective defined by the provisions of
the Treaty relating to freedom of establishment.
[19] In particular, there is an unjustified restriction on that freedom where, in a Member State, admission to a particular
profession is refused to a person covered by the Treaty who holds a diploma which has been recognised as an equivalent
qualification by the competent authority of the country of establishment and who furthermore has fulfilled the specific
conditions regarding professional training in force in that country, solely by reason of the fact that the person concerned does
not possess the national diploma corresponding to the diploma which he holds and which has been recognised as an
equivalent qualification.
The Court was accordingly able to conclude, in terms obviously favourable to Thieffry:
[27] In these circumstances, the answer to the question referred to the Court should be that when a national of one Member
State desirous of exercising a professional activity such as the profession of advocate in another Member State has obtained
a diploma in his country of origin which has been recognized as an equivalent qualification by the competent authority
under the legislation of the country of establishment and which has thus enabled him to sit and pass the special qualifying
examination for the profession in question, the act of demanding the national diploma prescribed by the legislation of the
country of establishment constitutes, even in the absence of the directives provided for in Article 57, a restriction
incompatible with the freedom of establishment guaranteed by Article 52 of the Treaty.
NOTES
1. A similar approach had been taken in Reyners v Belgian State (Case 2/74) [1974] ECR 631, [1974] 2 CMLR 305, where
the Court insisted that the principle of non-discrimination had direct effect even in the absence of implementing
Directives.
2. The Court has extended the scope of these Treaty Articles in order to accommodate tourists. Tourists are neither self-
employed nor providers of services, but they are recipients of services and thus fall within the scope of Article 49.
[]
SECTION 3: BEYOND DISCRIMINATION
The limits of the non-discrimination approach to market integration are significant. Consider Thieffry (Case 71/76) (p.446
above). The key to the application of the principle of non-discrimination was the recognition of Thieffry's Belgian degree
as sufficient for French purposes. Without recognition, he could have been excluded from the French lawyer's market. There
would have been no nationality discrimination; no one could act as avocat without a French degree, irrespective of nationality.
(See, e.g., Procureur de la Republique v Bouchoucha (Case C-61/89) [1990] ECR 1-3551.)
This problem is serious for the professional person, who is faced by the need to meet the professional qualification

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requirements of the host State; in the absence of cross-recognition as in Thieffry (Case 71/76), home State qualifications are
unlikely to suffice. Similarly, a company may face serious problems in offering services across borders, because it may find
that certain regulations are imposed on all firms supplying services in the host State, but with which it, a non-national firm,
does not comply. Articles 43(2) and 50(3) declare that the host State may continue to apply its rules equally to all those
active on its market.
A: Challenging and justifying obstructive national measures
It should be immediately apparent that there are potentially close connections with the 'Cassis de Dijon' case law under
Article 28 (Chapter 12). The problem here too arises in relation to national measures which are not discriminatory, but which
hinder the exercise of free movement rights. The principles according to which the permissibility of such national measures
shall be judged appear to be the same under both Article 28 and Article 49, in so far as both enshrine fundamental Treaty
freedoms (cf. Case C-55/94 Gebhard, p.319 above). However, the Court's scrutiny of regulatory diversity between the Member
States in the context of Article 49 has commonly been couched in similar but not identical language to that which occurs
under Article 28.
Commission v Germany (Case 205/84)
[1986] ECR 3755, [1987] 2 CMLR 69, Court of Justice of the European Communities
The case involved German law regulating the provision of insurance services on German territory. All insurers had to have a
permanent establishment in Germany. All insurers had to be authorized by the German State. Plainly, insurers from other
States wishing to offer services in Germany were impeded by these requirements. The Commission argued that the rules
violated Articles 59 and 60 of the EC Treaty (now, after amendment, Articles 49 and 50 EC). The matter reached the Court
under Article 169 of the EC Treaty (now Article 226 EC: see Chapter 4)). The first extract sets out the Court's approach.
[25] According to the well-established case-law of the Court, Articles 59 and 60 of the EEC Treaty became directly applicable
on the expiry of the transitional period, and their applicability was not conditional on the harmonisation or the coordination
of the laws of the Member States. Those articles require the removal not only of all discrimination against a provider of a
service on the grounds of his nationality but also all restrictions on his freedom to provide services imposed by reason of
the fact that he is established in a Member State other than that in which the service is to be provided.
[26] Since the German Government and certain other of the governments intervening in its support have referred to the third
paragraph of Article 60 as a basis for their contention that the State of the person insured can also apply its supervisory
legislation to insurers established in another Member State, it should be added, as the Court made clear in particular in its
judgment of 17 December 1981 (Case 279/80 Webb [1981] ECR 3305), that the principal aim of that paragraph is to enable
the provider of the service to pursue his activities in the Member State where the service is given without suffering
discrimination in favour of the nationals of the State. However, it does not follow from that paragraph that all national
legislation applicable to nationals of that State and usually applied to the permanent activities of undertakings established
therein may be similarly applied in its entirety to the temporary activities of undertakings which are established in other
Member States.
[27] The Court has nevertheless accepted, in particular in its judgments of 18 January 1979 (Joined Cases 110 and 111 /78
Ministere public and Another v van Wesemael and Others [1979] ECR 35) and 17 December 1981 (Case 279/80 Webb, cited
above), that regard being had to the particular nature of certain services, specific requirements imposed on the provider of the
services cannot be considered to be incompatible with the Treaty where they have as their purpose the application of rules governing
such activities. However, the freedom to provide services, as one of the fundamental principles of the Treaty, may be restricted only
by provisions which are justified by the general good and which are applied to all persons or undertakings operating within the
territory of the State in which the service is provided in so far as that interest is not safeguarded by the provisions to which the
provider of a service is subject in the Member State of his establishment. In addition, such requirements must be objectively justified
by the need to ensure that professional rules of conduct are complied with and that the interests which such rules are designed to
safeguard are protected.
[28] It must be stated that the requirements in question in these proceedings, namely that an insurer who is established in another
Member State, authorised by the supervisory authority of that State and subject to the supervision of that authority, must have a
permanent establishment within the territory of the State in which the service is provided and that he must obtain a separate
authorisation from the supervisory authority of that State, constitute restrictions on the freedom to provide services inasmuch as
they increase the cost of such services in the State in which they are provided, in particular where the insurer conducts business in
that State only occasionally.
[29] It follows that those requirements may be regarded as compatible with Articles 59 and 60 of the EEC Treaty only if it is established
that in the field of activity concerned there are imperative reasons relating to the public interest which justify restrictions on the

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freedom to provide services, that the public interest is not already protected by the rules of the State of establishment and that the
same result cannot be obtained by less restrictive rules.
The Court then proceeded to accept the existence of a protectable interest in this area:
[30] As the German Government and the parties intervening in its support have maintained, without being contradicted by the
Commission or the United Kingdom and Netherlands Governments, the insurance sector is a particularly sensitive area
from the point of view of the protection of the consumer both as a policy-holder and as an insured person. This is so in particular
because of the specific nature of the service provided by the insurer, which is linked to future events, the occurrence of which, or at
least the timing of which, is uncertain at the time when the contract is concluded. An insured person who does not obtain payment
under a policy following an event giving rise to a claim may find himself in a very precarious position. Similarly, it is as a rule very
difficult for a person seeking insurance to judge whether the likely future development of the insurer's financial position and the
terms of the contract, usually imposed by the insurer, offer him sufficient guarantees that he will receive payment under the policy if
a claimable event occurs.
[31] It must also be borne in mind, as the German Government has pointed out, that in certain fields insurance has become a mass
phenomenon. Contracts are concluded by such enormous numbers of policy-holders that the protection of the interests of insured
persons and injured third parties affects virtually the whole population.
[32] Those special characteristics, which are peculiar to the insurance sector, have led all the Member States to introduce
legislation making insurance undertakings subject to mandatory rules both as regards their financial position and the conditions of
insurance which they apply, and to permanent supervision to ensure that those rules are complied with.
[33] It therefore appears that in the field in question there are imperative reasons relating to the public interest which may justify
restrictions on the freedom to provide services, provided, however, that the rules of the State of establishment are not adequate in
order to achieve the necessary level of protection and that the requirements of the State in which the service is provided do not
exceed what is necessary in that respect.
NOTE: After due examination, the Court concluded that the public interest was not adequately protected by the rules of
the State of establishment. In the abstract, then, Germany could lawfully restrict trade in order to serve the public
interest. It then fell to be determined whether the actual rules enacted could satisfy Community law. The Court refused to
accept that a blanket requirement of establishment in Germany was compatible with Community law. However, it took a
rather different view of the necessity to undergo an authorisation procedure.
Commission v Germany (Case 205/84)
[1986] ECR 3755, [1987] 2 CMLR 69, Court of Justice of the European Communities
[42] The Commission does not dispute that the State in which the service is provided is entitled to exercise a certain control
over insurance undertakings which provide services within its territory. At the hearing it even accepted that it was permissible
to provide for certain measures of supervision of the undertaking concerned to be applied prior to its conducting any
business in the context of the provision of services. It nevertheless maintained that such supervision should take a form
less restrictive than that of authorization. It did not however explain how such a system might work.
[43] The German Government and the governments intervening in its support maintain that the necessary supervision can
be carried out only by means of an authorization procedure which makes it possible to investigate the undertaking before it
commences its activities, to monitor those activities continuously and to withdraw the authorization in the event of serious
and repeated infringements.
[44] In that respect it should be noted that in all the Member States the supervision of insurance undertakings is organized
in the form of an authorization procedure and that the necessity of such a procedure is recognized in the two first coordination
directives as regards the activities to which they refer. In each of those directives Article 6 thereof provides that each Member
State must make the taking-up of the business of insurance in its territory subject to an official authorization. An undertaking
which sets up branches and agencies in Member States other than that in which its head office is situated must therefore
obtain an authorization from the supervisory authority of each of those States.
[45] It must also be observed that the proposal for a second directive provides for the retention of that system. The
undertaking must obtain an official authorization from each Member State in which it wishes to conduct business in the
context of the provision of services. Although, according to that proposal, the authorization must be obtained from the
supervisory authority of the State of establishment, that authority must first consult the authority of the State in which the
service is to be provided and send it all the relevant papers. The proposal also envisages permanent cooperation between
the two supervisory authorities, thus making it possible, in particular, for the authority of the State of establishment to take
all appropriate measures, which may extend to withdrawal of the authorization, to put an end to the infringements which

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have been notified to it by the supervisory authority of the State in which the service is provided.
[46] In those circumstances the German Government's argument to the effect that only the requirement of an authorization
can provide an effective means of ensuring the supervision which, having regard to the foregoing considerations, is
justified on grounds relating to the protection of the consumer both as a policy-holder and as an insured person, must be
accepted. Since a system such as that proposed in the draft for a second directive, which entrusts the operation of the
authorization procedure to the Member State in which the undertaking is established, working in close cooperation with the
State in which the service is provided, can be set up only by legislation, it must also be acknowledged that, in the present
state of Community law, it is for the State in which the service is provided to grant and withdraw that authorization.
[47] It should however be emphasized that the authorization must be granted on request to any undertaking established in
another Member State which meets the conditions laid down by the legislation of the State in which the service is provided,
that those conditions may not duplicate equivalent statutory conditions which have already been satisfied in the State in
which the undertaking is established and that the supervisory authority of the State in which the service is provided must
take into account supervision and verifications which have already been carried out in the Member State of establishment.
According to the German Government, which has not been contradicted on that point by the Commission, the German authorization
procedure conforms fully to those requirements.
[48] It is still necessary to consider whether the requirement of authorization which, under the Insurance Supervision Law, applies
to any insurance business other than transport insurance, is justified in all its applications. In that respect it has been pointed out, in
particular by the United Kingdom Government, that the free movement of services is of importance principally for commercial
insurance and that with regard to that particular type of insurance the grounds relating to the protection of policy-holders relied
on by the German Government and the governments intervening in its support do not apply.
[49] It follows from the foregoing that the requirement of authorization may be maintained only in so far as it is justified on the
grounds relating to the protection of policy-holders and insured persons relied upon by the German Government. It must also be
recognized that those grounds are not equally important in every sector of insurance and that there may be cases where, because
of the nature of the risk insured and of the party seeking insurance, there is no need to protect the latter by the application of the
mandatory rules of his national law.
[50] However, although it is true that the proposal for a second directive takes account of those considerations by excluding inter
alia commercial insurance, which is defined in detail, from the scope of the mandatory rules of the State in which the service is
provided, it must also be observed that, in the light of the legal and factual arguments which have been presented before it, the Court
is not in a position to make such a general distinction and to lay down the limits of that distinction with sufficient precision to
determine the individual cases in which the needs of protection, which are characteristic of insurance business in general, do not
justify the requirement of an authorization.
[51] It follows from the foregoing that the Commission's first head of claim must be rejected in so far as it is directed against the
requirement of authorization.
NOTES
1. See comment by D. Edward (1987) 12 EL Rev 231; R. Hodgin (1987) 24 CML Rev 273; J. Steenbergen (1987) CDE
526; D. Lasok (1988) 51 MLR 706.
Insurance regulation is increasingly subject to Community legislation (see generally). Usher, The Law of Money and Financial
Services in the EC (Oxford: OUP, 2000); and the Commission has a dedicated website containing relevant documentation,
http://europa.eu.int/comm/ internal_market/insurance/index_en.htm). The Commission has published an interpretative
communication relevant to the sector at [2000] OJ C43/5 (cfpp.359 and 407 above on the role of such communications).
However, the principle developed in this ruling that non-discriminatory national rules which have the effect of protecting
domestic industry can be challenged under Article 49 applies across the services sector. Increasingly the market for
services has been liberalized through the application of the primary Treaty provisions with out the need to resort to
harmonization. As suggested above at p.450, there are clear parallels with the Court's approach in Cassis de Dijon (Case
120/78, p.379 above); see, e.g., the language of para 29 of the above judgment in Case 205/84. The issue is similar.
One State demands compliance with its rules. All firms must adhere, but importers/migrants suffer because they too
are subjected to controls in their home State. The next case provides an example. The Commission considered France
was in violation of Article 59 of the EC Treaty (now, after amendment, Article 49 EC) by making the provision of services by
tourist guides accompanying groups of tourists from another Member State subject to the possession of a licence, itself
dependent on possession of a particular qualification. The Court agreed with the Commission.

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EU Law (9th Edition)


Steiner, Woods and Twigg-Flesner
OUP 2006

31: Intellectual property rights and the internal market (Extracts)

31.1 Introduction
The exercise of intellectual property rights, or industrial and commercial property rights, such as trade marks,
patents and copyright, can have a negative impact on the operation of the internal market: it may be used to
restrict the free movement of goods between Member States, and it can also result in restrictions of competition.
As far as the latter is concerned, it is of course the very purpose of intellectual property rights to give their owner
monopoly rights for a certain period of time as a reward for his creative endeavour or the acquired goodwill in
his product. Intellectual property rights are therefore necessary to encourage investment of time and money in
creative endeavour. A balance has therefore to be struck between recognising intellectual property rights and
preventing their use from undermining the internal market objective (including competition policy).
In this chapter, we will consider to what extent it is possible to use intellectual property rights to restrict the free
movement of goods by analysing the case law that has developed under Article 30 (ex 36), which contains the
derogations from the prohibition against quantitative restrictions or measures having an equivalent effect under
Article 28 (ex 30) (see Chapters 18 and 19). We will then examine to what extent competition law under Articles
81 and 82 (ex 85 and 86, respectively) has been applied to control the use of their rights by the owners of
intellectual property. It will become apparent that there is a degree of parallelism in the case law developed in
these areas.
31.2 Derogation from Article 28: protection of industrial and commercial property
As noted in Chapter 19, Article 30 permits a derogation from Article 28 where this is justified on grounds of the
protection of industrial or commercial property. This exception must be read in conjunction with Article 295 (ex
222) EC, which provides that:
This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership.
Together these provisions would appear to ensure that national laws governing industrial property remain intact.
However, since industrial property law by its very nature tends to contribute to a partitioning of the market,
usually along national lines, its exercise inevitably restricts the free movement of goods and conflicts with the
principle of market integration so fundamental to the Community. As we will see below (31.3), the competition
provisions of the Treaty may be invoked to prevent this partitioning, but they are not in themselves sufficient to
deal with all the situations in which industrial property law may be used to compartmentalise the market. So the
Commission, and more particularly the Court, since the Commission has no power to enforce the free movement
of goods provisions against individuals, have solved the problem by the application of Articles 28 and 30. As a
result, despite the prima facie protection offered to industrial property rights by Articles 30 and 295 EC, these
rights, protected under national law, have undoubtedly been curtailed.
31.2.1 'Specific subject matter' of the right
The scope of Article 30 was considered in Deutsche Grammophon Gesellschaft rnbHv Metro-SB-Grossmarkte
GmbH & Co. KG (case 78/70). Here Deutsche Grammophon (DG) were seeking to invoke German copyright
law to prevent the defendant wholesalers from selling DG's Polydor records, previously exported to France, in
Germany. Since a prohibition on re-import would clearly breach Article 28, the matter fell to be decided under
Article 30. Arguing from the second sentence of that Article, that 'prohibitions or restrictions shall not ...
constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States' the
Court concluded that the provision permitted prohibitions or restrictions on the free movement of goods only to
the extent that they were justified for the protection of the rights that form the specific subject matter of the
property. The Court drew a distinction between the existence of industrial property rights which falls within the
specific subject matter of the right and remains unaffected by Community law, and their exercise, which may
come within the prohibition of the Treaty. The specific subject matter (which overlaps with discussions of the

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purpose of an intellectual property right) will vary depending on the type of right in issue (e.g., trade marks, see
Hag II; on copyright see Magill, discussed at 31.3.2). If copyright protection is used to prohibit, in one Member
State, the marketing of goods brought on to the market by the holder of the rights, or with his consent, in the
territory of the other Member State (i.e., to prevent what are known as 'parallel' imports) solely because the
marketing has not occurred in the domestic market, such a prohibition, maintaining the isolation of the national
markets, conflicts with the essential aim of the Treaty, the integration of the national markets into one uniform
market. Thus it would constitute an improper exercise of the property right in question and would not be justified
under Article 30.
31.2.2 Exhaustion
The specific subject matter of the property, to protect which property rights may be legitimately exercised under
EC law, was expressed in Centrafarm BV v Sterling Drug Inc. (case 15/74) and Centrafarm BVv Winthrop BV
(case 16/74), in the context of a claim for infringement of patents and trade marks respectively, as a guarantee
that the owner of the trade mark or patent has the exclusive right to use that trade mark or patent, for the
purposes of putting into circulation in the EC products protected by the trade mark or patent for the first time;
either directly, or by the grant of licences to third parties. Once the protected product has been put on the market
in a particular Member State by or with the consent of the owner, or by a person economically or legally
dependent on him, such as a licensee, a subsidiary, a parent company or an exclusive distributor (but not an
assignee of trade-mark rights, see further IHT (case C-9/93)), he can no longer rely on national property rights to
prevent its import from that State into other Member States. His rights have been exhausted. The ECJ has held
that it is not permissible to rely on the right to place goods on the market for the first time to prevent the
importation of goods lawfully manufactured in one Member State into the territory of another Member State
where the goods have not yet been put into circulation but are in transit in order to be placed on the market of a
non-Member State (in this instance, Poland prior to its accession) (Rioglass (case C-115/02)).
This doctrine of 'exhaustion of rights' has been applied by the Court to trade marks (CentrafarmBVv
WinthropBV(case 16/74)), patents (Centra/arm BVvSterling Drug Inc. (case 15/74)), industrial designs (Keurkoop
BV v Nancy Kean Gifts BV (case 144/81)) and, subject to some qualification due to its special nature (see Warner
Brothers Inc. v Cristiansen (case 158/86); Coditel v Cine Vog Films (case 62/79)), copyright (Musik-Vertrieb
Membran GmbH v GEMA (cases 55 & 57/80)). It is thought that plant breeders' rights too would be subject to
the principle, since they were held in L. C. Nungesser KG v Commission (case 258/78) to fall within the concept
of industrial and commercial property.
In Merck & Co. Inc. v Stephar BV (case 187/80), the exhaustion principle was applied where the patent owner
had sold his product in Italy, where there existed no system of patent protection. The Court held that having
allowed the goods to be sold in Italy, he must accept the consequences as regards free circulation in the
Community.
However, where a product has been sold under a compulsory licence, without the consent of the owner, the latter
is entitled under Article 30 EC to rely on his property right to prevent the marketing in a third Member State of
that product resulting from the exploitation of the compulsory licence, since, not having consented to its use, he
is still entitled to enjoy the substance of his exclusive licence (Pharmon BVv Hoechst AG (case 19/84). See also
Thetford Corp. v Fiamma SpA (case 35/87)). Similarly, where the manufacturing or marketing of a product is
lawful in a Member State, not through the owner's consent but because of the expiry of the protection period
provided for industrial property rights under the law of that Member State, a person with exclusive rights in that
product in another Member State may prevent the import of the protected product into the Member State in
which he holds these rights (EMI Electrola GmbH v Patricia (case 341/87), which concerned rights of
reproduction and distribution of musical works).
Where a product has been put lawfully on the market in a particular Member State with the owner's consent and
the period of protection permitted under national law in that State has not expired, its import into another
Member State may not be restrained, even though the purpose of an attempt to prevent importation is to prevent
parties taking advantage of different price levels in different Member States, whether the reason for the price
differences be government policy, legislation or ordinary market forces (Centrafarm; GEMA).
[]
31.2.6 Intellectual property rights and national origin
In these cases, property rights were being invoked to protect the owner's legitimate property in his product.
Where the owner seeks to invoke his rights to prevent the import of goods solely because the public may be

