Week 11, Class 11: Free movement of goods 04/05/2021

We will not have a cumulative session from now until the end of classes but we could turn it into
an advantage because usually we have not studied materials at the end of classes. And so there
are not that many questions. So what we could do you do is have accumulated section
somewhere closer to the exam dates if you if you want. So an optional session and by that time
everyone will have questions.

PART II – INTERNAL MARKET

Introduction

So we will talks about internal market law. Internal Market is everywhere around us. So the
questions you see on that slides are only few questions you could add a whole bunch of corona
related questions all to be solved under free movements law.

1. What

Now all the slides with the definition. So what is the internal market of the European Union
according to the Commission on Eur-Lex, is “ a single market in which the free movement of
goods, services, capital and persons is assured, and in which citizens are free to live, work,
study and do business.”
The last part of the definition refers to citizenship something that we will not see in this class.
Our internal market, single market, is part of a whole evolution from a free trade area over a
customs union towards economic and monetary union. I am not going all over all this steps now.
However, be aware of the importance internal markets is both economic and non-economic and
legal you could say. There is a lot of interesting things from a legal point of view.

2. Economic Importance

We are still an important economic power in the world if we work together. The importance has
decreased a little bit since Brexit. Brexit had a impact, but still, the EU Internal Market remain an
important economic power.

3. Non-Economic Importance

Also the non-economic perspective of Internal Market is important, why? Because so many cases
are about the way of economic versus non-economic goals and interests. If a group environment
activist, brought, out of protest, (inaudible) we have to weigh the economics vs. the non-
economic interest, and you will see that in many of these cases the more economic interests
actually prevailed. So it's a little bit as in competition law where we said maximum competition
is never good for the EU. We don’t want absolute competition; we need to weight the need of
competition against other needs or economic interests. And you will see here the same thing. It is
not always that the economic goals will prevails (inaudible).

This is actually how the EU started. This has an important message for us, if you go back to the
to the origins of our EU, those origins were economic but only to the extent that the economic
goals equals the non-economic goal of preserving peace and the whole idea was to make war
economically impossible and it worked quite well. So that is why, the EU is a Nobel Peace Prize
recipient in 2013. You should never forget that, it is not only about the economic goals but also
the non-economic goals, and that is supported with powerful legal instruments and this is in turn
why we want to study it.

4. EU internal market law today

So those 3 stages that you see in the slide are the stages according to which every movement in
ternal market cases are solved. So it is not unlike competition law, where you also work in
different lines of defence, but these are somewhat different sets.
1. The first step will be to find the relevant freedom, for some freedom it’s easy for
others it's more difficult, such as the one we will deal with today, free movement of the
goods.
2. Once you have found your freedom, you will check what kind of restriction is at stake:
a. is it a direct discrimination: meaning discrimination based on nationality or
b. Is it an indirect discrimination: meaning the distinction made by the national
restrictive measures is not based on nationality but on a proxy which leads to
discrimination on the basis of nationality. For example establishments, where are
you established:
i. the member state said says well this is just for the people that are
established in my state. Then, chances are that most of the people
established in the state have the nationality of that state, so that will be
indirect discrimination.
ii. Or is it not discriminatory but simply restrictive, it makes it less attractive
for you to move to another member state.
3. All of these will be in principle (inaudible) but of courses you will have the right to
justify it, depending on the type of restriction, your justification will also differ.

This is the same kind of easy reasoning that we had in competition law. So 1) first step which
freedom. We know the four freedom. What do you do with citizenship of the union, some
 people would bring it on the free movement of persons others will say it’s fifth freedom or
four and half. It is a little different from the classical free movement of goods, free movement
of natural and legal person, free movement of services and capital and payments.

Step 1: Which freedom?

I have told you before, establishment and services are not usually dealt with together.
Establishment refer to a situation where you permanently reside in the host member state, so in
another member state than your state of origin; plus, where in that member state, you have some
infrastructure. Services refers to the situation where you are in a host member state on a
temporally basis and where you have no infrastructure. Of course this is a beautiful theory, in
practice, this is not either or, it is a continuing practice. You will often do business in another
member states and after sometimes, you will have an office there. So it often a gradual thing.