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misled as to their national origin, the Court has held (Theodor Kohl KG v Ringelhan and Rennett SA (case
177/83)) that national trade-mark law may not be relied upon in the absence of evidence of unfair competition.
Similarly national measures which seek to employ industrial or commercial property rights in order to encourage
or protect domestic production at the expense of imports from other Member States will breach Article 28 and
will not be permitted under Article 30 (e.g., Genetics UK v Smith Kline (case C-191/90) (re licences of right);
Commission v UK (case C-30/90) (re compulsory patent licences)).
31.2.7 International exhaustion
The principles outlined above will only apply to trade within the Community. Where parties seek to assert their
property rights to prevent goods from third countries from entering the Community, the free movement
provisions of Articles 28 and 30 do not apply (EMI Records Ltd v CBS United Kingdom Ltd (case 51/75),
Generics UK Ltd v Smith Kline and French (case C-191/90), Silhouette International Schmied GmbH & Co. KG
v Hartlaner Handelsgesellschaft mbH (case C-355/96) - this last case concerned the Trade Marks Directive,
discussed further below). In Silhouette, the ECJ held that national rules of an EU Member State providing for
exhaustion of trade-mark rights for products put on the market outside the EEA with the consent of the trade-
mark proprietor were incompatible with the terms of the Trade Marks Directive. From the wording of Article
7(1), exhaustion would take place only if the goods had been put on the market within the EEA. The Court took
the opportunity to refine the scope of this ruling in Sebago Inc. v GB-Unic (case C-173/98). Sebago was the
owner of trade marks for shoes, registered in Benelux. GB-Unic sold some Sebago shoes which had been
manufactured in El Salvador and imported into the EU via a supplier in Belgium. Sebago claimed that this
violated its rights, as it had not consented to the sale of those shoes in the Community. GB-Unic argued that it is
sufficient for consent (thereby triggering the exhaustion doctrine) if the proprietor of the trade mark has
consented to the marketing in the EC of similar goods bearing the same trade mark. Having reaffirmed its
judgment in Silhouette, the ECJ then went on to take a narrow view of consent, stating that consent must relate to
the specific goods in respect of which exhaustion was claimed. The question of consent arose again in Zino
Davidoffv A&G Imports Ltd and Levi Strauss & Co v Tesco (joined cases C-414 to 416/99). The defendants in
the case argued that, to fall within Silhouette and Sebago, a trade-mark proprietor must object to the import of
trade-marked goods that had been lawfully marketed outside the EEA; failure to object implied consent.
Although the ECJ accepted that consent in the context of international exhaustion could be implied from the
circumstances, those circumstances must 'unequivocally demonstrate that the proprietor has renounced his right
to oppose placing of the goods on the market within the EEA' (para. 47). In particular, the defendant must prove
that the trade-mark proprietor has consented to the marketing of the goods, it is not for the proprietor to prove
that it has not so consented. As the ECJ pointed out, to have held otherwise would have meant that consent
would have been deemed to be given in the absence of any proof (para. 58), which is a different and more easily
satisfied level of consent than implied consent. The matter of proof came before the ECJ again, albeit in a
different context, in the case of van Doren + Q GmbH v lifestyle + sportswear Handelsgesellschaft mbH (case C-
244/00). The defendants in this case argued that they had obtained the goods (manufactured in the United States
and subject to an exclusive distribution agreement in Germany) within the EEA and that the doctrine of
exhaustion to prevent the trade-mark proprietor from stopping the parallel imports applied. Van Doren, however,
alleged that the goods came directly from the United States. The question that was referred was: which party
should be subject to the burden of proof and, in particular, whether Article 28 required that the burden of proof
be removed from the defendant? The ECJ held that it is generally for the defendant to prove that the conditions
for the application of the exhaustion principle exist, but this was qualified: if the defendant shows that there
would be a risk of market partitioning if he had to bear the burden of proof, then it would be for the trademark
owner to demonstrate that the goods in question were originally placed on the market outside the EEA by him or
with his consent. A risk of market partitioning would arise because if the defendant had to prove that the goods
were placed on the market within the EEA, the trade-mark owner might be able to identify the member of the
exclusive or selective distribution network who supplied the defendant, and reduce supplies to that member to
prevent further sales to the defendant. However, once the trade-mark owner has established that the goods were
first marketed outside the EEA, then it would be for the defendant to prove, in turn, that the trade-mark owner
consented to the subsequent marketing of the goods in the EEA.
31.2.8 Free movement of services
The case law discussed so far has been concerned with the free movement of goods, but the free movement of
services may similarly be affected by the tension between protecting intellectual property rights and ensuring
free movement in the internal market. Although the derogation provision in Article 46 EC does not refer to the
protection of industrial property, unlike Article 30, the Court has held that indistinctly applicable measures can

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justify intellectual property rights which might otherwise conflict with the operation of Article 49 (Coditel (case
62/79), Collins v Imtrat (case C-159/87)). However, in the absence of more specific case law on this point, it is
difficult to predict the extent to which the Court would adopt a similar approach to that taken under Article 30 in
the field of services.
31.2.9 Harmonisation
Because of the wide disparity in national trade-mark rules and its resulting adverse impact on the internal market,
harmonisation at Community level was clearly required. In the field of trade marks, Directive 89/104 was passed
in 1989 ([1989] OJ L40/1). Its aim was to approximate those aspects of trade-mark law which most directly
affect the functioning of the common market, to ensure that the conditions for obtaining and continuing to hold a
registered trade-mark right are the same in all Member States. The directive defines trade-mark rights and the
rights attached to trade-mark ownership, as well as its limitations. It provides common grounds for refusal of
registration, invalidity and loss or exhaustion of rights. The effect of the measure is to broaden the scope of what
may be registered as a trade mark and extend the rights conferred by trade-mark registration, thereby reducing
the need for reliance on the unpredictable remedy of passing off. However, as the Court pointed out in IHT (case
C-9/93), the directive does not change the essential character of national trade-mark law, which remains
essentially territorial and independent.
The Trade Marks Directive has not been without its critics. One particular area of concern is the scope of the
exhaustion doctrine in relation to goods from outside the EU, the case law on which parallels that in relation to
similar cases brought under Article 30 (see 31.2.6.) The narrow interpretation of the exhaustion rule in Article
7(c) of the Trade Marks Directive has been the subject of some adverse comment, as, by limiting the scope of the
exhaustion doctrine, it allows companies to partition markets and maintain high prices. A report comparing
prices between the EU and the USA showed that prices in the USA tend to be between 40-50 per cent of those in
the EU.
In the absence of full harmonisation of national trade-mark law, Regulation 90/ 94 ([1994] OJ LI 1) was
introduced. The regulation provided for the introduction of a Community trade mark, covering all the Member
States, to be obtained by a single application. The Commission presented a proposal for amendments to the
regulation (COM (2002) 767 final), which was subsequently adopted in Regulation 422/2004 ( [2004] OJ L70/1).
The legal protection of designs is now covered by Directive 98/71/EC, which required Member States to
harmonise the central elements of their design laws, was agreed in 1998 and came into force in 2001. The
Regulation on Community Design was adopted in 2001 (Regulation 6/2002, [2002] OJ L3/1). It introduces Com-
munity registered designs and Community unregistered designs as other means of protection for designs. The
Commission proposals on 'utility models' (COM (97) 691) have not progressed. The Commission has put
forward proposals for a Community patent and a proposal for a Directive on patent protection for inventions
related to computer programs, both based on the Green Paper (COM (95) 382).
In the field of copyright, eight directives have been agreed. Directive 93/83 provided for the coordination of
certain rules relating to copyright and rights relating to copyright applicable to satellite broadcasting ([1993] OJ
L246), and Directive 93/ 98 provided for the harmonisation of the terms of protection of copyright and related
rights ([1993] OJ L290). Specific directives apply to copyright in the broadcasting area (e.g., the Lending Rights
Directive 92/100/EEC ([1992] OJ L346/61) and the Satellite Broadcasting and Cable Retransmission Directive
93/83/EEC ([1993] OJ L248/15)) and there is a directive on the legal protection of topographies of
semiconductor products (Directive 87/54/EEC) and on the legal protection of databases (Directive 96/9). More
recently, directives on copyright and the information society (Directive 2001/29); and on the resale right for the
benefit of the original author of a work of art (Directive 2001/84) have been agreed. Finally, a directive on
measures and procedures to ensure the enforcement of intellectual property rights was adopted in 2004 (Directive
2004/48/EC [2004] OJ L195/16).
31.2.10 Discrimination
It may be noted that any discrimination, direct or indirect, in relation to industrial and commercial property rights
will fall foul of Article 12 (ex 6) EC, which prohibits 'any discrimination on the grounds of nationality' (Collins v
Imtrat (cases C-92/92, 328/92)).
31.3 Intellectual property rights and competition law
As the discussion above has demonstrated, the ECJ has drawn a distinction between the existence of industrial
property rights and their exercise. The mere existence of industrial property rights cannot infringe Articles 81 or

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82 EC; an improper or abusive exercise of these rights, however, can. The exploitation of industrial or
commercial property rights will be improper if these rights are used to defeat Community law on restrictive
practices (see, e.g., Consten (cases 56 & 58/64; discussed below and in Chapter 27). Any concerted attempt or
attempt by a dominant undertaking to use these rights to partition markets, or to maintain artificial price levels, or
to impose discriminatory or unfair conditions on trading partners is liable to fall foul of Articles 81 or 82 EC.
31.3.1 Improper exercise of rights
In Etablissements Consten SA v Commission (cases 56 & 58/64) Consten could not rely on its trade-mark rights
to prevent parallel imports of Grundig products from other Member States. The purpose of the GINT trade mark
was not to protect the owner's legitimate rights in his product, for example, to prevent other goods being passed
off as Grundig's, but to partition the market and ensure absolute territorial protection for Grundig products in
France. Thus its exercise in the context of Grundig's dealer agreement was in breach of Article 81(1).
The same principle has been applied to patents and copyright. In Parke, Davis & Co. v Probel (case 24/67) the
Court held that an 'improper exploitation' of patent rights in the context of agreements, decisions of undertakings
or concerted practices or by firms in a dominant position could breach EC competition law.
In Re GEMA ([1971] CMLR D35) the Commission found that GEMA, an authors' rights society holding a
dominant position in authors' copyright in Germany, was improperly exploiting its rights in breach of Article 82.
GEMA was exploiting its copyrights by discriminatory practices; it was discriminating against nationals from
other Member States, who could not become full members; it paid supplementary fees, 'loyalty bonuses', only to
some of its members from a fund to which all had contributed, without objective justification. It was imposing
unfair conditions on its members, by extending its contractual rights to non-copyright works, and claiming rights
to future works. All these practices went beyond what was necessary to protect GEMA's legitimate property
rights.
Similarly, in Windsurfing International Inc. v Commission (case 193/83) WSI, the owner of patent licences in a
special sail rig (comprising mast, mast foot, sail and pair of curved booms) for use with windsurfing boards, was
seeking in its licensing agreements to impose unnecessary restrictions on its licensees in breach of Article 81(1).
For example, licensees were required to exploit the patents (for the rigs) only for the manufacture of sailboards
using hulls which had been given WSI's prior approval; to pay royalties for rigs made under the patent on the
basis of the selling price of the complete sailboard; to manufacture only in a specified manufacturing plant; and
they were not permitted to challenge the licensed patents. These provisions were all found to constitute improper
exploitation.
31.3.2 The specific subject matter of intellectual property rights
In placing limitations on the exercise of industrial property rights, the Commission, supported by the Court, has
curtailed the very substance of these rights. These rights can now only be exercised to protect what the
Commission regards as the 'specific subject matter' of the property concerned. In this, there are similarities to the
approach adopted under Article 30 regarding goods, and under the ECJ's case law regarding services.
The specific subject matter of the property, to protect which industrial property rights may legitimately be
exercised, has been narrowly defined. For patents, it is to ensure, to the holder, so as to recompense the creative
effort of the inventor, the exclusive right to use an invention (Centra/arm BVv Sterling Drug Inc. (case 15/74)).
Patent rights clearly merit protection if the Community wishes to encourage creative endeavour. Thus while
patent licensing agreements have generally been held in breach of Article 81(1) the Commission has been
prepared to grant exemption under Article 81(3) (e.g., Davidson Rubber Co. [1972] CMLR D52), and it is
expected that this view will continue to be taken under the decentralised enforcement system now applicable (see
Chapter 29).
The specific subject matter of a trade-mark right is to protect the owner from competitors who would profit,
deliberately or accidentally, from the reputation and goodwill attached to the mark by selling goods with the
same mark, or one which was sufficiently similar to cause confusion in the mind of the consumer (see, e.g.,
Deutsche Renault AG v Audi AG (case C-317/91)). Thus, trade-mark rights cannot be used simply to prevent
parallel imports within the EC of the trade-marked product, which may be cheaper than the same product sold in
the importing State, even to protect a distributor's investment in a particular territory from 'free riders' (i.e.,
parallel importers who seek to take advantage of the product's goodwill, built up by the promotional efforts of
others). It is only rights in the product which are protected.
The specific subject matter or purpose of copyright protection was held in Radio Telefis Eireann v Commission

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(case T-69/89) to be to protect the owner's moral rights in the work and ensure a reward for creative endeavour,
which entitles the holder to exclusive rights of performance and reproduction of the protected work (para. 71).
RTE could not take advantage of its legitimate monopoly in radio and TV broadcasts by refusing to grant
licences for the reproduction of its advance programme listings to potential competitors, thereby retaining an
'unlawful monopoly downstream'. Such an exercise of copyright did not correspond to its essential function of
copyright protection but pursued an aim 'manifestly contrary to Article [82]'. On appeal (Radio Telefis Eireann v
Commission (cases C-241 & 242/91P)), the ECJ upheld the CFFs judgment, but without ruling explicitly on the
purpose of copyright. In Re GEM/1, the Commission suggested that any conditions embodied in an agreement or
practice or imposed by a dominant undertaking which go beyond what is necessary to protect the owners'
existing property, and certainly any discriminatory treatment, risk infringing Articles 81 or 82.
In Ministre Public v Tournier (case 395/87), in the context of a reference concerning the compatibility of
reciprocal arrangements between copyright management societies with Articles 28, 81 and 86 the Court held that
contracts entered into with users would not infringe Article 81 unless the practices at issue exceeded the limits
absolutely necessary for the attainment of the legitimate copyright objective of safeguarding the rights and
interests of their members vis-a-vis users of the protected property, in this case recorded music.
However, in NDC Health Corporation v IMS Health (case C-481/01 P(R)), the CFI (upheld by the ECJ)
emphasised that a refusal to licence intellectual property rights would only then constitute an abuse within
Article 82 EC if there are exceptional circumstances in the public interest which required that a licence be
granted. The Commission, following a complaint from NDC, had taken the view that IMS Health has a dominant
position in the German market for data services on sales and prescriptions of pharmaceuticals. IMS had
developed a geographical model of analysis, called a 'brick structure', which is used for making available sales
data to IMS customers and which constituted a de facto industry standard. The dominance arose because IMS
customers had been heavily involved in the development of this 'brick structure' and were therefore dependent on
it. Having concluded that IMS's refusal to license the use of their model of analysis meant that there existed a
prima facie case for abuse of IMS's dominant position, the Commission ordered IMS to grant a licence by way of
interim measure. This decision was suspended by the CFI and an appeal to the ECJ against the suspension failed.
The CFI (case T-184/01 R) emphasised that:
the respect for property rights in general and for intellectual property rights in particular is expressly reflected in
Articles 30 and 295 EC. The mere fact that the applicant has invoked and sought to enforce its copyright. .. for
economic reasons does not lessen its entitlement to rely upon the exclusive right granted by national law for the
very purpose of rewarding innovation (para. 143).
The evidence suggested that the lack of competition which resulted from the refusal to license was not
perceptible, but rather that the position of particular competitors had become difficult because they could not use
similar technology. This, however, was not enough to find a prima facie infringement of Article 82 (note that the
Commission subsequently withdrew its decision).
The decision in IMS Health, above, followed a complaint by NDC to the Commission. This had been prompted
by a decision by a German court to grant an injunction in favour of IMS to prevent NDC from using a brick
structure derived from IMS's structure. The German court referred a number of questions on the interpretation of
Article 82 to the ECJ (see MS Health v NDC Health (case C-418/ 01)). The case turned on the application of
Magill (cases C 241 & 242/91) and Bronner (case C-7/97), discussed in chapter 28) to the present situation. The
Court confirmed that a refusal to license could not, in itself, be an abuse under Article 82, although the manner in
which these rights are exercised could. It therefore held that it would be an abuse by a dominant undertaking
which owned an intellectual property right in a brick structure indispensable to the presentation of regional sales
data to refuse to grant a licence to another undertaking which also intends to provide such data in the same
Member State. This was subject to a number of conditions: first, the undertaking requesting the licence intends to
offer new products for which there is potential demand and which are not offered by the owner of the IP rights;
secondly, there are no objective justifications for refusing to grant the licences; and finally, the refusal is such as
to enable the owner of the IP rights to eliminate all competition on the relevant market.
The upshot of this ruling is that there may be circumstances where Article 82 does appear to require a degree of
compulsory licensing, at least in circumstances where a refusal to do so would eliminate the possibility of
innovation, and where there are no objective justifications for this refusal. The Court in IMS did not indicate
what sort of objective justifications there might be, and it seems likely that future litigation will turn on this
issue. It seems that this will largely be a matter to be resolved before the domestic courts, because the EC]
emphasised that this decision would be for the national courts to take.

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It must be emphasised that such protection as is offered to protect the specific subject matter of the property
concerned has been significantly reduced by the doctrine of exhaustion of rights discussed above. Any rights
claimed in the context of agreements or practices within Articles 81 or 82 EC which are not permitted under this
doctrine will risk infringing EC competition law. Furthermore since Radio Telefts Eireann v Commission (cases
C-241 & 242/91P), it is clear that, where exceptional circumstances exist, the holder of an intellectual property
right will not be permitted to refuse to license it.
31.3.3 Block exemption and Article 82
The fact that an industrial property right such as an exclusive licence falls within a block exemption cannot
protect an undertaking from liability under Article 82 EC if that right is abused, even where the abuse consists
only in increasing an already dominant position, thereby eliminating effective competition in a substantial part of
the common market (Tetra Pak (case T-51/89)).
31.4 Conclusions
The case law of the ECJ, in the context of both the free movement of goods and competition law, represents an
uneasy compromise between the single market principle and the need to safeguard legitimate industrial and
commercial property rights protected under national law. Other decisions indicate a greater willingness to safe-
guard the interests of creativity, originality and goodwill protected by intellectual property law, and to encourage
and reward the taking of commercial risks. This is evidenced, e.g., by a more generous approach to the question
of the permitted exercise of property rights protected under national law (e.g., EMIElectrola v Patricia (case
341/87); Deutsche Renault AG v Audi AG (case C-317/91)) and by limiting the scope of the exhaustion principle
(Hag II (case C-10/89); IHT (case C-9/93); but cf. Silhouette (case 355/96) and Sebago (case C-l 73/98)),
although the difficulties with patents, especially Pharmaceuticals, remain (e.g., Merck vPrimecrown (cases C-267
& 268/95)). In the area of copyright law the Court has refused to apply the exhaustion principle to the showing of
films and hiring of video cassettes (as opposed to their sale), recognising the owners' legitimate claim to benefit
from repeated use (Coditel v SA, Cine Vog Films (case 62/79); Warner Brothers Inc. v Cristiansen (case
158/86)).
Community legislation has supplemented the work of the Court and now provides a framework for the protection
of industrial property rights in the Community, and steady progress has been made. Member States have clearly
recognised industrial and commercial property law as an area in which, under the subsidiarity principle of Article
5 (ex 3b) EC, the objectives 'cannot be sufficient!}" achieved by the Member States' without endangering the
single market and can be 'better achieved by the Community'.
Nevertheless, the Court's restrictive approach to IP rights under both the competition provisions and the doctrine
of exhaustion may be criticised for curtailing rather too severely the rights of the owner of IP rights. The desire
to promote market integration may have swung the balance too far away from protecting IP rights. The decision
in IMS Health may be of concern in that it seems to weaken further the rights of IP holders. It seems that the
challenge of finding the correct balance between protecting IP rights and promoting the internal market is one
that has yet to be resolved in a satisfactory manner.

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LEGAL PROTECTION FOR ENCRYPTED SERVICES IN THE INTERNAL MARKET


CONSULTATION ON THE NEED FOR COMMUNITY ACTION
Commission Green Paper (EXTRACTS)

Executive summary

Objective
In recent years the increase in the availability of frequencies and the use of new technology have been
accompanied by an increase in the number of television services whose signal is encrypted with a view to
restricting reception to subscribers. In order to receive the programmes, viewers must have a decoding
device that can reconstitute the original picture.
The market is experiencing rapid growth particularly as a result of the advent of digital technology, which
permits an expansion in the capacity for communication. These television services will increasingly be
compelled to adopt a transnational and often even European dimension due to their specialised nature.
However, growth is being jeopardized by piracy: a flourishing unofficial decoder manufacturing industry is
emerging in parallel to that of authorised manufacturers. Devices enabling access to a service without
payment of the subscription or fee are produced and marketed without the permission of service operators.
This results in considerable losses for the service provider and indirectly adversely affects the potential
market of programme suppliers and official manufacturers.
In the light of these developments, the Commission already emphasised the need for effective protection of
coded signals against their illegal reception in its Strategic Programme for the Internal Market of 22
December 1993 (COM(93)632 final).
Such a requirement is all the more urgent in the run-up to the Information Society: as more and more
encrypted services become available in the future, measures will need to be adopted to ensure the protection
of these services, whatever their content, against illicit reception.
Accordingly, in its Communication of July 1994 entitlted "Europe's Way to the Information Society: An
Action Plan" (COM(94) 347) the Commission announced the preparation of a Green Paper on the Legal
Protection of Encrypted Services in the Internal Market with the aim of examining problems raised both by
the absence of specific legislation on the legal protection of encrypted services in some Member States and
by disparaties between existing legislation in others.

The current regulatory environment


A comparison of the regulatory methods chosen by legislators in the Member States reveals appreciable
differences in the approach to the problem of illicit reception of encrypted services.
Whereas some Member States adopted specific legislation ensuring protection against the illegal reception
of encrypted services in the late 1980s, others ( A, P, E, GR, DK, D and LUX) have no such legislation to
date.
The general rules (e.g. on unfair competition, telecommunications and copyright) sometimes applied in
Member States belonging to the second group are often unable to provide effective protection against the
illegal reception of encrypted services. This has allowed the development, in some of those Member States,
of a flourishing industry that manufactures, markets, installs and maintains pirate devices. A specialist
press has also developed, providing targeted publications and commercial promotion networks for pirate
decoders. The repercussions of this situation extend to other Member States, where such devices are
introduced on to the market in spite of restrictive measures.
Among the Member States which have adopted specific legislation, the differences between the solutions
adopted are substantial, in particular as regards scope, the activities prohibited (commercial promotion,
private possession) and the level of sanctions.

Need for Community action


In view of this situation, Community action could well be justified. The fact that the Member States do not
all have an equivalent level of legal protection prevents the Internal Market from operating correctly. This
creates a number of obstacles to the free movement of encrypted services and decoders and numerous
distortions of competition between operators in the various Member States. The present differences between

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the regulatory solutions and the resulting extra costs and legal uncertainty are viewed by the profession as a
major barrier to the development of a European market of new encrypted services.

Such an initiative would also be useful in preparation for the Information Society, in which encrypted
services could be called upon to play a major role. It would also eliminate the fragmentation of the Internal
Market and would simultaneously take other existing Community objectives into account such as those
persued by the industrial, audiovisual, cultural and consumer protection policies

Operators have overwhelmingly expressed support for a Community measure. In this regard, the DVB
(European Digital Video Broadcasting Group) has adopted a recommendation emphasizing the need for a
clear and uniform EU-wide regulatory framework. This view was shared by the European Parliament,
which proposed inserting in the Directive on the Use of Standards for the Transmission of Television
Signals a recital underlining the need to introduce and apply efficient anti-piracy legislation at European
level; the Directive, along with the recital, was adopted by the Council on 24 October 1995.

Before proposing an initiative, however, the Commission would like to consult interested parties on the
course of action described below.

The Commission could propose an initiative harmonizing national legislation. Taking into account the
principle of proportionality and subsidiarity, the proposed initiative could provide for minimum
harmonisation, leaving Member States free to adopt stricter principles while ensuring a minimum level of
equivalent protection within the Union. The proposed initiative could thus prohibit the production, sale,
possession for either commercial or personal use, installation and commercial promotion of decoders
designed to enable access to encrypted services without the encryptor's authorisation. Such a course of
action would both ensure EU-wide equivalent protection against illicit access to encrypted services and
afford legal certainty to the interests concerned.
....................

Introduction
I. The problem of illicit reception
The use of signal encryption in broadcasting has been on the increase in recent years. In the 1 980s systems
characterised by varying degrees of security began to appear employing a form of scrambling in which the
standard picture and/or sound signals are altered before transmission in such a way that a normal receiver
cannot reconstitute the original programme. In order to recover the original picture the viewer needed a
special decoding device (decoder, smart card or computer programme-normally issued on the payment of a
subscription fee) which could interpret the instructions accompanying the encrypted signal.
Originally used by cable companies to modulate the number of channels available to the viewer under the
terms of his subscription agreement, the technology rapidly spread to terrestrial pay-television stations and
evolved dramatically with the satellite broadcasting of encrypted channels. The use of encryption will,
however, increase sharply with the advent of digital technology and the development of Information Society
services (such as interactive teleshopping, tele-information services, on-line professional services and
interactive games) since they will all, in varying degrees, need to rely on encryption to ensure their viable
development.
Encryption is used for a variety of reasons: on top of commercial strategy requirements, i.e. the need to find
fresh sources of revenue, copyright holders can require to use encryption to protect and exploit the covered
programmes. The protection of minors, particularly in the case of adult channels, as well as the improved
identification of the audience to allow for targeted maketing, can also be major factors.

A flourishing unauthorised manufacturing industry has, however, sprung up alongside that of official
producers of decoding devices. This pirate industry manufactures and markets decoding devices enabling
illicit reception of the service without the service provider's authorisation , usually at prices below those of
official devices.
It is estimated that unauthorised devices currently represent about 5 to 20% of the total number of devices
in circulation and generate turnover of several million Ecus annually. Moreover, a specialised press
developed around this pirate market, providing targeted publications and thus also a medium for the

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marketing of unauthorised devices. An after-sales service market also developed, providing maintenance
and even sometimes the replacement of the device in the event that the operator would change system.

The sale of these unauthorised devices has, first of all, an adverse effect on the operators of encrypted
services. As well as suffering losses in terms of potential market and profits, they bear additional costs as a
result of having to adopt expensive distribution systems for their decoder devices (which are usually rented
out) in order to control their use.
For the suppliers of the programmes contained in the broadcasts, the marketing of the unauthorised devices
represents a loss of profits, as in the negotiations concerning the price payable for the rights, no account will
have been taken of the individuals who receive the programmes via an unauthorised device.
For those supplying the technology, the marketing of unauthorised devices undermines confidence in their
system and results in lost profits connected with the potential market taken over by such equipment.

For the consumers, the marketing of the unauthorised devices constitutes a risk as they could be mislead
about the origin of the decoding device they are purchasing and thus believe they are buying authorised
device, whereas it is in fact a pirated decoder. In this case, if the operator modifies the encryption system
for security reasons, the device purchased would be of no use to the consumer, who would have to pay for
another decoder. Moreover, the service providers pass on the losses they suffer from piracy onto the price
of, or rental charges for, authorised devices made available to consumers.

II. The Regulatory Environment


In order to redress this problem, operators have asked that Member States adopt specific rules providing
rapid and effective legal protection against the manufacture and distribution of unauthorised decoding
devices. While technological progress has improved the security of encryption systems, purely
technological solutions have often proved ineffective. When choosing an encryption system the operator is
faced with a trade-off between the cost of the system and the level of security it provides. Experience has
moreover shown that piracy techniques have developed at the same rate as encryption techniques and that
there is no guarantee that new systems using digital technology will not come under attack. It was therefore
felt that, in order to deal with pirates, technology had to be supplemented by legislation. However, the
resulting wave of regulatory change among Member States, which has not as yet been completed, reveals a
substantial difference in approach.

In this context, in its July 1994 Communication entitled "Europe's way to the Information Society. An
Action Plan" (COM(94) 347), the Commission announced the preparation of a "Green Paper on the Legal
Protection of Encrypted Services in the Internal Market" aimed at analysing the problems raised both by
the absence of specific legislation on illicit reception of encrypted services in some Member States and by
disparities between existing legislation in others.

III. Services covered


The subject of the following analysis is the illicit reception of an encrypted service, i.e. reception without
payment and/or authorisation, by persons who are not authorised by the service providers, and the solutions
that have been found to this problem by national regulations. "Encrypted services" is defined for the
purposes of this Paper as services whose signal is encrypted in order to ensure payment of a fee. This
category includes traditional encrypted broadcasts (via a cable, hertzian waves or by satellite), the new
broadcasting services (digital television, pay-per-view, near video on demand) and Information Society
services, namely electronic distance services provided on individual request of a service user (in particular
video on demand, games supplied on request, teleshopping and multimedia information services ).

Services encrypted for reasons other than ensuring the payment of a fee, i.e. those encrypted in order to
guarantee the integrity and confidentiality of the message transmitted, namely financial or
telecommunications services (in particular mobile telephone services using GSM technology) are not
covered. This exclusion is based on the fact that the general interests involved in the event of interception of
these services (i.e. the integrity and confidentiality of the communication) differ appreciably from the
general-interest objective (i.e. the protection of the value of a service provides against payment) threatened
by the illicit reception of encrypted services as defined for the purpose of this Paper. As this difference has

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led to appreciably different solutions in terms of legislation both at national and international level
particularly as regards action and the level of sanctions, the joint treatment of both problems is not justified.

Moreover, the Green Paper does not cover questions concerning systems designed to prevent the copying of
a work or other protected subject matter. These have been addressed in the Green Paper on Copyright and
Related Rights in the Information Society adopted by the Commission in July 1995.

Lastly, this Green Paper does not deal with questions relating to the standardization of conditional access
systems, or with the conditions under which licences are granted for such systems, since they are already
covered by the Directive on the Use of Standards for the Transmission of Television Signals,2or with the
control by national authorities of coding systems. The latter question, which is closely linked to the the
problem of security, is currently being studied by the Commission in the context of its work on the security
of information systems. Other studies could furthermore be launched at a future date if the efficient
operation of the Internal Market would be threatened or jeopardized by the implementation of national
rules.

Chapter 1: The European market in encrypted services


1. A buoyant market
The recent past, technological developments (e.g. satellites and fibre optic cables) have produced rapid
changes in the European audiovisual landscape and allowed for a steady expansion of the supply of
services. As more operators have increasingly engaged in targeted commercial strategies, the encryption of
their signals has proved essential for their viability.
The traditional structure for financing private channels, based exclusively on advertising income, is often no
longer a viable proposition for new entrants. As the number of broadcasting stations increases, the
contribution of income per channel from traditional television advertisers becomes smaller.
Simultaneousley operators attempt to distinguish themselves from this growing number of potential
competitors by catering to the needs of specific market niches, i.e. by focusing on the tastes and interests of
particular user groups (thematic film, music or sports channels, etc.). An operator can thus profile himself
from his mass market competitors by targeting a demand that had previously been satisfied only in part or
not at all. Comparing identical geographical areas, however, niche service audiences are invariably more
closely targeted and, by the same token, smaller. Operators of specialised media cannot, therefore, rely on
income from mass market advertisers,5 who express less or little interest a media strategy that is not aimed
a mass audience.

1.1 Reasons for using encryption:


The main reasons for encrypting signals can be summed up as follows:
To ensure the financial contribution of the beneficiaries of the service. the concept of niche services
is based on the ability to provide added value to certain categories of users as compared to those
aimed at the mass market. Users can therefore be asked to contribute to the financing of this
specialised service which, as a result of encryption, cannot be received by non-subscribers;
The possibility of increasing advertising revenue per audience unit. by encrypting the signal, the
operator will find it easier to sell advertising space to, or strike sponsorship deals with, firms
interested in the targeted market niche. Advertisers will therefore be asked to pay for the targeted
market only and not for the entire equivalent geographical market. They will therefore be willing to
pay more per audience unit since the audience will be regarded as being of a higher quality
compared to a mass audience.
The ability to target supply more accurately. increased knowledge of the user of the service will
help the operator to fine-tune his service to the exact requirements of the target market.
Simplifying the acquisition of broadcasting rights. satellite broadcasting has considerably increased
the potential reception area. Traditionally, however, broadcasting rights are granted on a territorial
basis, which means access often has to be limited to viewers within a specific geographical or
common language area. Encryption allows the operator to restrict the reception of the signal
exclusively to those territories for which rights have been acquired. Moreover, as suggested in the

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"Cable and Satellite" Directive,6encryption will enable the use of the actual audience (e.g. the
number of subscribers and not the geographical area) as a basis for the negotiation of satellite
broadcasting and cable retransmission rights, thereby reducing the acquisition cost of programmes
intended for the development of a niche service.
The creation of a new window in the chronology of media distribution. encryption allows
rightholders to add a new window to the pattern of media distribution; operators of an encrypted
service often carry programming before it is broadcast to a mass audience and, in order to secure
exclusive rights in respect of those works, they are prepared to pay large sums, thereby creating a
new source of income for the rightsholders.
Regulatory requirements. on grounds of public policy, in particular the protection of minors (e.g. in
the case of broadcasting channels aimed at adult audiences), the authorities may, as forseen in the
Television Without Frontiers Directive7 (Article 22, second sentence), allow certain services to
operate on condition that they are encrypted so that reception can be limited to specific groups of
viewers.

1.2 Encrypted services


The European market in encrypted services consists mainly of pay-television channels. Initially transmitted
via cable and hertzian waves, this service especially expanded when medium powered and high powered
satellites were introduced allowing broadcasts to be received anywhere within the footprint of the satellite
using an individual satellite dish.

The development of technology has, however, enabled more sophisticated pay broadcasting services to be
launched, e.g. pay-per-view broadcasts, which must be
paid for before they can be seen by viewers. Pay-per-view is technically possible without digital
compression, but it requires a sophisticated subscription management system. Pay-per-view could involve
the viewer paying to see one particular event (e.g. a concert or a boxing match) or a series of events (e.g. the
right to see ten football matches). In the latter example the broadcaster cannot presently identify exactly
which events have been viewed by a particular viewer. Technological progress is however allowing systems
to be developed that will allow rights holders to be remunerated in line with the actual "consumption" of
their programmes.

The next stage will probably be near video on demand, which involves the broadcaster transmitting the
same programme (usually, but not necessarily, a film) at different starting times. A viewer can thus choose
not only the programme he wants to see but also, within certain limits, the time at which he wants to see it.
This stage will be followed by the commercial development of actual video on demand, which gives the
viewer complete flexibility over starting times, as they would no longer be pre-determined by the
broadcaster.

The explosion of encryption applications will only take place, however, with the development of the other
services of the Information Society: not only audiovisual services, but all the other applications (e.g.
interactive teleshopping, tele-information services, professional on-line services, interactive games, etc.)
will, to a varying degree, have to rely on encryption for their viable development. Moreover, as encryption
will often be essential for security purposes (e.g. for electronic payment in the case of teleshopping),
synergy between these two encryption applications (control/security being enhanced by the subscription
system) would - under conditions of legal certainty - make its use even better suited to promoting the
development of all services in the Information Society .

The development of these new services will depend to a large extent on the establishment of a regulatory
framework which simultaneously takes account of the legitimate requirements of operators and users of the
services. In this respect, great importance will be attached to the solution found on the international and
worldwide level to the multitude of security problems implied in the use of electronic transactions. These
include in particular the regulatory restrictions on the use of encryption systems, public authorities' control
over encrypted communications for reasons of national security, and the identification and verification of
the respective parties. At present, the Commission, in the framework of its activities on the security of
information systems, is analysing the possibility of establishing, at European level, organisations which

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would be responsible for the control and certification, and totally independent from public authorities.

3. A market exposed to piracy


3.1 Technological development
Due to advanced technology, it is in theory now possible to use a conditional access system providing such
a high level of security that pirates would be incapable of breaking it. In practice, however, these systems
also have to comply with certain economic and regulatory realities, namely:
Systems must be produced and distributed at a reasonable price, since consumers will be unwilling
to pay more than a certain amount to buy a decoder,12 depending on the extent to which they find the
programmes interesting or the selection of channels that can be picked up with the system in question.
The cost of operating the system must not exceed the amount of revenue (i.e. the income the
operator stands to lose if illicit decoding devices are put on sale) at risk.
Systems must comply with regulatory requirements imposed by certain Member States on the use
of encryption for commercial purposes.

As the need to achieve an acceptable cost for the conditional access system means that they cannot be made
completely secure, manufacturers of illicit decoding devices have taken advantage of this situation, and are
now even able to keep up with the pace of technological developments......
.....
3.2 The consequences of piracy
In some Member States, however, the manufacture and marketing of unauthorised decoding devices and the
manipulation of authorised devices so as to allow access to a service in breach of the conditions laid down
with regard to time (duration of the subscription) and quantity (number of channels) have now become
highly lucrative.15 In those Member States, they have given rise to parallel activities, such as the
publication of specialized magazines and the setting-up of maintenance and after-sales services.
The fact that they allow illicit reception of encrypted services has several adverse consequences:
the encryptors are deprived of the subscription revenue they would have obtained if the customer
had purchased a lawful device (about ECU 200-250 annually for each unauthorised receiver);
in some cases it is necessary to replace the pirated system. Operators spend vast sums each year
(from ECU 60 000 to more than ECU 1.2 million per operator, according to the survey) on system
protection (controlling distribution, making improvements, changing cards, etc.). Even control systems
based on removable smart cards, which seemed more immune than most, have been compromised. It was at
first claimed that if a system was pirated, it could be safeguarded simply by a new issue of cards. In fact,
when the number of subscribers is very large, the cost of replacing all the cards can be a significant drain on
earnings. On top of the cost of each smart card,16there are the code development costs, postage and other
costs (the survey revealed that making pirated systems secure again can cost more than ECU 45 million);
the time needed to develop a new system. Turning once again to the example of the smart cards, an
operator wishing to replace its card would need some time to develop a new one. Meanwhile, the only
available course of action would be to engage in a series of temporary electronic countermeasures until it
can issue a new smart card. This is a risky situation, especially since pirates anticipate the countermeasures
and take appropriate avoiding action. In addition, there would inevitably need to be a period of time in
which both the old card and the new card would remain operational. This means that the pirate cards in
circulation would also last through the transition period, giving pirates enough time to develop a new pirate
card. With the assistance of private investors, pirates can now produce their own cards and chips almost as
quickly as the broadcasters. Other techniques aimed at disabling pirate cards (e.g. sending de-activating
signals that disconnect only unauthorised cards) have proved short-lived (in this particular case, because
pirate manufacturers themselves distribute devices specifically designed to block out the de-activating
signal).
financial harm to those holding rights in the programmes. Since the fees paid to rightholders
generally also take into account the potential audience, the fact that encrypted programmes are picked up
via illicit reception deprives rightholders of the income they would have received from subscription revenue
if the customer had purchased an authorised decoder instead. Moreover, when negotiations take place
regarding rights in respect of subsequent (in clear) broadcasts, rightholders will find it more difficult to
secure high levels of remuneration because of illicit reception which had already occurred when the

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material was broadcast on the encrypted channel;


the loss of income and credibility for suppliers of the technology. When selecting an encryption
system, operators will want to be sure that the system chosen is the most secure, so that they can provide
those holding the rights in the programmes with a guarantee that a broadcast they have authorised will not
be pirated; a high incidence of illicit decoding devices might be construed as evidence that a system is not
very effective;
the fact that market confidence in the system would be undermined. The market requires confidence
in encryption if the notion of exclusiveness associated with the services is to be maintained and if the
window created in the media chronology is to be justified. Illicit reception erodes that confidence in such a
manner that rightholders will become reluctant to license first-run programming, broadcasters will not be
prepared to pay high licence fees and consumers will be reluctant to pay subscription fees.
the consumers could be mislead about the origin of the decoding device they are purchasing and
thus believe they are buying authorised device, whereas it is in fact a pirated decoder. In this case, if the
operator modifies the encryption system for security reasons, the device purchased would be of no use to
the consumer, who would have to pay for another decoder. Moreover, the service providers pass on the
losses they suffer from piracy onto the price of, or rental charges for, authorised devices made available to
consumers.

As well as these direct consequences there are indirect effects on the development of the market in new
encrypted services. Clearly, development will be possible only if an adequate level of security is guaranteed
for operators to be willing to engage in activities requiring heavy initial investment.

4. A market covered by fragmented rules


In order to deal with the pirate industry, technology has had to be supplemented by legislation as part of a
regulatory process at Member State level. This process has followed different approaches and is still not
complete. The legislation will be examined in Chapter 3.
According to the media industry, such regulatory fragmentation could well entail difficulties for the
development of encrypted services at European level and adversely affect the proper operation of the
Internal Market. Since the transnational dimension will become increasingly necessary for the growth of a
truly European encrypted services industry, the absence of an equivalent level of legal protection against
piracy could well have an adverse effect on the development of those services on a European scale.
As confirmed by the consultation, operators could, because of the absence of legal protection in one or more
countries where reception is possible, decide not to cover a Member State, for fear of the consequences of
piracy in that country. Effective legal protection weighs heavily in an operator's decision to market his
service in a given Member State.
In addition, the cost of research into national laws and of possible legal proceedings in the event of piracy in
the various Member States means additional costs to operators and to their activities, thus adversely
affecting the development of the service.
When negotiations covering programme rights take place, the absence of equivalent legal protection in
every Member State where reception is possible will make it more difficult to secure those rights since
(especially in the case of recent works) operators cannot guarantee that there will be no illicit access in
other Member States. It will also be more difficult to determine what remuneration the rightholders should
receive, given that the actual audience in the signal reception area cannot be determined accurately.
Operators will thus find it more difficult to secure rights at a reasonable price, and this will have
repercussions on their cross-border activities in particular.
Since certain methods of transmission are more exposed to illicit access than others (in particular off-air or
satellite transmission as compared with cable distribution, which is generally more secure due to the
physical link with the viewer), operators may well choose not to use some of those methods feeling that the
risk of piracy is higher. Thus, in the absence of effective legal protection, certain transmission systems, in
particular those with the strongest transnational potential, might be used less often than others.

The absence of equivalent legal protection in Member States will also have negative consequences if illicit
equipment is imported from third countries. Such equipment will be able to enter the Community via a
Member State which does not prohibit its marketing or distribution and can then easily arrive in another

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Member State, making the latter's efforts to combat illicit reception ineffective.

What is more, the disparity between rules on illicit reception will result in distortions of competition
between operators in different countries. Those who transmit signals in Member States providing a high
level of legal protection will have a competitive advantages (this will be reflected in their programme-
purchasing ability, for instance) over those who distribute their signal in a State where there is no legal
protection, since they will have to bear additional costs through having to use a particularly secure
encryption system.

Lastly there is a risk that, as a result of differences between solutions in the Member States, the
opportunities afforded by the Directive on the Use of Standards for the Transmission of Television
Signals17 will be lost. The use of increasingly standardized systems will be hindered by the fact that the
level of legal protection against illicit access is not the same in all the Member States from which the
programmes are broadcast. This means that the level of security of the system and the means used to
distribute decoding equipment will have to vary with the Member Stateof reception, leading to further
fragmentation in an audiovisual area which, to some extent, ought to be standardized. In this respect, DVB
(European Digital Video Broadcasting Group, which is at the origin of the digital television standards
partly reproduced in Directive 95/47/EC has, in the context of its experts' group on the piracy of encrypted
services adopted a recommendation underlining the need to provide operators throughout the Union with a
clear and uniform regulatory framework that can be relied upon in the event of illicit access to encrypted
services.

.
CHAPTER 3: MEMBER STATES' LEGISLATION
1. Overview
The analysis of the regulatory environment focuses on the solutions provided by national legislations to the
problem of illicit reception of an encrypted service, i.e. reception, without payment and/or authorisation, by
persons not authorised by the service provider.
A succinct analysis of the regulatory solutions of each Member State to the problem of illicit reception of
encrypted services is set out below. It should however be noted that the legislative environment can evolve
very rapidly and any "snapshot" could cease to be relevant within a very short time.