Within Persons, you have a distinction between free movement of employees and freedom of
establishment:
- Free movement of employees implies that working under the guardian or the
supervision of somebody else;
- Freedom of establishment is for independent persons.

Capital and Payments are now together although they were different thing at the beginning of
the process where:
- Payments were linked to other freedoms. I pay for my goods, I pay for your service; and
- Capital was linked to economic and monetary union, and therefore liberalization of
payments move that much faster than the liberalization of capital.
Don't worry about that today capital opinions are now in the with same articles, the same
treatments, everything identical.

And then the last thing you should know about these freedoms, is that there are not mutually
exclusive, you can have several freedom applied to your case but usually the court will chose
only one. And they do so on the basis of a dominance theory. They would say, this case is more
a free movement of services than a free movement of good case. For those of you that already
had Internal Market law think about the case of (ask Bruno) where lottery tickets were sent from
one member state to another, and the question was is it a good? And answer is yes, but more
importantly, is it a service? The answer was since the service (have to check – it doesn’t make
sense) it is embodies within the lottery ticket, therefore we will deal with it under the free
movement of service.

Any question? Most of you had an introduction to this anyway so you are familiar with these
four freedoms.
All of these freedoms have their relevant treaty articles. In red you see the key article in the
treaty, but the other article are usually dealing with justification or a principle or a more specific
situation. So we will deal with good and we will deal with services.

As soon as you deal with services you are also dealing with establishment because the two have
grown together. For example that important services directive that you read about is as much an
establishment directive as it is a services directive. These two are now dealt with together in
regulation and caselaw.

So difference between workers and establishment you know; difference between establishment
and services you know. Services is formally under the treaty (Art 57 TFEU) a residual category,
so the treaty tells us that we should apply free movement of services only if no other freedoms
applies, however, in practice we do exactly the opposite. So this is simply not applied therefore
you can ignore it. Services has become gradually the most important freedom where it started out
as the least important freedom, at least under the treaty text.

Why has services become the most important, freedom? There is several reasons, but one of the
important reasons is servitization. What used to be goods are now services. Why? Because we
serve them over platforms, or we don’t serve them any more we rent them out. Example:
- Digital agriculture: we used to buy seeds, we used to buy the pesticide as goods. Now
you subscribe, you have a subscription to a provider of satellite images analyzing your
crop fields and then they will tell you what seeds you need, what pesticide you need, their
size and then tell you, you can rent those seeds from me but I prohibit you to use them
next year. Next year you can re subscribe and pay me again for the subscription. That’s
servitization.

No hierarchy, but the Court of Justice mostly choose one freedom.

Step 2: Restrictions

Life has become more easier for you than your predecessor in this regards, because all the treaty
articles the basic articles are now formulating the exact same way and that is this way, a total
ban of all form of restriction: discrimination, indirect discrimination, non-discriminatory
restrictive measure, everything is prohibited, subject of course to justification.

So we got from discrimination to restriction or to obstacle, the “dual regulatory burden”, the
mere fact that my law is different from your law forces you if you want to develop a strategy to
conquer internal market, forces you to know my law, and that create a dual regulatory burden. So
even if my law is not discriminatory, it may still hinder you from doing business abroad – see
quote from Dassonville in slide.

Step 3: Justification

At step 3, you have to distinguish between cases where the distinction is discriminatory from
cases where the distinction is merely restrictive but not discriminatory:
- In case of Discrimination: you will justify on the basis of what you find in the treaty
In case of non-discrimination, but merely restrictive measure: you will justify on the basis of
what you find on the treaty plus the so called, judge made “Rule of Reason” (The Rule of reason is
a legal approach by competition authorities or the courts where an attempt is made to evaluate the pro-competitive
features of a restrictive business practice against its anticompetitive effects in order to decide whether or not the
practice should be prohibited.), where you have, as a member state justifying a restriction, to fulfill
the following conditions:
- No harmonisation: because if there is harmonization you will apply the harmonized
measure. So even if that harmonization in the hierarchy of norms is lower of that treaty
 provision, you apply the harmonized measure. This is counter intuitive, you would like to
follow the hierarchy but we don’t.
- No discrimination: this is essential
- Compelling reason of general interest: a general good, a noble goal
- Proportionality = appropriate and necessary:

We see here some resemblance to for example Art 101(3) – as there is no discrimination in there,
yet it is also different. An Example of justification in the treaty can be Art 52(1).