CHAPTER 4: BARRIERS TO THE EFFICIENT OPERATION OF THE INTERNAL MARKET


In view of the regulatory environment in the Member States, the Commission considers that the present
legislative differencies can create obstacles to the free movement of goods and services and can thus
damage the efficient operation of the Internal Market.

Some of these obstacles seem incompatible with the principles of the Treaty and will therefore have to be
removed. This applies, first, to certain national regulations which make a distinction, for the purposes of
legal protection against illicit reception, based on the origin of the service. Under such rules, services
originating from other Member States are sometimes protected against illicit reception only if the national
authority has first issued a certificate which entitles them to such protection.26

Secondly, other regulations simply make it impossible for some services to obtain protection, because of the
means of transmission used, e.g. when only hertzian services or services carried by cables are protected
against illicit reception, whereas encrypted satellite services, all of which are of foreign origin, do not enjoy
such protection.27 This is consequently disguised discrimination.

In these cases the transfrontier provision of services, such as that which exists between the subscriber and
the encryptor, would be rendered more difficult than the provision of national services. The latter would be
automatically protected, whereas services originating from other Member States would not be so protected
or would have to obtain prior authorisation in order to enjoy such protection. These measures do not seem
justifiable in the light of European Court of Justice case-law. Indeed discriminatory measures affecting the
freedom to provide services are compatible with Community law only if they can be brought within an
express derogation, such as that contained in Article 56 of the Treaty, which refers to grounds of public

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policy, public security or public health.28 In these particular cases, it would appear that none of the grounds
in question could justify such discrimination. In this regard, the Commission may put an end to such
discrimination as part of its monitoring of the application of Community law.

By contrast, the Obstacles to the free movement of decoding devices (Article 30 et seq.)
Article 30 of the Treaty states that quantitative restrictions on imports and all measures having equivalent
effect shall be prohibited between analysis of national regulations has identified a number of obstacles to
the free movement of goods and services which might be justified by a public interest objective, and
therefore compatible with the principles of the Treaty. For these obstacles, an initiative to ensure the
operation of the Internal Market might be necessary. Manufacturing and marketing prohibitions are
indistinctly applicable regulations30 which have restrictive effects on trade, in so far as they erect barriers
to the importation and marketing of products originating in other Member States.

In the light of the case-law of the Court, these prohibitions are justified because they pursue public interest
objectives. First, they aim to protect the encryptor against those who might fraudulently profit from his
activities (namely manufacturers and distributors of unauthorised decoding devices), and to protect the
consumer against the marketing of devices which, as they are not official, would no longer guarantee
reception of the service if the operator were to change the system. This objective, which aims to ensure that
trade is conducted within a framework of equity and fairness, is one of the general or public interest
objectives which, according to the Court, may justify an obstacle to the free movement of goods. The
protection of consumers and the fairness of commercial transactions have on several occasions
been recognized by the Court as justification for barriers to the free movement of goods.

Secondly, these prohibitions aim to ensure the right to remuneration of the intellectual property right
holders of encrypted broadcasts and industrial and intellectual property right holders in respect of
devices.32 However, the objective of ensuring the right to legitimate remuneration, whether it is the
remuneration of the right holders for programmes or that of the right holders for the technology contained in
unauthorised devices, is one of the rights which, under the case-law of the ECJ, is the specific aim of
industrial and intellectual property.33

These rules also respect the proportionality criterion, since they confine themselves to prohibiting the
marketing of devices manufactured without the prior authorisation of the encryptor, irrespective of their
domestic or foreign origins; therefore they do not go beyond what is necessary for the attainment of the
objective.34 Finally, they also respect the substitution and equivalence criterion, since there are no
alternative and less restrictive measures that would ensure the desired protection.

In conclusion, an obstacle to the free movement of decoding devices manufactured and marketed in the
State of origin, without the prior consent of the encryptor, may be justified by consumer protection and the
fairness of commercial transactions, as well as by the protection of industrial or intellectual property.

2. Obstacles to the free movement of services relating to decoding devices


(Article 59 et seq.)
The analysis of national regulations has shown that some laws prohibit activities which are ancillary to the
manufacture and marketing of illicit decoding devices. This applies to regulations which prohibit the
marketing, installation, maintenance and replacement of illicit decoding devices.
These activities constitute the provision of services within the meaning of Articles 59 and 60 of the Treaty.
Although these prohibitions are indistinctly applicable, they nevertheless do have restrictive effects on the
free movement of services. Marketing activities and/or after-sales services carried out by service providers
established in other Member States would be prohibited.
Nevertheless, according to the case-law of the Court,these restrictive effects may be justified; in fact these
laws pursue public interest objectives such as the protection of consumers and industrial and intellectual
property. In addition, these restrictive effects do not go beyond what is necessary for the attainment of the
objective, and may therefore be regarded as proportionate.
In conclusion, prohibitions on the marketing, installation, maintenance and replacement of decoding devices
manufactured and marketed in the State of origin without the prior consent of the encryptor may be

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justified by the need to protect consumers and industrial and intellectual property.

3. Obstacles to the free movement of encrypted services


Obstacles to the free movement of encrypted services may also result from the absence of legal protection
in certain receiving States. The consultation conducted by the Commission has confirmed that operators
consider effective legal protection against illicit reception of the service to be an important factor when
deciding whether to distribute the service in a country. The absence of such legal protection certainly makes
marketing more difficult and more haphazard. Operators will have to bear additional costs due not only to
the use of a particularly secure system, but also to the need to adopt particularly costly distribution systems
for the decoding devices (normally rental).
A legal void of this kind gives rise to restrictive effects on the movement of encrypted services in the
Internal Market, since their distribution in countries without legal protection against illicit reception is made
more difficult.
However, this restrictive effect is not contrary to Community law because, as has been recognized by the
Court, in the absence of any Community harmonisation, Member State are free to regulate economic
activities in their territory in line with the principles of the Treaty. They may therefore decide, whilst
respecting the proportionality criterion, whether or not to prohibit certain activities on the grounds of
general interest objectives.
In conclusion, regulatory policy considerations relating to economic activities, which are for the Member
State to assess, may justify the restrictive effect entailed by the regulatory void in the absence of any
Community harmonisation.

4. Distortions of competition
Disparities between national regulations or the absence of such regulations in some Member States may
also lead to distortions of competition in the Internal Market. An operator who distributes his decoding
devices in a State with strong legal protection will have competitive advantages (which will for example be
reflected in his programme purchasing capacity) over the operator who has to distribute his service in a
State without effective legal protection, since the latter will have to bear additional costs resulting for
example from the choice of a particularly secure distribution system.
This disparity between the competitive environments of the Member States could have adverse
consequences for the development of encrypted services in the Internal Market, since operators would not
be subject to the same market conditions within the European Union.
In conclusion, disparity between regulations may lead to distortions of competition which might make it
more difficult to develop encrypted services.

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JUDGMENT OF THE COURT (Grand Chamber)


16 December 2008(*)
Case C-210/06,
REFERENCE for a preliminary ruling under Article 234 EC from the Szegedi tltbla (Hungary), made
by decision of 20 April 2006, received at the Court on 5 May 2006, in the proceedings in the case of
CARTESIO Oktat s Szolgltat bt,
(Transfer of a company seat to a Member State other than the Member State of
incorporation Application for amendment of the entry regarding the company seat in the commercial
register Refusal Appeal against a decision of a court entrusted with keeping the commercial
register Article 234 EC Reference for a preliminary ruling Admissibility Definition of court or
tribunal Definition of a court or tribunal against whose decisions there is no judicial remedy under
national law Appeal against a decision making a reference for a preliminary ruling Jurisdiction of
appellate courts to order revocation of such a decision Freedom of establishment Articles 43 EC and
48 EC)
Case C-210/06,
REFERENCE for a preliminary ruling under Article 234 EC from the Szegedi tltbla (Hungary), made
by decision of 20 April 2006, received at the Court on 5 May 2006, in the proceedings in the case of

CARTESIO Oktat s Szolgltat bt,

THE COURT (Grand Chamber),

...after hearing the Opinion of the Advocate General at the sitting on 22 May 2008, gives the following
Judgment
1 This reference for a preliminary ruling concerns the interpretation of Articles 43 EC, 48 EC and
234 EC.
2 The reference has been made in the context of proceedings brought by CARTESIO Oktat s
Szolgltat bt (Cartesio), a limited partnership established in Baja (Hungary), against the decision
rejecting its application for registration in the commercial register of the transfer of its company seat to
Italy.

National legal context


The law relating to civil procedure
3 Article 10(2) of Law III of 1952 on civil procedure (a Polgri perrendtartsrl szl 1952. vi III.
trvny, the Law on civil procedure), states:
At second instance:

(b) appeals arising from cases dealt with by regional courts or courts of Budapest shall be heard by
appeal courts
4 Article 115/A of the Law on civil procedure provides that:
(1) The court may ask the Court of Justice of the European Communities for a preliminary ruling in
accordance with the rules laid down in the Treaty establishing the European Community.
(2) The court shall make the reference for a preliminary ruling by order and shall stay the
proceedings
(3) An appeal may be brought against a decision to make a reference for a preliminary ruling. An
appeal cannot be brought against a decision dismissing a request for a reference for a preliminary
ruling.

5 Under Article 233(1) of the Law on civil procedure:


Save as otherwise provided, appeal proceedings may be brought against the decisions of courts of first
instance
6 Article 233/A of that Law provides that:
An appeal may be brought against orders made at second instance in respect of which a right of appeal
exists under the rules applicable proceedings at first instance.
7 Article 249/A of the Law on civil procedure states that:
Appeal proceedings may also be brought against a decision made at second instance dismissing a
request for a reference for a preliminary ruling (Article 155/A).
8 Article 270 of the Law on civil procedure is worded as follows:

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(1) Save as otherwise provided, the Legfelsbb Brosg [Supreme Court] shall hear appeals on
points of law. The general rules shall apply mutatis mutandis.
(2) The parties, interveners and persons affected by the decision may, in respect of the part of that
decision which refers to them, bring an appeal on a point of law before the Legfelsbb Brosg against
final judgments and orders which bring proceedings an end, pleading infringement of the law.

9 Article 271(1) of the Law on civil procedure provides that:


No appeal shall lie:
(a) against decisions which have become final at first instance, except in cases which are permitted
by law;
(b) where one party has failed to exercise the right to bring an appeal and the court of second
instance, hearing the appeal brought by the other party, confirms the decision at first instance;

10 Under Article 273(3) of that law:


The institution of appeal proceedings shall not have suspensory effect but, where a party so requests,
the Legfelsbb Brosg may exceptionally suspend enforcement of the judgment
.......

The dispute in the main proceedings and the questions referred for a preliminary ruling
21 Cartesio was formed on 20 May 2004 as a betti trsasg (a limited partnership) under
Hungarian law. Its seat was established in Baja (Hungary). Cartesio was registered in the commercial
register on 11 June 2004.
22 Cartesio has two partners both of whom are natural persons resident in Hungary and holding
Hungarian nationality: a limited partner, whose only commitment is to invest capital, and an unlimited
partner, with unlimited liability for the companys debts. Cartesio is active, inter alia, in the field of
human resources, secretarial activities, translation, teaching and training.
23 On 11 November 2005, Cartesio filed an application with the Bcs-Kiskun Megyei Brsg
(Regional Court of Bcs-Kiskun), sitting as a Cgbrsg (commercial court), for registration of the
transfer of its seat to Gallarate (Italy) and, in consequence, for amendment of the entry regarding
Cartesios company seat in the commercial register.
24 By decision of 24 January 2006, that application was rejected on the ground that the Hungarian
law in force did not allow a company incorporated in Hungary to transfer its seat abroad while
continuing to be subject to Hungarian law as its personal law.
25 Cartesio lodged an appeal against that decision with the Szegedi tltbla (Court of Appeal of
Szeged).
26 Relying on the judgment in Case C-411/03 SEVIC Systems [2005] ECR I-10805, Cartesio claimed
before the Szegedi tltbla that, to the extent that Hungarian law draws a distinction between
commercial companies according to the Member State in which they have their seat, that law is contrary
to Articles 43 EC and 48 EC. It follows from those articles that Hungarian law cannot require Hungarian
companies to choose to establish their seat in Hungary.
27 Cartesio also maintained that the Szegedi tltbla was required to refer that question for a
preliminary ruling, since it constitutes a court or tribunal of a Member State against whose decisions
there is no judicial remedy under national law.
28 The Szegedi tltbla points out that, under Hungarian law, proceedings before the courts
responsible for maintaining the commercial register and before courts hearing appeals against decisions
of the commercial register courts are not inter partes. It therefore wishes to know whether it may be
classified as a court or tribunal within the meaning of Article 234 EC.
29 Moreover, if the answer to this question is in the affirmative, the Szegedi tltbla is of the view
that is still unclear whether, for the purposes of the third paragraph of Article 234 EC, it should be
classified as a court or tribunal against whose decisions there is no judicial remedy under national law.
30 It states in that regard that although, according to Hungarian law, its decisions on appeal are final
and enforceable, they may nevertheless be the subject of an extraordinary appeal an appeal on a
point of law before the Legfelsbb Brsg.
31 However, as the purpose of an appeal on a point of law is to ensure the consistency of case-law,
the possibility of bringing such an appeal is limited, in particular by the condition governing the
admissibility of pleas, which is linked to the obligation to allege a breach of law.
32 The Szegedi tltbla further notes that, in Hungarian academic legal writing and case-law,
questions have been raised as to the compatibility with Article 234 EC of the provisions laid down in
Articles 155/A and 249/A of the Law on civil procedure concerning appeals against decisions by which a
preliminary question is referred to the Court.
33 In that regard, the Szegedi tltbla points out that those provisions might result in an appellate
court preventing a court which has decided to make a reference to the Court from doing so, even

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though an interpretation by the Court of a provision of Community law is needed to resolve the dispute
in the main proceedings.......
34 ..........
40 In those circumstances, on the view that resolution of the dispute before it depended on the
interpretation of Community law, the Szegedi tltbla decided to stay proceedings and to refer the
following questions to the Court for a preliminary ruling:
(1) Is a court of second instance which has to give a decision on an appeal against a decision of a
commercial court (cgbrsg) in proceedings to amend a registration [of a company], entitled to make
a reference for a preliminary ruling under Article 234 [EC], where neither the action before the
commercial court nor the appeal procedure is inter partes?
(2) In so far as an appeal court is included in the concept of a court or tribunal which is entitled to
make a reference for a preliminary ruling under Article 234 [EC], must that court be regarded as a
court against whose decisions there is no judicial remedy, which has an obligation, under Article 234
[EC], to submit questions on the interpretation of Community law to the Court of Justice of the
European Communities
(3) Does a national measure which, in accordance with domestic law, confers a right to bring an
appeal against an order making a reference for a preliminary ruling limit the power of the Hungarian
courts to refer questions for a preliminary ruling or could it limit that power derived directly from
Article 234 [EC] if, in appeal proceedings, the national superior court may amend the order, render
the request for a preliminary ruling inoperative and order the court which issued the order for reference
to resume the national proceedings which had been suspended?....
....
The questions referred for a preliminary ruling
...
. The second question
64 By this question, the Court is essentially being asked whether a court such as the referring court,
whose decisions in disputes such as that in the main proceedings may be appealed on points of law, falls
to be classified as a court or tribunal against whose decisions there is no judicial remedy under national
law, within the meaning of the third paragraph of Article 234 EC.
Admissibility
65 The Commission of the European Communities contends that this question is inadmissible as it is
manifestly irrelevant to the resolution of the dispute in the main proceedings, since the order for
reference has already been submitted to the Court, rendering any examination of whether there is an
obligation to make a reference devoid of interest.
66 That objection must be rejected.
67 According to settled case-law, there is a presumption of relevance in favour of questions on the
interpretation of Community law referred by a national court, and it is a matter for the national court to
define, and not for the Court to verify, in which factual and legislative context they operate. The Court
declines to rule on a reference for a preliminary ruling from a national court only where it is quite
obvious that the interpretation of Community law that is sought is unrelated to the actual facts of the
main action or to its purpose, where the problem is hypothetical, or where the Court does not have
before it the factual or legal material necessary to give a useful answer to the questions submitted to it
(see, to that effect, Joined Cases C-222/05 to C-225/05 van der Weerd and Others [2007] ECR I-4233,
paragraph 22 and the case-law cited).
68 As stated in paragraph 27 above, Cartesio claimed before the referring court that that court was
required to make a reference to the Court for a preliminary ruling, since it fell to be classified as a court
or tribunal against whose decisions there is no judicial remedy under national law, within the meaning of
the third paragraph of Article 234 EC.
69 As the referring court had doubts concerning that plea, it decided to refer a question on that issue
to the Court for a preliminary ruling.
70 It would be contrary to the spirit of cooperation which must guide all relations between national
courts and the Court of Justice, and contrary also to the requirements of procedural economy, to require
a national court first to seek a preliminary ruling on the sole question whether that court is one of those
referred to in the third paragraph of Article 234 EC, before, where appropriate, having to formulate
not until then and by a second reference for a preliminary ruling the questions concerning the
provisions of Community law relating to the substance of the dispute before it.
71 Moreover, the Court has already replied to a question relating to the characteristics of national
courts in the light of the third paragraph of Article 234 CE in a context offering certain similarities with
that of the present reference for a preliminary ruling, without the admissibility of that question being
disputed (Case C-99/00 Lyckeskog [2002] ECR I-4839).
72 In those circumstances, it does not appear at least not prima facie that the interpretation of
Community law sought is unrelated to the actual facts of the main action or to its purpose.

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73 Accordingly, the presumption of relevance in favour of references for a preliminary ruling is not,
as regards the present question, rebutted by the objection put forward by the Commission (see, inter
alia, van der Weerd and Others, paragraphs 22 and 23).
74 It follows that the second question is admissible.
Substance
75 The issue raised by this question is thus whether the referring court falls to be classified as a
court or tribunal of a Member State against whose decisions there is no judicial remedy under national
law, within the meaning of the third paragraph of Article 234 EC. It is clear from the order for reference
that this question is raised in view of the fact, referred to in paragraphs 30 and 31 above, that, although
Hungarian law provides that decisions delivered on appeal by the referring court may be the subject of
an extraordinary appeal in other words, an appeal on a point of law before the Legfelsbb Brsg, the
purpose of which is to ensure the consistency of case-law the possibilities of bringing such an appeal
are limited, in particular, by the condition governing the admissibility of pleas, which is linked to the
obligation to allege a breach of law, and in view of the fact, also pointed out in the order for reference,
that under Hungarian law an appeal on a point of law does not, in principle, have the effect of
suspending enforcement of the decision delivered on appeal.
76 The Court has already held that decisions of a national appellate court which can be challenged by
the parties before a supreme court are not decisions of a court or tribunal of a Member State against
whose decisions there is no judicial remedy under national law within the meaning of Article 234 EC.
The fact that the examination of the merits of such challenges is conditional upon a preliminary
declaration of admissibility by the supreme court does not have the effect of depriving the parties of a
judicial remedy (Lyckeskog, paragraph 16).
77 That is true a fortiori in the case of a procedural system such as that under which the case before
the referring court must be decided, since that system makes no provision for a preliminary declaration
by the supreme court that the appeal is admissible and, instead, merely imposes restrictions with
regard, in particular, to the nature of the pleas which may be raised before such a court, which must
allege a breach of law.
78 In common with the lack of suspensory effect of appeals on a point of law before the Legfelsbb
Brsg, such restrictions do not have the effect of depriving the parties in a case before a court whose
decisions are amenable to an appeal on a point of law of the possibility of exercising effectively their
right to appeal the decision handed down by that court in a dispute such as that in the main
proceedings. It does not follow, therefore, from those restrictions or from the lack of suspensory effect
that that court falls to be classified as a court handing down a decision against which there is no judicial
remedy.
79 In the light of the foregoing, the answer to the second question must be that a court such as the
referring court, whose decisions in disputes such as that in the main proceedings may be appealed on
points of law, cannot be classified as a national court or tribunal against whose decisions there is no
judicial remedy under national law, within the meaning of the third paragraph of Article 234 EC.

Substance
88 Article 234 EC gives national courts the right and, where appropriate, imposes on them the
obligation to make a reference for a preliminary ruling, as soon as the national court perceives either
of its own motion or at the request of the parties that the substance of the dispute raises one of the
points referred to in the first paragraph of Article 234. It follows that national courts have the widest
discretion in referring matters to the Court if they consider that a case pending before them raises
questions involving interpretation of provisions of Community law, or consideration of their validity,
necessitating a decision on their part (Case 166/73 Rheinmhlen-Dsseldorf [1974] ECR 33, paragraph
3).
89 It is also clear from the case-law of the Court that, in the case of a court or tribunal against
whose decisions there is a judicial remedy under national law, Article 234 EC does not preclude decisions
of such a court by which questions are referred to the Court for a preliminary ruling from remaining
subject to the remedies normally available under national law. Nevertheless, in the interests of clarity
and legal certainty, the Court must abide by the decision to refer, which must have its full effect so long
as it has not been revoked (Case 146/73 Rheinmhlen-Dsseldorf [1974] ECR 139, paragraph 3).
90 Moreover, the Court has already held that the system established by Article 234 EC with a view to
ensuring that Community law is interpreted uniformly throughout the Member States instituted direct
cooperation between the Court of Justice and the national courts by means of a procedure which is
completely independent of any initiative by the parties (Case C-2/06 Kempter [2008] ECR I-0000,
paragraph 41).
91 The system of references for a preliminary ruling is based on a dialogue between one court and
another, the initiation of which depends entirely on the national courts assessment as to whether a
reference is appropriate and necessary (Kempter, paragraph 42).

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92 It is clear from the order for reference that, under Hungarian law, a separate appeal may be
brought against a decision making a reference to the Court for a preliminary ruling, although the main
proceedings remain pending in their entirety before the referring court, proceedings being stayed until
the Court gives a ruling. The appellate court thus seised has, under Hungarian law, power to vary that
decision, to set aside the reference for a preliminary ruling and to order the first court to resume the
domestic law proceedings.
93 As is clear from the case-law cited in paragraphs 88 and 89 above, concerning a national court or
tribunal against whose decisions there is a judicial remedy under national law, Article 234 EC does not
preclude a decision of such a court, making a reference to the Court, from remaining subject to the
remedies normally available under national law. Nevertheless, the outcome of such an appeal cannot
limit the jurisdiction conferred by Article 234 EC on that court to make a reference to the Court if it
considers that a case pending before it raises questions on the interpretation of provisions of Community
law necessitating a ruling by the Court.
94 It should be pointed out, moreover, that the Court has already held that, in a situation where a
case is pending, for the second time, before a court sitting at first instance after a judgment originally
delivered by that court has been quashed by a supreme court, the court at first instance remains free to
refer questions to the Court pursuant to Article 234 EC, regardless of the existence of a rule of national
law whereby a court is bound on points of law by the rulings of a superior court (Case 146/73
Rheinmhlen-Dsseldorf).
95 Where rules of national law apply which relate to the right of appeal against a decision making a
reference for a preliminary ruling, and under those rules the main proceedings remain pending before
the referring court in their entirety, the order for reference alone being the subject of a limited appeal,
the autonomous jurisdiction which Article 234 EC confers on the referring court to make a reference to
the Court would be called into question, if by varying the order for reference, by setting it aside and
by ordering the referring court to resume the proceedings the appellate court could prevent the
referring court from exercising the right, conferred on it by the EC Treaty, to make a reference to the
Court.
96 In accordance with Article 234 EC, the assessment of the relevance and necessity of the question
referred for a preliminary ruling is, in principle, the responsibility of the referring court alone, subject to
the limited verification made by the Court in accordance with the case-law cited in paragraph 67 above.
Thus, it is for the referring court to draw the proper inferences from a judgment delivered on an appeal
against its decision to refer and, in particular, to come to a conclusion as to whether it is appropriate to
maintain the reference for a preliminary ruling, or to amend it or to withdraw it.
97 It follows that, in a situation such as that in the case before the referring court, the Court must
also in the interests of clarity and legal certainty abide by the decision to make a reference for a
preliminary ruling, which must have its full effect so long as it has not been revoked or amended by the
referring court, such revocation or amendment being matters on which that court alone is able to take a
decision.
98 In the light of the foregoing, the answer to the third question must be that, where rules of
national law apply which relate to the right of appeal against a decision making a reference for a
preliminary ruling, and under those rules the main proceedings remain pending before the referring
court in their entirety, the order for reference alone being the subject of a limited appeal, the second
paragraph of Article 234 EC is to be interpreted as meaning that the jurisdiction conferred by that
provision of the Treaty on any national court or tribunal to make a reference to the Court for a
preliminary ruling cannot be called into question by the application of those rules, where they permit the
appellate court to vary the order for reference, to set aside the reference and to order the referring
court to resume the domestic law proceedings.
.....
The fourth question
......
On those grounds, the Court (Grand Chamber) hereby rules:
(1) A court such as the referring court, hearing an appeal against a decision of a lower
court, responsible for maintaining the commercial register, rejecting an application for
amendment of information entered in that register, must be classified as a court or tribunal
which is entitled to make a reference for a preliminary ruling under Article 234 EC, regardless
of the fact that neither the decision of the lower court nor the consideration of the appeal by
the referring court takes place in the context of inter partes proceedings.
(2) A court such as the referring court, whose decisions in disputes such as that in the
main proceedings may be appealed on points of law, cannot be classified as a court or
tribunal against whose decisions there is no judicial remedy under national law, within the
meaning of the third paragraph of Article 234 EC.
(3) Where rules of national law apply which relate to the right of appeal against a decision
making a reference for a preliminary ruling, and under those rules the main proceedings

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remain pending before the referring court in their entirety, the order for reference alone
being the subject of a limited appeal, the second paragraph of Article 234 EC is to be
interpreted as meaning that the jurisdiction conferred on any national court or tribunal by
that provision of the Treaty to make a reference to the Court for a preliminary ruling cannot
be called into question by the application of those rules, where they permit the appellate
court to vary the order for reference, or set aside the reference and to order the referring
court to resume the domestic law proceedings.

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Opinion of Mr Advocate General Poiares Maduro delivered on 22 May 2008.


CARTESIO Oktat s Szolgltat bt.
Reference for a preliminary ruling: Szegedi tlotbla - Hungary.
Case C-210/06.

Opinion of the Advocate-General


1. The reference for a preliminary ruling arises out of an appeal against a decision of the Bcs-Kiskun
Megyei Brsg (Regional Court, Bcs-Kiskun) (Hungary), sitting as a commercial court. It concerns a
limited partnership that seeks to transfer its operational headquarters from Hungary to Italy, but wishes
to remain registered in Hungary, so that its legal status may continue to be governed by Hungarian law.
However, the commercial court, in the exercise of its task of maintaining the commercial register,
refused to enter the new address in the local register on the ground that the transfer was not possible
under Hungarian law. It held that a firm that wishes to transfer its operational headquarters to another
Member State must first be wound up in Hungary and then reconstituted under the law of that Member
State. In the framework of the appeal proceedings, the Szegedi tlotbla (Court of Appeal, Szeged) has
asked this Court for guidance in order to determine whether the relevant Hungarian legislation is
compatible with the right to freedom of establishment. In addition, the referring court raises several
questions regarding the application of Article 234 EC.
I Facts and reference for a preliminary ruling
2. Cartesio is a betti trsasg (limited partnership) constituted in accordance with Hungarian law and
registered in Baja (Hungary). It has two partners who are resident in Hungary and have Hungarian
nationality: the limited partner, who is obliged to contribute a stipulated amount of capital and is liable
only for that amount , and the general partner, who is liable for all debts of the limited partnership.(2)
3. On 11 November 2005, Cartesio submitted an application to the commercial court to amend its
registration in the local commercial register so as to record the following address as its new operational
headquarters: 21013 Gallarate (Italy), Via Roma No 16. The commercial court, however, rejected
Cartesios application. It held that Hungarian law did not offer companies the possibility of transferring
their operational headquarters to another Member State while retaining their legal status as a company
governed by Hungarian law. Therefore, in order to change its operational headquarters, Cartesio would
first have to be dissolved in Hungary and then reconstituted under Italian law.
4. Cartesio brought an appeal against the decision of the commercial court before the Szegedi tlotbla
(Court of Appeal, Szeged). That court referred the following questions to the Court of Justice for a
preliminary ruling:
(1) Is a court of second instance which has to give a decision on an appeal against a decision of a
commercial court (cgbrsg) in proceedings to amend a registration, entitled to make a reference for a
preliminary ruling under Article 234 [EC], where neither the action before the commercial court nor the
appeal procedure is inter partes
(2) In so far as an appeal court is included in the concept of court or tribunal which is entitled to make
a reference for a preliminary ruling under Article 234 [EC], must that court be regarded as a court
against whose decisions there is no judicial remedy, which has an obligation, under Article 234 [EC], to
submit questions on the interpretation of community law to the Court of Justice of the European
Communities?
(3) Does a national measure which, in accordance with domestic law, confers a right to bring an appeal
against an order making a reference for a preliminary ruling, limit the power of the Hungarian courts to
refer questions for a preliminary ruling or could it limit that power derived directly from Article 234
[EC] if, in appeal proceedings the national superior court may amend the order, render the request for
a preliminary ruling inoperative and order the court which issued the order for reference to resume the
national proceedings which had been suspended?
..
..
II Assessment
A The first question

5. By its first question, the referring court asks whether a reference for a preliminary ruling is admissible
in proceedings on appeal against a decision from a lower court, where neither the proceedings before
the lower court nor the appeal proceedings are inter partes . Thus, in a sense, the referring court begins
by asking whether it may ask this Court a question. (3) The answer follows clearly from the case-law. In
the context of the present case, the commercial court merely fulfilled a registry function: it made an
administrative decision without being required to resolve a legal dispute. (4) For the purposes of Article
234 EC, this must be classified as a non-judicial function, in the framework of which the commercial
court is not entitled to request a reference for a preliminary ruling. (5) By contrast, the appeal
proceedings against the decision of the commercial court are, from the perspective of Article 234 EC,
judicial proceedings, notwithstanding the fact that they are ex parte . (6) A court seized in the

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framework of such proceedings is consequently entitled to request a reference for a preliminary ruling
from the Court of Justice. (7) The conclusion, therefore, is that the first question referred by the national
court is admissible and, moreover, must be answered in the affirmative.

B The second question


6. Second, the referring court asks whether it must be regarded as a court or tribunal against whose
decisions there is no judicial remedy under national law and which is under the obligation referred to in
the third paragraph of Article 234 EC. It might be argued that that question is inadmissible, because the
answer to it is not necessary to resolve the dispute in the main proceedings after all, the referring
court has decided to submit its other questions for a preliminary ruling regardless. However, when a
question is clearly of wider practical significance for the uniform interpretation and application of
Community law and is not artificially related to the facts, (8) the rules of admissibility should not be
applied in a manner that renders them virtually insurmountable. Thus, when the only realistic option for
a national court is to submit such a question in the framework of proceedings where the answer might
not be strictly necessary for the resolution of the case before it, the threshold of admissibility should, in
my opinion, not be placed too high. (9)
7. As to the question currently at issue, it is difficult to see any alternative means by which it might
realistically reach the Court, despite its obvious relevance for the functioning of the preliminary
reference procedure and given that its relationship with the facts of the case cannot be described as
being an artificial one. It would be excessively burdensome to require a national court, as a first step, to
submit a reference for a preliminary ruling only to ask whether it is under the obligation referred to in
Article 234 EC and then, as a second step if the answer turns out to be a positive one, to refer its actual
questions for a preliminary ruling. (10) Therefore, I suggest that the Court provide assistance in this
matter, as it did in a similar context in the case of Lyckeskog . (11)

8. According to the order for reference, in cases such as the one currently at issue, the party concerned
may bring an appeal against the decision of the tlotbla before the Legfelsobb Brsg (Supreme
Court). The referring court notes, however, that an appeal to the Legfelsobb Brsg is limited to points
of law. In that regard, the referring court mentions Article 270(2) of the Polgri perrendtartsrl szl
1952. vi III. trvny (Law III of 1952 on Civil Procedure), which provides: the parties, interveners and
persons affected by the decision may, in respect of the part of that decision which refers to them, bring
an appeal on a point of law only before the Legfelsobb Brsg against final judgments and orders which
bring proceedings to an end, pleading infringement of the law. In addition, the referring court points out
that appeal proceedings do not have automatic suspensory effect. The first sentence of Article 273(3) of
the same law states: the institution of appeal proceedings shall not have suspensory effect but, where a
party so requests, the Legfelsobb Brsg may exceptionally suspend enforcement of a judgment.

9. Yet, these limitations do not warrant the conclusion that the tlotbla must be regarded as a court
or tribunal against whose decisions there is no judicial remedy under national law. Presumably, any
issue relating to the validity or interpretation of Community law constitutes a point of law and could
therefore be subject to appeal. Moreover, national procedural rules according to which such an appeal
has suspensory effect only in exceptional circumstances are in principle compatible with Community law,
provided, first, that such rules are not applied in a manner that treats appeals on points of Community
law less favourably than those based on points of domestic law (principle of equivalence) and, second,
that they do not, in practice, render the exercise of rights conferred by Community law impossible or
excessively difficult (principle of effectiveness). (12)

10. Thus, the fact that an appeal against a decision of a national court or tribunal is limited to points of
law and lacks automatic suspensory effect does not imply that that court or tribunal is under the
obligation referred to in the third paragraph of Article 234 EC.

C The third question


11. The third question referred for a preliminary ruling relates to the possibility, existing under
Hungarian civil procedural law, to bring a separate appeal against a decision to make a reference for a
preliminary ruling. Article 155/A of Law III of 1952 on Civil Procedure provides: a separate appeal may
be brought against a decision to make a reference for a preliminary ruling. A separate appeal cannot be
brought against a decision dismissing a request for a reference for a preliminary ruling. (13) It would
appear that, in this context, the general rules concerning the suspensory effect of an appeal apply. (14)
The referring court explains in its order for reference that, if an appeal is brought against an order for
reference for a preliminary ruling, the court which hears the appeal may amend the order for reference,
or render the request for a preliminary ruling inoperative and order the court which made the order for
reference to resume the national proceedings which had been suspended. By its third question, the
referring court asks whether such national procedural rules are compatible with the preliminary ruling

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procedure established under the Treaty.

12. Again, it may be argued that this question is inadmissible given the fact that, in the present case, no
appeal seems to have been brought against the order for reference. (15) None the less, the possibility of
an appeal is a point of national law which is for the national court to determine. Moreover, I believe that
in the present case the Court should be particularly respectful of the wishes of the national court and
benefit from the opportunity to provide guidance on the matter. The reasons for this are the same as
the reasons for which I would consider the second question to be admissible.

13. First, this question is not strictly hypothetical. It is closely related to the facts of the case (the reality
of which is undisputed) and the answer to be provided to the national court might certainly be relevant
to its decision if there were to be an appeal a reality which the national court deemed to be relevant
when drafting the order. In my view, there is a hypothetical question, justifying a judgement of
inadmissibility, only when either the facts are themselves artificial or it is the relationship of the question
with the facts that is artificial. It is only in such cases that the reasons which justify the inadmissibility of
hypothetical questions (misconception of the facts, prejudging and the risk of abuse) are at play. (16) In
the present case, however, the Court would not be providing a legal answer on the basis of a
hypothetical factual context which could, by bypassing the actual context surrounding the interpretation
and application of a legal rule, affect the quality and legitimacy of the judicial ruling. The only so-called
hypothetical aspect in this case is, in reality, better qualified as an element of contingency: the fact that
the answer to be provided by the Court might end up not being determinant for the resolution of the
dispute in the main proceedings if no appeal is, in fact, to be brought against the order to refer.
However, suc h a contingent element is not absent from other legal questions that the Court routinely
answers. The Court can never be absolutely certain that the answer it is providing will, in fact, be
relevant to the outcome of the dispute in the main proceedings. The national court may, for example,
end up deciding the case on the basis of a national procedural point of law without ever applying the
Community law answer provided by the Court of Justice. That does not mean that the Court has
answered a hypothetical question, so long as the question arose from genuine facts whose relationship
with Community law was not artificial. One must distinguish between a question based on artificial facts
or unrelated to the facts of the case (which, in my view, is hypothetical and inadmissible) and a question
that is related to the facts of the case but might prove not to be determinant in its final outcome (which,
in my view, is not hypothetical and ought to be admissible).

14. Second, in spite of its obvious relevance for the functioning of the preliminary reference procedure,
it is difficult to see how the issue might otherwise reach the Court. Of course, it is theoretically
conceivable that a party in national proceedings before a lower court might bring an appeal against an
order for reference before a superior court and that, notwithstanding national procedural rules according
to which the appeal has suspensory effect, the lower court might maintain its order for reference. In
such circumstances, the issue of the effect of the appeal would certainly be of immediate relevance.
However, this scenario would also require the lower court to disobey its domestic rules of procedure
without knowing whether Community law gives it the power to do so. Clearly, that would put the lower
court in a very uncomfortable situation. (17) This is probably what explains why such a question has
never been expressly raised before the Court even if some previous cases and well-known national laws
and practices might indicate that it is indeed of considerable relevance in the day to day application of
Community law by national courts. (18) My suggestion to the Court, therefore, would be to defer to the
judgment of the national court on the relevance of such question for the national proceedings by
answering the third question of the Szegedi tlotbla, using this opportunity to address this issue of
great practical importance for Community law. In this way, the Court may be able to forestall obstacles
that may arise in the future as regards the cooperation between itself and those national courts whose
orders for reference could become subject to appeal.

15. Article 234 EC provides that any court or tribunal of a Member State is entitled to make a reference
to the Court whenever it considers that a preliminary ruling on a question of interpretation or validity
relating to Community law is necessary to enable it to give judgment. (19) Hence, national courts derive
the power to make a reference for a preliminary ruling from the Treaty itself. Moreover, they enjoy the
widest discretion in referring matters to the Court of Justice. (20)

16. Naturally, a decision of a lower court that contains a reference for a preliminary ruling is not, by
virtue of Community law, exempt from remedies normally available under national law. (21)
Nonetheless, where an appeal has been lodged against a decision containing an order for reference, the
Court of Justice will in principle abide by the request for a preliminary ruling, so long as the referring
court has not revoked its questions. (22) The Court of Justice may suspend the preliminary ruling
proceedings pending the outcome of the national appellate proceedings if the appeal has suspensory

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effect and if the Court of Justice has been notified thereof by the referring court: the notification is
regarded as an implicit request to suspend the preliminary ruling proceedings. (23) However, the Court
of Justice will simply proceed with the preliminary ruling procedure, despite the effects that an appeal
might have under national law, if the referring court has expressly requested the Court of Justice to do
so. (24)

17. The crucial question is whether national procedural rules may oblige lower courts to suspend or even
revoke a request for a preliminary ruling in circumstances where an appeal has been brought against an
order for reference. That question has, in fact, been addressed by Advocate-General Warner in his
Opinion in Rheinmhlen (25) and I would almost be tempted merely to refer to that Opinion, in which
he argued that no fetter can be placed by national law on the power of a lower court in any Member
State to refer questions to this Court. I shall not even attempt to emulate the force and clarity with
which he set out the arguments that brought him to this conclusion. Instead, I shall limit myself to
expressing my agreement with his Opinion and making a few additional remarks.

18. There may be several reasons why a lower court might want to revoke its request for a preliminary
ruling after an appeal has been lodged against the decision containing the order for reference. For
instance, the parties may have found an alternative way to settle their dispute during the appellate
proceedings. (26) It may also be the case that the judgment on appeal has rendered the questions
referred for a preliminary ruling moot, because it has turned out, for instance, that the action brought
before the lower court was inadmissible. Hence, appellate proceedings and their outcome may very well
prompt a lower court to ask for a suspension of its request for a preliminary ruling or even to revoke
that request. However, this should not lead us to conclude that there are circumstances in which a
judgment of an appellate court may oblige a lower court to do so.

19. The possibility for a lower court in any Member State to interact directly with the Court of Justice is
vital to the uniform interpretation and the effective application of Community law. It is also the
instrument that makes of all national courts Community law courts. Through the request for a
preliminary ruling, the national court becomes part of a Community law discourse without depending on
other national powers or judicial instances. (27) The Treaty did not intend that such a dialogue should
be filtered by any other national courts, no matter what the judicial hierarchy in a State may be. As
stated by the Irish Supreme Court (in refusing to hear an appeal against an order for reference): the
power is conferred on [the lower court] by the Treaty without any qualification, express or implied, to
the effect that it is capable of being overruled by any other national court. (28)

20. Therefore, the issue of the necessity for a request for a preliminary ruling is a matter that falls to be
decided between the referring court and the Court of Justice. Indeed, that is why, ultimately, the
admissibility of a request for a preliminary ruling is determined by the Court of Justice and not by
domestic courts which, within the national procedural framework, are superior to the referring court. If
the opposite were true, it could happen that, by virtue of a national rule or practice, orders for reference
by lower courts would systematically become subject to appeal, giving rise to a situation in which at
least de facto national law allowed only courts of last instance to refer questions for a preliminary
ruling. The risk of treating such question as a question of national procedural law and not Community
law is highlighted by the present case in which the national law permits a separate appeal against a
decision to make a reference for a preliminary ruling. It would be tantamount to allowing national
procedural law to alter the conditions set out in Article 234 EC for a reference to the Court of Justice.

21. In short, Community law gives any court in any Member State the authority to refer questions for a
preliminary ruling to the Court of Justice. That authority cannot be qualified by national law. I
accordingly conclude that Article 234 EC precludes the application of national rules according to which
national courts may be obliged to suspend or revoke a request for a preliminary ruling..

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Judgment of the Court of 18 March 1980.

SA Compagnie gnrale pour la diffusion de la tlvision, Coditel, and others v Cin Vog Films
and others.

Reference for a preliminary ruling: Cour d'appel de Bruxelles - Belgium.

Provision of services : Cable diffusion of television.

Case 62/79.

1 . FREEDOM TO PROVIDE SERVICES - RESTRICTIONS - APPLICATION OF NATIONAL LAWS ON THE


PROTECTION OF COPYRIGHTS - ASSIGNMENT OF RIGHTS - PERMISSIBLE - CONDITIONS

( EEC TREATY , ART . 59 )

2 . FREEDOM TO PROVIDE SERVICES - RESTRICTIONS - CABLE TELEVISION DIFFUSION IN A MEMBER


STATE OF A FILM SHOWN IN ANOTHER MEMBER STATE WITH THE CONSENT OF THE OWNER OF THE
RIGHT - OBJECTION BY THE ASSIGNEE OF THE PERFORMING RIGHTS IN THE FIRST STATE -
PERMISSIBLE

( EEC TREATY , ART . 59 )

Subject of the case

ON THE INTERPRETATION OF ARTICLE 59 OF THE EEC TREATY ,


Grounds
1 BY A JUDGMENT OF 30 MARCH 1979 , WHICH WAS RECEIVED AT THE COURT ON 17 APRIL 1979 ,
THE COUR D ' APPEL , BRUSSELS , REFERRED TWO QUESTIONS TO THE COURT UNDER ARTICLE 177 OF
THE EEC TREATY FOR A PRELIMINARY RULING ON THE INTERPRETATION OF ARTICLE 59 AND OTHER
PROVISIONS OF THE TREATY ON FREEDOM TO PROVIDE SERVICES .

2 THOSE QUESTIONS WERE RAISED DURING AN ACTION BROUGHT BY A BELGIAN CINEMATOGRAPHIC


FILM DISTRIBUTION COMPANY , CINE VOG FILMS S.A ., THE RESPONDENT BEFORE THE COUR D '
APPEL , FOR INFRINGEMENT OF COPYRIGHT . THE ACTION IS AGAINST A FRENCH COMPANY , LES
FILMS LA BOETIE , AND THREE BELGIAN CABLE TELEVISION DIFFUSION COMPANIES , WHICH ARE
HEREAFTER REFERRED TO COLLECTIVELY AS THE CODITEL COMPANIES . COMPENSATION IS SOUGHT
FOR THE DAMAGE ALLEGEDLY CAUSED TO CINE VOG BY THE RECEPTION IN BELGIUM OF A
BROADCAST BY GERMAN TELEVISION OF THE FILM ' ' LE BOUCHER ' ' FOR WHICH CINE VOG OBTAINED
EXCLUSIVE DISTRIBUTION RIGHTS IN BELGIUM FROM LES FILMS LA BOETIE .