Powerful legal tool

Internal Market Law is such a powerful tool. It is at least as powerful as competition law in many
regards, except for one: fines. That’s what we miss in internal market law, that whole type of
enforcement aspect is not so much present here. You may say, that is not correct because we now
have the fines and lump sum payment that you have to make as a member state when you in a
second time do not execute a judgment by the court of justice, that is correct. For example
Belgium is currently paying 7500euro/day because we don’t want to adapt the taxation of
(inaudible) of other member states. But yeah what’s 7500 euro/day compare to the fines in
competition case.

ECJ 14.12.2000, AMID, C-141/99

This is a tax law case, as you know, the most beautiful examples of internal market law comes
from tax law. I know some people when they hear about tax law they are out of their mind – but
taxation is actually a marvelous area of law.

To understand that example, you don’t need ot understand anything about taxation except for 2
things:
1. If I have a loss this year, I am able to recover that loss next year. So I had a loss of 50,
and the next year I have a profit of 100 and I will only have to pay taxes for next year of
100 – 50, which is 50.
2. You have to know something about the basics of international taxation. We discussed
them when we discuss ….. and competition law issues. We have similar issues in internal
 market law and taxation for example: I teach in the Netherlands and Belgium say we will
tax you because you are Belgian, and the Netherlands will say we will tax you because
you made that money in the Netherlands. And then I have no income left if they both
indeed tax me. In tax law, Belgium will say, will are not going to tax you, you will allow
the Netherlands to tax you on the basis of bilateral taxation treaty but we still want to see
your taxes in the Netherlands because we will add that in you taxable base and we will
tax you more on what you earned in Belgium. In other words, Belgium, my home state,
we look at my world-wide income, whereas the Netherlands, as my host state will only
look at what I earned in the Netherlands.

Now we can start talking about the case. I am a Belgium company, AMID, and that Belgium
company has an establishment, his factory in Luxembourg. In Belgium, in year T, I have a loss
of 10. In Luxembourg, the same year I have a profit of 10. In year T+1, in Belgium I made a
profit of 10 and same thing in Luxembourg, a profit of 10. The Belgium authority do not come to
ask for any contribution. For year T+1, the Belgium authority says you had a profit of 10, can
you please pay on the profit of 10. And then AMID says, no because last year I had a loss of 10
and 10-10 = 0 so I don’t have to pay you any taxes. At that point, the Belgium Tax authority says
sorry, you are wrong because we are your host state authority and we will look at your world-
wide income and your loss of 10 in year T has been offset by the profit of 10 in Luxembourg. So
please pay me now on your profit of year T+1. At this point AMID is furious because they say
you no right to offset my loss of 10 in Belgium with the gain in Luxembourg, because the
consequence is that I had a loss which I cannot use in Belgium nor Luxembourg. Luxembourg
look at the income earned in my its nation only. So AMID cannot use to loss in Belgium and
cannot use the loss in Luxembourg since it only look at income earned in its nation.

So AMID goes to court, just like several other companies have done before. They all went to the
Belgium court and some of those companies went to the highest court, the cour de cassation and
every time, again and again, same story: yes it’s seems unfair for the companies but this is the
consequences for the international taxation and there is nothing the court can do about it.

Until there is one lawyer that said, well counting in an EU law case out of the story. Because
when I look more closely, if I had established my permanent establishment not in Luxembourg
but in the Belgium province of Luxembourg, so in Belgium, we will not have this discussion and
then of course that loss, could be used. It is only because I established in the member state, the
home state of Luxembourg that now I have a loss which I cannot use in either state and that to
me is restrictive.