3 IT IS APPARENT FROM THE FILE THAT THE CODITEL COMPANIES PROVIDE , WITH THE AUTHORITY
OF THE BELGIAN ADMINISTRATION , A CABLE TELEVISION DIFFUSION SERVICE COVERING PART OF
BELGIUM . TELEVISION SETS BELONGING TO SUBSCRIBERS TO THE SERVICE ARE LINKED BY CABLE
TO A CENTRAL AERIAL HAVING SPECIAL TECHNICAL FEATURES WHICH ENABLE BELGIAN BROADCASTS
TO BE PICKED UP AS WELL AS CERTAIN FOREIGN BROADCASTS WHICH THE SUBSCRIBER CANNOT
ALWAYS RECEIVE WITH A PRIVATE AERIAL , AND WHICH FURTHERMORE IMPROVE THE QUALITY OF
THE PICTURES AND SOUND RECEIVED BY THE SUBSCRIBERS .

4 THE COURT BEFORE WHICH THE CLAIM WAS MADE , THE TRIBUNAL DE PREMIERE INSTANCE ,
BRUSSELS , DECLARED THAT IT WAS UNFOUNDED AS AGAINST LES FILMS LE BOETIE , BUT IT
ORDERED THE CODITEL COMPANIES TO PAY DAMAGES TO CINE VOG . THE CODITEL COMPANIES
APPEALED AGAINST THAT JUDGMENT . THAT APPEAL WAS DECLARED INADMISSIBLE BY THE COUR D '
APPEL TO THE EXTENT TO WHICH IT WAS BROUGHT AGAINST THE COMPANY LES FILMS LA BOETIE ,
WHICH IS NOT NOW THEREFORE A PARTY TO THE DISPUTE .

5 THE FACTS OF THE CASE BEARING UPON THE OUTCOME OF THE DISPUTE WERE SUMMARIZED BY
THE COUR D ' APPEL AS FOLLOWS . BY AN AGREEMENT OF 8JULY 1969 LES FILMS LA BOETIE , ACTING
AS THE OWNER OF ALL THE PROPRIETARY RIGHTS IN THE FILM ' ' LE BOUCHER ' ' , GAVE CINE VOG
THE ' ' EXCLUSIVE RIGHT ' ' TO DISTRIBUTE THE FILM IN BELGIUM FOR SEVEN YEARS . THE FILM WAS
SHOWN IN CINEMAS IN BELGIUM STARTING ON 15 MAY 1970 . HOWEVER , ON 5 JANUARY 1971
GERMAN TELEVISION ' S FIRST CHANNEL BROADCAST A GERMAN VERSION OF THE FILM AND THIS
BROADCAST COULD BE PICKED UP IN BELGIUM . CINE VOG CONSIDERED THAT THE BROADCAST HAD
JEOPARDIZED THE COMMERCIAL FUTURE OF THE FILM IN BELGIUM . IT RELIED UPON THIS GROUND

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OF COMPLAINT BOTH AGAINST LES FILMS LA BOETIE , FOR NOT HAVING OBSERVED THE EXCLUSIVITY
OF THE RIGHTS WHICH IT HAD TRANSFERRED TO IT , AND AGAINST THE CODITEL COMPANIES FOR
HAVING RELAYED THE RELEVANT BROADCAST OVER THEIR CABLE DIFFUSION NETWORKS .

6 THE COUR D ' APPEL FIRST OF ALL EXAMINED THE ACTIVITIES OF THE CABLE TELEVISION
DIFFUSION COMPANIES FROM THE POINT OF VIEW OF COPYRIGHT INFRINGEMENT . IT CONSIDERED
THAT THOSE COMPANIES HAD MADE A ' ' COMMUNICATION TO THE PUBLIC ' ' OF THE FILM WITHIN
THE MEANING OF THE PROVISIONS APPLYING IN THIS FIELD AND THAT , AS REGARDS COPYRIGHT
LAW AND SUBJECT TO THE EFFECT THEREON OF COMMUNITY LAW , THEY THEREFORE NEEDED THE
AUTHORIZATION OF CINE VOG TO RELAY THE FILM OVER THEIR NETWORKS . THE EFFECT OF THIS
REASONING BY THE COUR D ' APPEL IS THAT THE AUTHORIZATION GIVEN BY THE COPYRIGHT OWNER
TO GERMAN TELEVISION TO BROADCAST THE FILM DID NOT INCLUDE AUTHORITY TO RELAY THE FILM
OVER CABLE DIFFUSION NETWORKS OUTSIDE GERMANY , OR AT LEAST THOSE EXISTING IN BELGIUM
.

7 THE COUR D ' APPEL THEN WENT ON TO EXAMINE IN THE LIGHT OF COMMUNITY LAW THE
ARGUMENT OF THE CODITEL COMPANIES THAT ANY PROHIBITION ON THE TRANSMISSION OF FILMS ,
THE COPYRIGHT IN WHICH HAS BEEN ASSIGNED BY THE PRODUCER TO A DISTRIBUTION COMPANY
COVERING THE WHOLE OF BELGIUM , IS CONTRARY TO THE PROVISIONS OF THE EEC TREATY , IN
PARTICULAR TO ARTICLE 85 AND ARTICLES 59 AND 60 . AFTER REJECTING THE ARGUMENT BASED ON
ARTICLE 85 , THE COUR D ' APPEL WONDERED IF THE ACTION UNDERTAKEN AGAINST THE CABLE
TELEVISION DIFFUSION COMPANIES BY CINE VOG INFRINGED ARTICLE 59 ' ' IN SO FAR AS IT LIMITS
THE POSSIBILITY FOR A TRANSMITTING STATION ESTABLISHED IN A COUNTRY WHICH BORDERS ON
BELGIUM , AND WHICH IS THE COUNTRY OF THE PERSONS FOR WHOM A SERVICE IS INTENDED ,
FREELY TO PROVIDE THAT SERVICE ' ' .

IN THE OPINION OF THE APPELLANT COMPANIES , ARTICLE 59 MUST BE UNDERSTOOD TO MEAN THAT
IT PROHIBITS RESTRICTIONS ON FREEDOM TO PROVIDE SERVICES AND NOT MERELY RESTRICTIONS
ON THE FREEDOM OF ACTIVITY OF THOSE PROVIDING SERVICES , AND THAT IT COVERS ALL CASES
WHERE THE PROVISION OF A SERVICE INVOLVES OR HAS INVOLVED AT AN EARLIER STAGE OR WILL
INVOLVE AT A LATER STAGE THE CROSSING OF INTRA-COMMUNITY FRONTIERS .

8. BELIEVING THAT THAT SUBMISSION BEARS UPON THE INTERPRETATION OF THE TREATY , THE
COUR D ' APPEL REFERRED TO THE COURT OF JUSTICE THE FOLLOWING TWO QUESTIONS :

' ' 1 . ARE THE RESTRICTIONS PROHIBITED BY ARTICLE 59 OF THE TREATY ESTABLISHING THE
EUROPEAN ECONOMIC COMMUNITY ONLY THOSE WHICH PREJUDICE THE PROVISION OF SERVICES
BETWEEN NATIONALS ESTABLISHED IN DIFFERENT MEMBER STATES , OR DO THEY ALSO COMPRISE
RESTRICTIONS ON THE PROVISION OF SERVICES BETWEEN NATIONALS ESTABLISHED IN THE SAME
MEMBER STATE WHICH HOWEVER CONCERN SERVICES THE SUBSTANCE OF WHICH ORIGINATES IN
ANOTHER MEMBER STATE?

2 . IF THE FIRST LIMB OF THE PRECEDING QUESTION IS ANSWERED IN THE AFFIRMATIVE , IS IT IN


ACCORDANCE WITH THE PROVISIONS OF THE TREATY ON FREEDOM TO PROVIDE SERVICES FOR THE
ASSIGNEE OF THE PERFORMING RIGHT IN A CINEMATOGRAPHIC FILM IN ONE MEMBER STATE TO RELY
UPON HIS RIGHT IN ORDER TO PREVENT THE DEFENDANT FROM SHOWING THAT FILM IN THAT STATE
BY MEANS OF CABLE TELEVISION WHERE THE FILM THUS SHOWN IS PICKED UP BY THE DEFENDANT
IN THE SAID MEMBER STATE AFTER HAVING BEEN BROADCAST BY A THIRD PARTY IN ANOTHER
MEMBER STATE WITH THE CONSENT OF THE ORIGINAL OWNER OF THE RIGHT?

''

9 ACCORDING TO ITS WORDING THE SECOND QUESTION IS ASKED IN CASE THE ANSWER TO THE
FIRST LIMB OF THE FIRST QUESTION SHOULD BE IN THE AFFIRMATIVE ; BUT THE COUR D ' APPEL
EVIDENTLY HAD IN MIND AN ANSWER STATING THAT IN PRINCIPLE ARTICLE 59 ET SEQ . OF THE
TREATY APPLY TO THE PROVISION OF THE SERVICES CONCERNED BECAUSE ONLY IN THAT CASE CAN
THE SECOND QUESTION HAVE ANY MEANING .

10 THE COURT OF JUSTICE WILL FIRST OF ALL EXAMINE THE SECOND QUESTION . IF THE ANSWER TO
THIS QUESTION IS IN THE NEGATIVE BECAUSE THE PRACTICE IT DESCRIBES IS NOT CONTRARY TO
THE PROVISIONS OF THE TREATY ON FREEDOM TO PROVIDE SERVICES - ON THE ASSUMPTION THAT
THOSE PROVISIONS ARE APPLICABLE - THE NATIONAL COURT WILL HAVE ALL THE INFORMATION
NECESSARY FOR IT TO BE ABLE TO RESOLVE THE LEGAL PROBLEM BEFORE IT IN CONFORMITY WITH
COMMUNITY LAW .

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11 THE SECOND QUESTION RAISES THE PROBLEM OF WHETHER ARTICLES 59 AND 60 OF THE TREATY
PROHIBIT AN ASSIGNMENT , LIMITED TO THE TERRITORY OF A MEMBER STATE , OF THE COPYRIGHT
IN A FILM , IN VIEW OF THE FACT THAT A SERIES OF SUCH ASSIGNMENTS MIGHT RESULT IN THE
PARTITIONING OF THE COMMON MARKET AS REGARDS THE UNDERTAKING OF ECONOMIC ACTIVITY IN
THE FILM INDUSTRY .

12 A CINEMATOGRAPHIC FILM BELONGS TO THE CATEGORY OF LITERARY AND ARTISTIC WORKS MADE
AVAILABLE TO THE PUBLIC BY PERFORMANCES WHICH MAY BE INFINITELY REPEATED . IN THIS
RESPECT THE PROBLEMS INVOLVED IN THE OBSERVANCE OF COPYRIGHT IN RELATION TO THE
REQUIREMENTS OF THE TREATY ARE NOT THE SAME AS THOSE WHICH ARISE IN CONNEXION WITH
LITERARY AND ARTISTIC WORKS THE PLACING OF WHICH AT THE DISPOSAL OF THE PUBLIC IS
INSEPARABLE FROM THE CIRCULATION OF THE MATERIAL FORM OF THE WORKS , AS IN THE CASE OF
BOOKS OR RECORDS .

13 IN THESE CIRCUMSTANCES THE OWNER OF THE COPYRIGHT IN A FILM AND HIS ASSIGNS HAVE A
LEGITIMATE INTEREST IN CALCULATING THE FEES DUE IN RESPECT OF THE AUTHORIZATION TO
EXHIBIT THE FILM ON THE BASIS OF THE ACTUAL OR PROBABLE NUMBER OF PERFORMANCES AND IN
AUTHORIZING A TELEVISION BROADCAST OF THE FILM ONLY AFTER IT HAS BEEN EXHIBITED IN
CINEMAS FOR A CERTAIN PERIOD OF TIME . IT APPEARS FROM THE FILE ON THE PRESENT CASE THAT
THE CONTRACT MADE BETWEEN LES FILMS LA BOETIE AND CINE VOG STIPULATED THAT THE
EXCLUSIVE RIGHT WHICH WAS ASSIGNED INCLUDED THE RIGHT TO EXHIBIT THE FILM ' ' LE
BOUCHEUR ' ' PUBLICLY IN BELGIUM BY WAY OF PROJECTION IN CINEMAS AND ON TELEVISION BUT
THAT THE RIGHT TO HAVE THE FILM DIFFUSED BY BELGIAN TELEVISION COULD NOT BE EXERCISED
UNTIL 40 MONTHS AFTER THE FIRST SHOWING OF THE FILM IN BELGIUM .

14 THESE FACTS ARE IMPORTANT IN TWO REGARDS . ON THE ONE HAND , THEY HIGHLIGHT THE FACT
THAT THE RIGHT OF A COPYRIGHT OWNER AND HIS ASSIGNS TO REQUIRE FEES FOR ANY SHOWING
OF A FILM IS PART OF THE ESSENTIAL FUNCTION OF COPYRIGHT IN THIS TYPE OF LITERARY AND
ARTISTIC WORK . ON THE OTHER HAND , THEY DEMONSTRATE THAT THE EXPLOITATION OF
COPYRIGHT IN FILMS AND THE FEES ATTACHING THERETO CANNOT BE REGULATED WITHOUT REGARD
BEING HAD TO THE POSSIBILITY OF TELEVISION BROADCASTS OF THOSE FILMS . THE QUESTION
WHETHER AN ASSIGNMENT OF COPYRIGHT LIMITED TO THE TERRITORY OF A MEMBER STATE IS
CAPABLE OF CONSTITUTING A RESTRICTION ON FREEDOM TO PROVIDE SERVICES MUST BE EXAMINED
IN THIS CONTEXT .

15 WHILST ARTICLE 59 OF THE TREATY PROHIBITS RESTRICTIONS UPON FREEDOM TO PROVIDE


SERVICES , IT DOES NOT THEREBY ENCOMPASS LIMITS UPON THE EXERCISE OF CERTAIN ECONOMIC
ACTIVITIES WHICH HAVE THEIR ORIGIN IN THE APPLICATION OF NATIONAL LEGISLATION FOR THE
PROTECTION OF INTELLECTUAL PROPERTY , SAVE WHERE SUCH APPLICATION CONSTITUTES A MEANS
OF ARBITRARY DISCRIMINATION OR A DISGUISED RESTRICTION ON TRADE BETWEEN MEMBER
STATES . SUCH WOULD BE THE CASE IF THAT APPLICATION ENABLED PARTIES TO AN ASSIGNMENT OF
COPYRIGHT TO CREATE ARTIFICIAL BARRIERS TO TRADE BETWEEN MEMBER STATES .

16 THE EFFECT OF THIS IS THAT , WHILST COPYRIGHT ENTAILS THE RIGHT TO DEMAND FEES FOR
ANY SHOWING OR PERFORMANCE , THE RULES OF THE TREATY CANNOT IN PRINCIPLE CONSTITUTE AN
OBSTACLE TO THE GEOGRAPHICAL LIMITS WHICH THE PARTIES TO A CONTRACT OF ASSIGNMENT
HAVE AGREED UPON IN ORDER TO PROTECT THE AUTHOR AND HIS ASSIGNS IN THIS REGARD . THE
MERE FACT THAT THOSE GEOGRAPHICAL LIMITS MAY COINCIDE WITH NATIONAL FRONTIERS DOES
NOT POINT TO A DIFFERENT SOLUTION IN A SITUATION WHERE TELEVISION IS ORGANIZED IN THE
MEMBER STATES LARGELY ON THE BASIS OF LEGAL BROADCASTING MONOPOLIES , WHICH INDICATES
THAT A LIMITATION OTHER THAN THE GEOGRAPHICAL FIELD OF APPLICATION OF AN ASSIGNMENT IS
OFTEN IMPRACTICABLE .

17 THE EXCLUSIVE ASSIGNEE OF THE PERFORMING RIGHT IN A FILM FOR THE WHOLE OF A MEMBER
STATE MAY THEREFORE RELY UPON HIS RIGHT AGAINST CABLE TELEVISION DIFFUSION COMPANIES
WHICH HAVE TRANSMITTED THAT FILM ON THEIR DIFFUSION NETWORK HAVING RECEIVED IT FROM A
TELEVISION BROADCASTING STATION ESTABLISHED IN ANOTHER MEMBER STATE , WITHOUT
THEREBY INFRINGING COMMUNITY LAW .

18 CONSEQUENTLY THE ANSWER TO THE SECOND QUESTION REFERRED TO THE COURT BY THE COUR
D ' APPEL , BRUSSELS , SHOULD BE THAT THE PROVISIONS OF THE TREATY RELATING TO THE
FREEDOM TO PROVIDE SERVICES DO NOT PRECLUDE AN ASSIGNEE OF THE PERFORMING RIGHT IN A
CINEMATOGRAPHIC FILM IN A MEMBER STATE FROM RELYING UPON HIS RIGHT TO PROHIBIT THE
EXHIBITION OF THAT FILM IN THAT STATE , WITHOUT HIS AUTHORITY , BY MEANS OF CABLE
DIFFUSION IF THE FILM SO EXHIBITED IS PICKED UP AND TRANSMITTED AFTER BEING BROADCAST IN

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ANOTHER MEMBER STATE BY A THIRD PARTY WITH THE CONSENT OF THE ORIGINAL OWNER OF THE
RIGHT .

19 IT IS CLEAR FROM THE ANSWER GIVEN TO THE SECOND QUESTION THAT COMMUNITY LAW , ON
THE ASSUMPTION THAT IT APPLIES TO THE ACTIVITIES OF THE CABLE DIFFUSION COMPANIES WHICH
ARE THE SUBJECT-MATTER OF THE DISPUTE BROUGHT BEFORE THE NATIONAL COURT , HAS NO
EFFECT UPON THE APPLICATION BY THAT COURT OF THE PROVISIONS OF COPYRIGHT LEGISLATION IN
A CASE SUCH AS THIS . THEREFORE THERE IS NO NEED TO ANSWER THE FIRST QUESTION .
......Operative part

ON THOSE GROUNDS ,

THE COURT ,

IN ANSWER TO THE QUESTIONS REFERRED TO IT BY THE COUR D ' APPEL , BRUSSELS , BY JUDGMENT
OF 30 MARCH 1979 , HEREBY RULES :

THE PROVISIONS OF THE TREATY RELATING TO THE FREEDOM TO PROVIDE SERVICES DO NOT
PRECLUDE AN ASSIGNEE OF THE PERFORMING RIGHT IN A CINEMATOGRAPHIC FILM IN A MEMBER
STATE FROM RELYING UPON HIS RIGHT TO PROHIBIT THE EXHIBITION OF THAT FILM IN THAT STATE ,
WITHOUT HIS AUTHORITY , BY MEANS OF CABLE DIFFUSION IF THE FILM SO EXHIBITED IS PICKED UP
AND TRANSMITTED AFTER BEING BROADCAST IN ANOTHER MEMBER STATE BY A THIRD PARTY WITH
THE CONSENT OF THE ORIGINAL OWNER OF THE RIGHT .

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Judgment of the Court of 6 October 1982.

Coditel SA, Compagnie gnrale pour la diffusion de la tlvision, and others v Cin-Vog Films
SA and others.

Reference for a preliminary ruling: Cour de cassation - Belgium.

Copyright and right of distribution: Cable diffusion of television.

Case 262/81.

1 . FREEDOM TO PROVIDE SERVICES - RESTRICTIONS - ARTISTIC AND INTELLECTUAL PROPERTY -


DISTINCTION BETWEEN THE EXISTENCE AND THE EXERCISE OF A RIGHT IN THE CONTEXT OF THE
FREE MOVEMENT OF GOODS - APPLICATION OF THAT DISTINCTION IN THE CONTEXT OF THE
MOVEMENT OF SERVICES

( EEC TREATY , ARTS . 36 AND 59 )

2 . COMPETITION - AGREEMENTS AND CONCERTED PRACTICES - COPYRIGHT IN A FILM - EXERCISE OF


THE RIGHT - CONDITIONS OF PROHIBITION - CONTRACT GRANTING THE EXCLUSIVE RIGHT TO
EXHIBIT A FILM - EXERCISE OF THE EXCLUSIVE EXHIBITION RIGHT - CONDITIONS OF PROHIBITION -
CRITERIA OF APPRAISAL

( EEC TREATY , ART . 85 ( 1 ))

ON THE INTERPRETATION OF ARTICLES 85 AND 86 OF THE TREATY ,

Grounds

1 BY ORDER OF 3 SEPTEMBER 1981 , WHICH WAS RECEIVED AT THE COURT ON 30 SEPTEMBER 1981 ,
THE BELGIAN COUR DE CASSATION ( COURT OF CASSATION ) REFERRED TO THE COURT FOR A
PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY A QUESTION CONCERNING THE
INTERPRETATION OF ARTICLE 85 READ IN CONJUNCTION WITH ARTICLE 36 OF THAT TREATY .

2 THE QUESTION AROSE IN THE COURSE OF PROCEEDINGS BETWEEN THREE BELGIAN CABLE
TELEVISION DIFFUSION COMPANIES , WHICH ARE HEREINAFTER REFERRED TO JOINTLY AS THE
CODITEL COMPANIES , APPELLANTS IN CASSATION , ON THE ONE HAND , AND A BELGIAN FILM
DISTRIBUTION COMPANY , CINE-VOG FILMS SA , A FRENCH FILM PRODUCING COMPANY , LES FILMS
LA BOETIE , AND OTHER REPRESENTATIVES OF THE CINEMATOGRAPHIC INDUSTRY , THE
RESPONDENTS IN CASSATION , ON THE OTHER HAND .

3 THE ACTION WHICH GAVE RISE TO THOSE PROCEEDINGS WAS FOR COMPENSATION FOR THE
DAMAGE WHICH CINE-VOG ALLEGED IT HAD SUFFERED AS THE RESULT OF THE RETRANSMISSION OF
THE BROADCAST ON GERMAN TELEVISION OF THE FILM ' ' LE BOUCHER ' ' , IN RESPECT OF WHICH
CINE-VOG HAD ACQUIRED EXCLUSIVE DISTRIBUTION RIGHTS IN BELGIUM FROM LES FILMS LA BOETIE
.

4 IT IS APPARENT FROM THE FILE THAT THE CODITEL COMPANIES PROVIDE , WITH THE AUTHORITY
OF THE BELGIAN ADMINISTRATION , A CABLE TELEVISION DIFFUSION SERVICE COVERING PART OF
BELGIUM . TELEVISION SETS BELONGING TO SUBSCRIBERS TO THE SERVICE ARE LINKED BY CABLE
TO A CENTRAL AERIAL HAVING SPECIAL TECHNICAL FEATURES WHICH ENABLE BELGIAN BROADCASTS
TO BE PICKED UP AS WELL AS CERTAIN FOREIGN BROADCASTS WHICH THE SUBSCRIBER CANNOT
ALWAYS RECEIVE WITH A PRIVATE AERIAL , AND WHICH FURTHERMORE IMPROVE THE QUALITY OF
THE PICTURE AND SOUND RECEIVED BY THE SUBSCRIBERS .

5 THE COURT BEFORE WHICH THE CLAIM WAS ORIGINALLY MADE , THE TRIBUNAL DE PREMIERE
INSTANCE ( COURT OF FIRST INSTANCE ), BRUSSELS , ORDERED THE CODITEL COMPANIES TO PAY
DAMAGES TO CINE-VOG . THE CODITEL COMPANIES APPEALED AGAINST THAT JUDGMENT , AND THE
COUR D ' APPEL ( COURT OF APPEAL ), AFTER HOLDING THAT ARTICLE 85 WAS NOT APPLICABLE TO
THE DISPUTE , SUBMITTED TO THE COURT OF JUSTICE TWO QUESTIONS WHICH , ESSENTIALLY ,
RAISED THE PROBLEM OF WHETHER ARTICLES 59 AND 60 OF THE TREATY PROHIBIT THE ASSIGNMENT
, LIMITED TO THE TERRITORY OF A MEMBER STATE , OF THE COPYRIGHT IN A FILM , IN VIEW OF THE
FACT THAT A SERIES OF SUCH ASSIGNMENTS MIGHT RESULT IN THE PARTITIONING OF THE COMMON
MARKET AS REGARDS THE UNDERTAKING OF ECONOMIC ACTIVITY IN THE FILM INDUSTRY .

6 BY JUDGMENT DATED 18 MARCH (( 1980 ) ECR 881 ), THE COURT RULED AS FOLLOWS :

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' ' THE PROVISIONS OF THE EEC TREATY RELATING TO THE FREEDOM TO PROVIDE SERVICES DO NOT
PRECLUDE AN ASSIGNEE OF THE PERFORMING RIGHT IN A CINEMATOGRAPHIC FILM IN A MEMBER
STATE FROM RELYING UPON HIS RIGHT TO PROHIBIT THE EXHIBITION OF THAT FILM IN THAT STATE ,
WITHOUT HIS AUTHORITY , BY MEANS OF CABLE DIFFUSION IF THE FILM SO EXHIBITED IS PICKED UP
AND TRANSMITTED AFTER BEING BROADCAST IN ANOTHER MEMBER STATE BY A THIRD PARTY WITH
THE CONSENT OF THE ORIGINAL OWNER OF THE RIGHT ' ' .

7 HOWEVER , WITHIN THE PERIOD PRESCRIBED BY STATUTE FOR LODGING AN APPEAL IN CASSATION
, THE CODITEL COMPANIES HAD APPEALED TO THE COUR DE CASSATION AGAINST THE JUDGMENT OF
THE COUR D ' APPEL , CLAIMING INTER ALIA THAT THE LATTER HAD ERRED IN HOLDING THAT
ARTICLE 85 OF THE TREATY WAS NOT APPLICABLE TO THE CASE IN POINT . THEY MAINTAINED , ON
THE ONE HAND , THAT ARTICLE 36 COULD NOT RESTRICT THE SCOPE OF APPLICATION OF ARTICLE 85
AND , ON THE OTHER HAND , THAT IF COPYRIGHT AS A LEGAL STATUS DID NOT FALL WITHIN THE
CLASS OF AGREEMENTS AND CONCERTED PRACTICES AS ENVISAGED BY ARTICLE 85 , ITS EXERCISE
MIGHT BE THE PURPOSE , THE MEANS OR THE RESULT OF AN AGREEMENT , DECISION OR CONCERTED
PRACTICE AND THAT A CONTRACT INVOLVING AN EXCLUSIVE LICENCE OR AN ASSIGNMENT OF
COPYRIGHT MIGHT AMOUNT TO AN AGREEMENT , DECISION OR CONCERTED PRACTICE FOR THE
PURPOSES OF ARTICLE 85 , NOT ONLY BECAUSE OF THE RIGHTS AND OBLIGATIONS ARISING FROM
ITS CLAUSES BUT ALSO BECAUSE OF THE ECONOMIC AND LEGAL CIRCUMSTANCES SURROUNDING IT
AND , IN PARTICULAR , BECAUSE OF THE EXISTENCE OF ANY SIMILAR AGREEMENTS CONCLUDED
BETWEEN THE SAME PARTIES OR EVEN BETWEEN THIRD PARTIES , AND OF THE CUMULATIVE EFFECT
OF SUCH PARALLEL AGREEMENTS .

8 THE COUR DE CASSATION CONSIDERED THAT THE ABOVE SUBMISSION RAISED A QUESTION OF
INTERPRETATION OF COMMUNITY LAW AND REFERRED THE FOLLOWING QUESTION TO THE COURT :

' ' WHERE A COMPANY WHICH IS THE PROPRIETOR OF THE RIGHTS OF EXPLOITATION OF A
CINEMATOGRAPHIC FILM GRANTS A CONTRACT TO A COMPANY IN ANOTHER MEMBER STATE AN
EXCLUSIVE RIGHT TO SHOW THAT FILM IN THAT STATE , FOR A SPECIFIED PERIOD , IS THAT
CONTRACT LIABLE , BY REASON OF THE RIGHTS AND OBLIGATIONS CONTAINED IN IT AND OF THE
ECONOMIC AND LEGAL CIRCUMSTANCES SURROUNDING IT , TO CONSTITUTE AN AGREEMENT ,
DECISION OR CONCERTED PRACTICE WHICH IS PROHIBITED BETWEEN UNDERTAKINGS PURSUANT TO
THE FIRST AND SECOND PARAGRAPHS OF ARTICLE 85 OF THE TREATY OR ARE THOSE PROVISIONS
INAPPLICABLE EITHER BECAUSE THE RIGHT TO SHOW THE FILM IS PART OF THE SPECIFIC SUBJECT-
MATTER OF COPYRIGHT AND ACCORDINGLY ARTICLE 36 OF THE TREATY WOULD BE AN OBSTACLE TO
THE APPLICATION OF ARTICLE 85 , OR BECAUSE OF THE RIGHT RELIED UPON BY THE ASSIGNEE OF
THE RIGHT TO SHOW THE FILM DERIVES FROM A LEGAL STATUS WHICH CONFERS ON THE ASSIGNEE
PROTECTION ERGA OMNES AND WHICH DOES NOT FALL WITHIN THE CLASS OF AGREEMENTS AND
CONCERTED PRACTICES REFERRED TO BY THE SAID ARTICLE 85?

''

9 THE QUESTION ESSENTIALLY SEEKS TO ASCERTAIN THE POSITION , IN RELATION TO PROHIBITIONS


CONTAINED IN ARTICLE 85 OF THE TREATY , OF A CONTRACT WHEREBY THE OWNER OF THE
COPYRIGHT IN A FILM GRANTS THE EXCLUSIVE RIGHT TO EXHIBIT THAT FILM WITHIN THE TERRITORY
OF A MEMBER STATE AND FOR A SPECIFIED PERIOD . MORE PARTICULARLY , THE QUESTION ASKS
WHETHER SUCH A GRANT MAY POSSIBLY FALL OUTSIDE THE SCOPE OF ARTICLE 85 BY VIRTUE OF THE
SPECIAL CHARACTER ATTRIBUTED TO THAT RIGHT BY ARTICLE 36 OF THE TREATY OR BY ITS
PROTECTED STATUS UNDER NATIONAL LAW .

10 IT SHOULD BE NOTED , BY WAY OF A PRELIMINARY OBSERVATION , THAT ARTICLE 36 PERMITS


PROHIBITIONS OR RESTRICTIONS ON TRADE BETWEEN MEMBER STATES PROVIDED THAT THEY ARE
JUSTIFIED ON GROUNDS INTER ALIA OF THE PROTECTION OF INDUSTRIAL AND COMMERCIAL
PROPERTY , A TERM WHICH COVERS LITERARY AND ARTISTIC PROPERTY , INCLUDING COPYRIGHT ,
WHEREAS THE MAIN PROCEEDINGS ARE CONCERNED WITH THE QUESTION OF PROHIBITIONS OR
RESTRICTIONS PLACED UPON THE FREE MOVEMENT OF SERVICES .

11 IN THIS REGARD , AS THE COURT HELD IN ITS JUDGMENT OF 18 MARCH 1980 ( CODITEL V CINE-
VOG FILMS ( 1980 ) ECR 881 ), THE PROBLEMS INVOLVED IN THE OBSERVANCE OF A FILM PRODUCER
' S RIGHTS IN RELATION TO THE REQUIREMENTS OF THE TREATY ARE NOT THE SAME AS THOSE
WHICH ARISE IN CONNECTION WITH LITERARY AND ARTISTIC WORKS THE PLACING OF WHICH AT
THE DISPOSAL OF THE PUBLIC IS INSEPARABLE FROM THE CIRCULATION OF THE MATERIAL FORM OF
THE WORKS , AS IN THE CASE OF BOOKS OR RECORDS , WHEREAS THE FILM BELONGS TO THE
CATEGORY OF LITERARY AND ARTISTIC WORKS MADE AVAILABLE TO THE PUBLIC BY PERFORMANCES
WHICH MAY BE INFINITELY REPEATED AND THE COMMERCIAL EXPLOITATION OF WHICH COMES
UNDER THE MOVEMENT OF SERVICES , NO MATTER WHETHER THE MEANS WHEREBY IT IS SHOWN TO

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THE PUBLIC BE THE CINEMA OR TELEVISION .

12 IN THE SAME JUDGMENT THE COURT FURTHER HELD THAT THE RIGHT OF THE OWNER OF THE
COPYRIGHT IN A FILM AND HIS ASSIGNS TO REQUIRE FEES FOR ANY SHOWING OF THAT FILM IS PART
OF THE ESSENTIAL FUNCTION OF COPYRIGHT .

13 THE DISTINCTION , IMPLICIT IN ARTICLE 36 , BETWEEN THE EXISTENCE OF A RIGHT CONFERRED


BY THE LEGISLATION OF A MEMBER STATE IN REGARD TO THE PROTECTION OF ARTISTIC AND
INTELLECTUAL PROPERTY , WHICH CANNOT BE AFFECTED BY THE PROVISIONS OF THE TREATY , AND
THE EXERCISE OF SUCH RIGHT , WHICH MIGHT CONSTITUTE A DISGUISED RESTRICTION ON TRADE
BETWEEN MEMBER STATES , ALSO APPLIES WHERE THAT RIGHT IS EXERCISED IN THE CONTEXT OF
THE MOVEMENT OF SERVICES .

14 JUST AS IT IS CONCEIVABLE THAT CERTAIN ASPECTS OF THE MANNER IN WHICH THE RIGHT IS
EXERCISED MAY PROVE TO BE INCOMPATIBLE WITH ARTICLES 59 AND 60 IT IS EQUALLY
CONCEIVABLE THAT SOME ASPECTS MAY PROVE TO BE INCOMPATIBLE WITH ARTICLE 85 WHERE THEY
SERVE TO GIVE EFFECT TO AN AGREEMENT , DECISION OR CONCERTED PRACTICE WHICH MAY HAVE
AS ITS OBJECT OR EFFECT THE PREVENTION , RESTRICTION OR DISTORTION OF COMPETITION
WITHIN THE COMMON MARKET .

15 HOWEVER , THE MERE FACT THAT THE OWNER OF THE COPYRIGHT IN A FILM HAS GRANTED TO A
SOLE LICENSEE THE EXCLUSIVE RIGHT TO EXHIBIT THAT FILM IN THE TERRITORY OF A MEMBER
STATE AND , CONSEQUENTLY , TO PROHIBIT , DURING A SPECIFIED PERIOD , ITS SHOWING BY
OTHERS , IS NOT SUFFICIENT TO JUSTIFY THE FINDING THAT SUCH A CONTRACT MUST BE REGARDED
AS THE PURPOSE , THE MEANS OR THE RESULT OF AN AGREEMENT , DECISION OR CONCERTED
PRACTICE PROHIBITED BY THE TREATY .

16 THE CHARACTERISTICS OF THE CINEMATOGRAPHIC INDUSTRY AND OF ITS MARKETS IN THE


COMMUNITY , ESPECIALLY THOSE RELATING TO DUBBING AND SUBTITLING FOR THE BENEFIT OF
DIFFERENT LANGUAGE GROUPS , TO THE POSSIBILITIES OF TELEVISION BROADCASTS , AND TO THE
SYSTEM OF FINANCING CINEMATOGRAPHIC PRODUCTION IN EUROPE SERVE TO SHOW THAT AN
EXCLUSIVE EXHIBITION LICENCE IS NOT , IN ITSELF , SUCH AS TO PREVENT , RESTRICT OR DISTORT
COMPETITION .

17 ALTHOUGH COPYRIGHT IN A FILM AND THE RIGHT DERIVING FROM IT , NAMELY THAT OF
EXHIBITING THE FILM , ARE NOT , THEREFORE , AS SUCH SUBJECT TO THE PROHIBITIONS CONTAINED
IN ARTICLE 85 , THE EXERCISE OF THOSE RIGHTS MAY , NONE THE LESS , COME WITHIN THE SAID
PROHIBITIONS WHERE THERE ARE ECONOMIC OR LEGAL CIRCUMSTANCES THE EFFECT OF WHICH IS
TO RESTRICT FILM DISTRIBUTION TO AN APPRECIABLE DEGREE OR TO DISTORT COMPETITION ON
THE CINEMATOGRAPHIC MARKET , REGARD BEING HAD TO THE SPECIFIC CHARACTERISTICS OF THAT
MARKET .

18 SINCE NEITHER THE QUESTION REFERRED TO THE COURT NOR THE FILE ON THE CASE PROVIDES
ANY INFORMATION IN THIS RESPECT , IT IS FOR THE NATIONAL COURT TO MAKE SUCH INQUIRIES AS
MAY BE NECESSARY .

19 IT MUST THEREFORE BE STATED THAT IT IS FOR NATIONAL COURTS , WHERE APPROPRIATE , TO


MAKE SUCH INQUIRIES AND IN PARTICULAR TO ESTABLISH WHETHER OR NOT THE EXERCISE OF THE
EXCLUSIVE RIGHT TO EXHIBIT A CINEMATOGRAPHIC FILM CREATES BARRIERS WHICH ARE ARTIFICIAL
AND UNJUSTIFIABLE IN TERMS OF THE NEEDS OF THE CINEMATOGRAPHIC INDUSTRY , OR THE
POSSIBILITY OF CHARGING FEES WHICH EXCEED A FAIR RETURN ON INVESTMENT , OR AN
EXCLUSIVITY THE DURATION OF WHICH IS DISPROPORTIONATE TO THOSE REQUIREMENTS , AND
WHETHER OR NOT , FROM A GENERAL POINT OF VIEW , SUCH EXERCISE WITHIN A GIVEN
GEOGRAPHIC AREA IS SUCH AS TO PREVENT , RESTRICT OR DISTORT COMPETITION WITHIN THE
COMMON MARKET .

20 ACCORDINGLY , THE ANSWER TO BE GIVEN TO THE QUESTION REFERRED TO THE COURT MUST BE
THAT A CONTRACT WHEREBY THE OWNER OF THE COPYRIGHT IN A FILM GRANTS AN EXCLUSIVE
RIGHT TO EXHIBIT THAT FILM FOR A SPECIFIC PERIOD IN THE TERRITORY OF A MEMBER STATE IS
NOT , AS SUCH , SUBJECT TO THE PROHIBITIONS CONTAINED IN ARTICLE 85 OF THE TREATY . IT IS ,
HOWEVER , WHERE APPROPRIATE , FOR THE NATIONAL COURT TO ASCERTAIN WHETHER , IN A GIVEN
CASE , THE MANNER IN WHICH THE EXCLUSIVE RIGHT CONFERRED BY THAT CONTRACT IS EXERCISED
IS SUBJECT TO A SITUATION IN THE ECONOMIC OR LEGAL SPHERE THE OBJECT OR EFFECT OF WHICH
IS TO PREVENT OR RESTRICT THE DISTRIBUTION OF FILMS OR TO DISTORT COMPETITION WITHIN
THE CINEMATOGRAPHIC MARKET , REGARD BEING HAD TO THE SPECIFIC CHARACTERISTICS OF THAT
MARKET .

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ON THOSE GROUNDS ,

THE COURT

IN ANSWER TO THE QUESTION REFERRED TO IT BY THE BELGIAN COUR DE CASSATION , BY ORDER OF


3 SEPTEMBER 1981 , HEREBY RULES :

A CONTRACT WHEREBY THE OWNER OF THE COPYRIGHT FOR A FILM GRANTS AN EXCLUSIVE RIGHT TO
EXHIBIT THAT FILM FOR A SPECIFIC PERIOD IN THE TERRITORY OF A MEMBER STATE IS NOT , AS
SUCH , SUBJECT TO THE PROHIBITIONS CONTAINED IN ARTICLE 85 OF THE TREATY . IT IS , HOWEVER
, WHERE APPROPRIATE , FOR THE NATIONAL COURT TO ASCERTAIN WHETHER , IN A GIVEN CASE ,
THE MANNER IN WHICH THE EXCLUSIVE RIGHT CONFERRED BY THAT CONTRACT IS EXERCISED IS
SUBJECT TO A SITUATION IN THE ECONOMIC OR LEGAL SPHERE THE OBJECT OR EFFECT OF WHICH IS
TO PREVENT OR RESTRICT THE DISTRIBUTION OF FILMS OR TO DISTORT COMPETITION ON THE
CINEMATOGRAPHIC MARKET , REGARD BEING HAD TO THE SPECIFIC CHARACTERISTICS OF THAT
MARKET .

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Judgment of the Court (Second Chamber) of 22 January 1981.


Dansk Supermarked A/S v A/S Imerco.
Reference for a preliminary ruling: Hjesteret - Denmark.
Free movement of goods - Copyright, trade marks, unfair competition.
Case 58/80.

Summary

1 . IT IS CLEAR FROM ARTICLE 36 OF THE EEC TREATY , IN PARTICULAR THE SECOND SENTENCE , AS
WELL AS FROM THE CONTEXT , THAT WHILST THE TREATY DOES NOT AFFECT THE EXISTENCE OF
RIGHTS RECOGNIZED BY THE LEGISLATION OF A MEMBER STATE IN MATTERS OF INDUSTRIAL AND
COMMERCIAL PROPERTY , YET THE EXERCISE OF THOSE RIGHTS MAY NONE THE LESS , DEPENDING
ON THE CIRCUMSTANCES , BE RESTRICTED BY THE PROHIBITIONS OF THE TREATY . INASMUCH AS IT
PROVIDES AN EXCEPTION TO ONE OF THE FUNDAMENTAL PRINCIPLES OF THE COMMON MARKET ,
ARTICLE 36 IN FACT ADMITS EXCEPTIONS ARE JUSTIFIED FOR THE PURPOSE OF SAFEGUARDING
RIGHTS WHICH CONSTITUTE THE SPECIFIC SUBJECT-MATTER OF THAT PROPERTY . THE EXCLUSIVE
RIGHT GUARANTEED BY THE LEGISLATION ON INDUSTRIAL AND COMMERCIAL PROPERTY IS
EXHAUSTED WHEN A PRODUCT HAS BEEN LAWFULLY DISTRIBUTED ON THE MARKET IN ANOTHER
MEMBER STATE BY THE ACTUAL PROPRIETOR OF THE RIGHT OR WITH HIS CONSENT .

HENCE JUDICIAL AUTHORITIES OF A MEMBER STATE MAY NOT PROHIBIT , ON THE BASIS OF A
COPYRIGHT OR OF A TRADE MARK , THE MARKETING ON THE TERRITORY OF THAT STATE OF A
PRODUCT TO WHICH ONE OF THOSE RIGHTS APPLIES IF THAT PRODUCT HAS BEEN LAWFULLY
MARKETED ON THE TERRITORY OF ANOTHER MEMBER STATE BY THE PROPRIETOR OF SUCH RIGHTS
OR WITH HIS CONSENT .

2 . COMMUNITY LAW DOES NOT IN PRINCIPLE HAVE THE EFFECT OF PREVENTING THE APPLICATION IN
A MEMBER STATE TO GOODS IMPORTED FROM OTHER MEMBER STATES OF THE PROVISIONS ON
MARKETING IN FORCE IN THE STATE OF IMPORTATION . IT FOLLOWS THAT THE MARKETING OF
IMPORTED GOODS MAY BE PROHIBITED IF THE CONDITIONS ON WHICH THEY ARE SOLD
CONSTITUTES AN INFRINGEMENT OF THE MARKETING USAGES CONSIDERED PROPER AND FAIR IN THE
MEMBER STATE OF IMPORTATION .

HOWEVER , THE ACTUAL FACT OF THE IMPORTATION OF GOODS WHICH HAVE BEEN LAWFULLY
MARKETED IN ANOTHER MEMBER STATE CANNOT BE CONSIDERED AS AN IMPROPER OR UNFAIR ACT
SINCE THAT DESCRIPTION MAY BE ATTACHED ONLY TO OFFER OR EXPOSURE FOR SALE ON THE BASIS
OF CIRCUMSTANCES DISTINCT FROM THE IMPORTATION ITSELF .

3 . IT IS IMPOSSIBLE IN ANY CIRCUMSTANCES FOR AGREEMENTS BETWEEN INDIVIDUALS TO


DEROGATE FROM THE MANDATORY PROVISIONS OF THE TREATY ON THE FREE MOVEMENT OF GOODS .

Parties

IN CASE 58/80

REFERENCE TO THE COURT UNDER ARTICLE 177 OF THE EEC TREATY BY THE HOEJESTERET ( SUPREME
COURT OF DENMARK ), FOR A PRELIMINARY RULING IN THE ACTION PENDING BEFORE THAT COURT
BETWEEN

DANSK SUPERMARKED A/S , HAVING ITS REGISTERED OFFICE IN AARHUS ,

AND

A/S IMERCO , HAVING ITS REGISTERED OFFICE IN GLOSTRUP , COPENHAGEN ,

Subject of the case

ON THE INTERPRETATION OF ARTICLES 30 AND 85 OF THE EEC TREATY AND OF REGULATION NO


67/67/EEC OF THE COMMISSION OF 22 MARCH 1967 ON THE APPLICATION OF ARTICLE 85 ( 3 ) OF
THE TREATY TO CERTAIN CATEGORIES OF EXCLUSIVE DEALING AGREEMENTS IN RELATION TO DANISH
LEGISLATION ON COPYRIGHT , TRADE MARKS AND UNFAIR COMPETITION ,

Grounds

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Central and Eastern European Moot Court Competition Kyiv 2009

1 BY AN ORDER OF 14 FEBRUARY 1980 , WHICH WAS RECEIVED AT THE COURT ON 18 FEBRUARY 1980
THE HOEJESTERET ( SUPREME COURT ) OF DENMARK REFERRED TO THE COURT FOR A PRELIMINARY
RULING UNDER ARTICLE 177 OF THE EEC TREATY A QUESTION THE SUBSTANCE OF WHICH CONCERNS
THE INTERPRETATION OF ARTICLES 30 AND 36 OF THE EEC TREATY IN ORDER TO DETERMINE THE
APPLICABILITY OF CERTAIN PROVISIONS OF NATIONAL LAW ON COPYRIGHT , TRADE MARKS AND
MARKETING TO GOODS IMPORTED FROM ANOTHER MEMBER STATE .

2 THE FILE SHOWS THAT A/S IMERCO , THE RESPONDENT IN THE MAIN ACTION , A GROUP OF DANISH
HARDWARE MERCHANTS COMMISSIONED IN THE UNITED KINGDOM ON THE OCCASION OF THE
FIFTIETH ANNIVERSARY OF ITS FOUNDATION IN 1978 A CHINA SERVICE DECORATED WITH PICTURES
OF DANISH ROYAL CASTLES AND BEARING ON THE REVERSE SIDE THE WORDS ' ' IMERCO FIFTIETH
ANNIVERSARY ' ' . THE SALE OF THAT SERVICE WAS RESERVED EXCLUSIVELY TO HARDWARE
MERCHANTS WHO WERE MEMBERS OF IMERCO . IT WAS AGREED BETWEEN IMERCO AND THE BRITISH
MANUFACTURER THAT THE SUBSTANDARD PIECES WHICH , OWING TO THE QUALITY STANDARDS
APPLIED , AMOUNTED TO APPROXIMATELY 20% OF THE PRODUCTION , MIGHT BE MARKETED BY THE
MANUFACTURER IN THE UNITED KINGDOM BUT MIGHT NOT IN ANY CIRCUMSTANCES BE EXPORTED TO
DENMARK OR TO OTHER SCANDINAVIAN COUNTRIES .

3 DANSK SUPERMARKED A/S , THE APPELLANT IN THE MAIN ACTION , THE PROPRIETOR OF SEVERAL
SUPERMARKETS , WAS ABLE TO OBTAIN THROUGH DEALERS A NUMBER OF SERVICES MARKETED IN
THE UNITED KINGDOM AND OFFERED THEM FOR SALE IN DENMARK AT PRICES APPRECIABLY LOWER
THAN THOSE OF THE SERVICES SOLD BY IMERCO ' S MEMBERS . THE FILE DOES NOT ESTABLISH
WHETHER THE SERVICES IN QUESTION WERE SOLD AS SUBSTANDARD IN THE UNITED KINGDOM ; IN
ANY CASE THE CUSTOMERS OF DANSK SUPERMARKED DO NOT APPEAR TO HAVE BEEN NOTIFIED OF
THAT FACT .

4 DANSK SUPERMARKED REFUSED TO WITHDRAW THE SERVICES FROM SALE DESPITE THE PROTESTS
OF IMERCO AND THE LATTER THEN INSTITUTED PROCEEDINGS BEFORE THE BYRET ( COURT OF FIRST
INSTANCE ) AARHUS AND OBTAINED A PROVISIONAL INJUNCTION DATED 22 JUNE 1978 PROHIBITING
DANSK SUPERMARKED FROM SELLING THE SERVICES IN QUESTION .

5 BY A JUDGMENT OF 19 MARCH 1979 THE SOE- OG HANDELSRET I KOEBENHAVN , ( MARITIME AND


COMMERCIAL COURT , COPENHAGEN ) UPHELD THAT INJUNCTION , CONSIDERING THAT DANSK
SUPERMARKED ' S ACTIONS WERE IN BREACH OF APPROVED COMMERCIAL USAGE AND INFRINGED
ARTICLES 1 AND 5 OF LAW NO 297 OF 14 JUNE 1974 ON MARKETING ( LOV OM MARKEDSFOERING ).
THE COURT DID NOT CONSIDER IT NECESSARY TO DECIDE WHETHER THERE HAD BEEN ANY
INFRINGEMENT OF THE NATIONAL PROVISIONS ON COPYRIGHT AND TRADE MARKS AS WAS FURTHER
CONTENDED BY IMERCO . WITH REGARD TO THE PROVISIONS OF COMMUNITY LAW , NAMELY
ARTICLES 30 AND 85 OF THE EEC TREATY AND REGULATION ( EEC ) NO 67/67 OF THE COMMISSION
OF 22 MARCH 1967 ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1967 , P . 10 ), UPON WHICH
DANSK SUPERMARKED RELIED IN ITS DEFENCE , THE COURT DID NOT TAKE THEM INTO
CONSIDERATION SINCE IT TOOK THE VIEW THAT THE INJUNCTION AGAINST DANSK SUPERMARKED
WAS NOT OF SUCH A NATURE AS TO CONSTITUTE AN OBSTACLE TO THE FREE MOVEMENT OF GOODS
BETWEEN MEMBER STATES OF THE COMMUNITY .

6 DANSK SUPERMARKED APPEALED AGAINST THAT JUDGMENT TO THE HOEJESTERET CLAIMING THAT
THE SAID PROVISIONS OF COMMUNITY LAW PRECLUDED THE APPLICATION OF THE DANISH LAW ON
MARKETING UNDER WHICH THE SOE- OG HANDELSRET HAD PROHIBITED THE MARKETING OF THE
SERVICES IN QUESTION . IN ORDER TO SETTLE THIS POINT THE HOEJESTERET SUBMITTED THE
FOLLOWING QUESTION TO THE COURT OF JUSTICE :

DO THE PROVISIONS OF THE EEC TREATY OR MEASURES IN IMPLEMENTATION THEREOF PRECLUDE


THE APPLICATION TO THE CASE OF THE DANISH LAWS ON COPYRIGHT , TRADE MARKS AND
MARKETING?

7 THE FILE SHOWS THAT THE HOEJESTERET WISHES TO ESTABLISH BY MEANS OF THAT QUESTION
WHETHER AND ON WHAT CONDITIONS THE PROVISIONS OF THE EEC TREATY MAY PRECLUDE THE
APPLICATION OF PROVISIONS OF NATIONAL LAW CONCERNING ON THE ONE HAND COPYRIGHT AND
TRADE-MARKS AND ON THE OTHER THOSE ON MARKETING WHICH ARE CONTAINED IN THE ABOVE-
MENTIONED LAW NO 297 OF 14 JUNE 1974 .

8 THE PROVISIONS OF THE TREATY TO WHICH THAT QUESTION RELATES ARE ARTICLE 30 ON THE
ELIMINATION OF QUANTITATIVE RESTRICTIONS ON IMPORTS AND MEASURES HAVING EQUIVALENT
EFFECT AND ARTICLE 36 IN SO FAR AS IT CONCERNS RIGHTS TO THE PROTECTION OF INDUSTRIAL
AND COMMERCIAL PROPERTY . ON THE OTHER HAND THE FILE SHOWS THAT THE PROVISIONS OF
COMMUNITY LAW RELATING TO COMPETITION , NAMELY ARTICLE 85 OF THE EEC TREATY AND

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REGULATION NO 67/67 UPON WHICH DANSK SUPERMARKED RELIES , ARE IRRELEVANT TO THE MAIN
ACTION ; IT IS ACCORDINGLY UNNECESSARY TO TAKE THEM INTO CONSIDERATION IN REPLYING TO
THE QUESTION SUBMITTED .

9 THAT QUESTION MUST BE UNDERSTOOD AS ASKING WHETHER GOODS WHICH HAVE BEEN
LAWFULLY MARKETED IN ONE MEMBER STATE WITH THE CONSENT OF THE UNDERTAKING WHICH IS
ENTITLED TO SELL THEM MAY BE PROHIBITED , UNDER AN AGREEMENT CONCLUDED BETWEEN THAT
UNDERTAKING AND THE MANUFACTURER , FROM BEING MARKETED IN ANOTHER MEMBER STATE
EITHER ON THE BASIS OF NATIONAL PROVISIONS ON THE PROTECTION OF COPYRIGHT OR TRADE
MARKS OR UNDER LEGISLATION ON MARKETING .

THE LEGISLATION ON THE PROTECTION OF COPYRIGHT AND TRADE MARKS

10 THE NATIONAL PROVISIONS ON THE PROTECTION OF COPYRIGHT AND TRADE MARKS HAVE BEEN
RELIED UPON BY IMERCO ON THE BASIS ON THE ONE HAND OF THE CREATIVE WORK ENTAILED BY
THE DESIGN AND PRODUCTION OF THE SERVICE AND ON THE OTHER OF THE AFFIXING OF ITS NAME
TO THAT SERVICE .

11 IN THIS MATTER IT IS SUFFICIENT TO REFER TO THE SETTLED CASE-LAW OF THE COURT AS IT HAS
BEEN SET OUT IN PARTICULAR IN THE JUDGMENT OF 22 JUNE 1976 ( TERRAPIN ( OVERSEAS ) LTD ,
CASE 119/75 ( 1976 ) ECR 1039 ). IT MAY BE RECALLED THAT THE EFFECT OF THE PROVISIONS OF
THE TREATY ON THE FREE MOVEMENT OF GOODS AND IN PARTICULAR OF ARTICLE 39 , IS TO
PROHIBIT BETWEEN MEMBER STATES QUANTITATIVE RESTRICTIONS ON IMPORTS AND ALL MEASURES
HAVING EQUIVALENT EFFECT . HOWEVER , ACCORDING TO ARTICLE 36 THAT PROVISION DOES NOT
PRECLUDE PROHIBITIONS OR RESTRICTIONS ON IMPORTS JUSTIFIED ON GROUNDS OF THE
PROTECTION OF INDUSTRIAL AND COMMERCIAL PROPERTY . NEVERTHELESS IT IS CLEAR FROM THAT
ARTICLE , IN PARTICULAR THE SECOND SENTENCE , AS WELL AS FROM THE CONTEXT , THAT WHILST
THE TREATY DOES NOT AFFECT THE EXISTENCE OF RIGHTS RECOGNIZED BY THE LEGISLATION OF A
MEMBER STATE IN MATTERS OF INDUSTRIAL AND COMMERCIAL PROPERTY , YET THE EXERCISE OF
THOSE RIGHTS MAY NONE THE LESS , DEPENDING ON THE CIRCUMSTANCES , BE RESTRICTED BY THE
PROHIBITIONS OF THE TREATY . INASMUCH AS IT PROVIDES AN EXCEPTION TO ONE OF THE
FUNDAMENTAL PRINCIPLES OF THE COMMON MARKET , ARTICLE 36 IN FACT ADMITS EXCEPTIONS TO
THE FREE MOVEMENT OF GOODS ONLY TO THE EXTENT TO WHICH SUCH EXCEPTIONS ARE JUSTIFIED
FOR THE PURPOSE OF SAFEGUARDING RIGHTS WHICH CONSTITUTE THE SPECIFIC SUBJECT-MATTER
OF THAT PROPERTY . THE EXCLUSIVE RIGHT GUARANTEED BY THE LEGISLATION ON INDUSTRIAL AND
COMMERCIAL PROPERTY IS EXHAUSTED WHEN A PRODUCT HAS BEEN LAWFULLY DISTRIBUTED ON THE
MARKET IN ANOTHER MEMBER STATE BY THE ACTUAL PROPRIETOR OF THE RIGHT OR WITH HIS
CONSENT .

12 THE FIRST PART OF THE REPLY TO THE QUESTION SUBMITTED MUST THEREFORE BE THAT
ARTICLES 30 AND 36 OF THE EEC TREATY MUST BE INTERPRETED TO MEAN THAT THE JUDICIAL
AUTHORITIES OF A MEMBER STATE MAY NOT PROHIBIT , ON THE BASIS OF A COPYRIGHT OR OF A
TRADE MARK , THE MARKETING ON THE TERRITORY OF THAT STATE OF A PRODUCT TO WHICH ONE OF
THOSE RIGHTS APPLIES IF THAT PRODUCT HAS BEEN LAWFULLY MARKETED ON THE TERRITORY OF
ANOTHER MEMBER STATE BY THE PROPRIETOR OF SUCH RIGHTS OR WITH HIS CONSENT .

THE APPLICATION OF THE RULES ON MARKETING

..............

14 THE QUESTION SUBMITTED BY THE HOEJESTERET IS INTENDED TO ESTABLISH WHETHER IT IS


POSSIBLE TO CONSIDER AS CONTRARY TO APPROVED MARKETING USAGE THE SALE IN DENMARK OF
GOODS MARKETED IN ANOTHER MEMBER STATE WITH THE AGREEMENT OF A DANISH UNDERTAKING
BUT SUBJECT TO THE CONDITION THAT THE GOODS MUST NOT BE EXPORTED TO DENMARK SO AS TO
COMPETE THERE WITH GOODS MARKETED EXCLUSIVELY BY THE UNDERTAKING CONCERNED .

15 IN ORDER TO REPLY TO THAT QUESTION IT MUST FIRST OF ALL BE REMARKED THAT COMMUNITY
LAW DOES NOT IN PRINCIPLE HAVE THE EFFECT OF PREVENTING THE APPLICATION IN A MEMBER
STATE TO GOODS IMPORTED FROM OTHER MEMBER STATES OF THE PROVISIONS ON MARKETING IN
FORCE IN THE STATE OF IMPORTATION . IT FOLLOWS THAT THE MARKETING OF IMPORTED GOODS
MAY BE PROHIBITED IF THE CONDITIONS ON WHICH THEY ARE SOLD CONSTITUTES AN
INFRINGEMENT OF THE MARKETING USAGES CONSIDERED PROPER AND FAIR IN THE MEMBER STATE
OF IMPORTATION .

16 IT MUST NEVERTHELESS BE EMPHASIZED , AS THE COURT OF JUSTICE HAS STRESSED IN ANOTHER


CONTEXT IN ITS JUDGMENT OF 25 NOVEMBER 1971 ( BEGUELIN , CASE 22/71 , ( 1971 ) ECR 949 ),

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THAT THE ACTUAL FACT OF THE IMPORTATION OF GOODS WHICH HAVE BEEN LAWFULLY MARKETED IN
ANOTHER MEMBER STATE CANNOT BE CONSIDERED AS AN IMPROPER OR UNFAIR ACT SINCE THAT
DESCRIPTION MAY BE ATTACHED ONLY TO OFFER OR EXPOSURE FOR SALE ON THE BASIS OF
CIRCUMSTANCES DISTINCT FROM THE IMPORTATION ITSELF .

17 IT MUST FURTHERMORE BE REMARKED THAT IT IS IMPOSSIBLE IN ANY CIRCUMSTANCES FOR


AGREEMENTS BETWEEN INDIVIDUALS TO DEROGATE FROM THE MANDATORY PROVISIONS OF THE
TREATY ON THE FREE MOVEMENT OF GOODS . IT FOLLOWS THAT AN AGREEMENT INVOLVING A
PROHIBITION ON THE IMPORTATION INTO A MEMBER STATE OF GOODS LAWFULLY MARKETED IN
ANOTHER MEMBER STATE MAY NOT BE RELIED UPON OR TAKEN INTO CONSIDERATION IN ORDER TO
CLASSIFY THE MARKETING OF SUCH GOODS AS AN IMPROPER OR UNFAIR COMMERCIAL PRACTICE .

.....

Operative part

ON THOSE GROUNDS ,

THE COURT ( SECOND CHAMBER ), IN ANSWER TO THE QUESTION REFERRED TO IT BY THE


HOEJESTERET BY ORDER OF THAT COURT DATED 14 FEBRUARY 1980 ,

HEREBY RULES :

1 . ARTICLES 30 AND 36 OF THE EEC TREATY MUST BE INTERPRETED TO MEAN THAT THE JUDICIAL
AUTHORITIES OF A MEMBER STATE MAY NOT PROHIBIT , ON THE BASIS OF A COPYRIGHT OR OF A
TRADE MARK , THE MARKETING ON THE TERRITORY OF THAT STATE OF A PRODUCT TO WHICH ONE OF
THOSE RIGHTS APPLIES IF THAT PRODUCT HAS BEEN LAWFULLY MARKETED ON THE TERRITORY OF
ANOTHER MEMBER STATE BY THE PROPRIETOR OF SUCH RIGHTS OR WITH HIS CONSENT .

2.ARTICLE 30 OF THE EEC TREATY MUST BE INTERPRETED AS MEANING : THAT THE IMPORTATION
INTO A MEMBER STATE OF GOODS LAWFULLY MARKETED IN ANOTHER MEMBER STATE CANNOT AS
SUCH BE CLASSIFIED AS AN IMPROPER OR UNFAIR COMMERCIAL PRACTICE , WITHOUT PREJUDICE
HOWEVER TO THE POSSIBLE APPLICATION OF LEGISLATION OF THE STATE OF IMPORTATION AGAINST
SUCH PRACTICES ON THE GROUND OF THE CIRCUMSTANCE OR METHODS OF OFFERING SUCH GOODS
FOR SALE AS DISTINCT FROM THE ACTUAL FACT OF IMPORTATION ; AND

THAT AN AGREEMENT BETWEEN INDIVIDUALS INTENDED TO PROHIBIT THE IMPORTATION OF SUCH


GOODS MAY NOT BE RELIED UPON OR TAKEN INTO CONSIDERATION IN ORDER TO CLASSIFY THE
MARKETING OF SUCH GOODS AS AN IMPROPER OR UNFAIR COMMERCIAL PRACTICE .

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Central and Eastern European Moot Court Competition Kyiv 2009

Judgment of the Court (Sixth Chamber) of 24 January 1989.

EMI Electrola GmbH v Patricia Im- und Export and others

Reference for a preliminary ruling: Landgericht Hamburg - Germany. - Copyright - Different


protection periods. - Case 341/87.

1 . Free movement of goods - Industrial and commercial property - Copyright - Related rights to
reproduce and distribute sound recordings - Application of Article 36 of the Treaty
( EEC Treaty, Art . 36 )
2 . Free movement of goods - Industrial and commercial property - Copyright - Musical works protected
in more than one Member State - Expiry of the protection period in one Member State - Marketing in
that State, without the consent of the copyright owner, of sound recordings incorporating those works -
Importation into and marketing in a Member State in which protection still exists - Opposed by the
copyright owner - Restrictions on trade resulting from the disparity between national laws - When
acceptable - Conditions
( EEC Treaty, Arts 30 and 36 )

Summary

1 . The protection of industrial and commercial property within the meaning of Article 36 of the Treaty
covers literary and artistic property including copyright, to the extent in particular that it is commercially
exploited . Consequently, it includes the protection of exclusive reproduction and distribution rights in
sound recordings to the extent to which that protection is assimilated under the applicable national
legislation to copyright protection .

2 . Articles 30 and 36 of the EEC Treaty do not preclude the application of a Member State' s legislation
which allows a producer of sound recordings in that Member State to rely on the exclusive rights to
reproduce and distribute certain musical works of which he is the owner in order to prohibit the sale, in
the territory of that Member State, of sound recordings of the same musical works when those
recordings are imported from another Member State in which they were lawfully marketed without the
consent of the aforesaid owner or his licensee and in which the producer of those recordings had
enjoyed protection which has in the mean time expired .

In so far as the disparity between national laws relating to the protection of literary and artistic property
may give rise to restrictions on intra-Community trade in sound recordings, such restrictions are
justified under Article 36 of the Treaty if they are the result of differences between the rules governing
the period of protection and this is inseparably linked to the very existence of the exclusive rights. No
such justification would exist if the restrictions on trade imposed or accepted by the national legislation
were of such a nature as to constitute a means of arbitrary discrimination or a disguised measure to
restrict trade .

Parties

In Case 341/87

REFERENCE to the Court under Article 177 of the EEC Treaty by the Landgericht ( Regional Court )
Hamburg for a preliminary ruling in the proceedings pending before that court between

EMI Electrola GmbH, Cologne

and

1 . Patricia Im - und Export Verwaltungsgesellschaft mbH, Lueneburg ..

on the question of the limits which the principle of the free movement of goods imposes on the exercise
of industrial property rights and copyright in the event of a disparity between the protection periods
provided for by the laws of the various Member States,

THE COURT ( Sixth Chamber )

having regard to the Report for the Hearing and further to the hearing on 19 October 1988,

after hearing the Opinion of the Advocate General delivered at the sitting on 29 November 1988, gives
the following Judgment

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