The case goes to the court of justice and the court says yes you are correct, this is restrictive, we
found no justification. It might be normal and usual in double taxation, we do not find a
justification in EU law, so Belgium please stop. And at that point, Belgium who had excellent
lawyers said no, this is wrong, are blinded by this minus in year T. For the sake of arguments,
let’s say that in Belgium in year T there were a + 10 and in Luxembourg a -10. Then in year T,
looking at world-wide income, you have to pay no tax. In Luxembourg in year T I will have to
pay no tax. So I could use my loss in Belgium. So Court, when you look at the Luxembourg side
of things, Luxembourg only its income I could now use that loss for year T+1. So dear Court, by
just playing a little bit with the numbers you now have a case where, instead of not being able to
use a loss, you can use it twice and that prove that Belgium had no intention what so ever of
creating restrictive rules for people established in other member states, this is just a coincidence
and for every 10 cases where there is problem for the companies involves, there may be
hundreds cases where it is advantages to set a business in another member states. And at that
point the court of justice tells us, well that’s very interesting, but I don’t really care, as soon as
you can find another case where moving to another states is disadvantageous that’s enough.

Ok so what do we have, we have a set of rules, which you can use against your own member
states that may have been written for behaviour of other member states. We can create truly
hypothetical stories. We have case law about this, where we have no actual client abroad but you
said what if I had client abroad, because the Dassonville tells us that all potential hinderances,
obstacles, even if for 1 obstacle there is 10 advantages, that’s justification that I can use these
rules.

Now I hope you realized how powerful those set of rules. This should suffice to overturn every
pieces of legislation, however, democratically, it might be in your national parliament, you can
overturn it if you can turn it into an EU case. I have the power against my competitor, I also have
the power against my own member state.

Question from student: How do you distinguish the statement by the court in the AMID case
from the rule of reason? Answer: there is no need to distinguish the 2, because it is in addition to.
Also in AMID, Belgium tried to justified its restrictive measures, but the court tell us that us if
you find one case where restrictive that’s enough. That’s powerful.

Could we make it even more powerful? Yes – Imagine if you could do this in situation purely
internal, where you don’t cross a member state’s border and you are still able to apply these
rules. And secondly, if we could apply tools not against member states but against each other that
will be very great, then we will have it all. And this is what we are doing with gradual
convergence between competition law and internal market law. We start with competition law
between member states and then we start applying internal market law to the behaviour of
individuals – that it what we call the horizontal direct effect of the free movement provisions.
Which is not equally developed for each of the freedoms, for some freedoms it is stronger than
for other but it is happening. And then when you are able to apply it within your own member
states, then I do not know of any stronger than the provisions of competition law and internal
market law.
OK interesting remarks during the break. All this distinguish between second stage and third
stage of your reasoning. The court saying this practice to me is restrictive regardless of whether
you can find 100 other instances where it's actually beneficial that is Step 2, that is saying it is
restrictive. And then after only can you try to come up with some justification. Which in this
case is not more than saying are the situation of companies establishing in Luxembourg is
different from that establishing within Belgium. The court rejects that in other tax cases you will
have as a justification ground backman the coherence of the tax system for example.

In that regards I want to point out to you that what this bizzare is that even though internal
market law and competitional law are converging there are some fundamental differences
between the two:
- One of them is that in internal market law your justification must not be economic.
Whereas in competition law your justification under 101(3) in the eyes of the
Commission must be economic. If it is something non-economic, like privacy, the
environment so far we rejected it. This may now change with all this stuff about Green
Deal and competitions to find the greenest competition idea. etc etc but that is where the
law stands
- aother example whereas in competition law we have attached much weight to de minimis
and internal market law there is node minimis.

So that is something that sooner or later we will have to come to to grips with this we cannot on
the one hand say I have at the two converge and we will apply them to exactly the same member
States and the same undertakings and on the other hand have such fundamental differences
between the two fields .

What’s new

OK very very briefly to end this general overview what is knew the rise of economic nationalism
is new ;can decommission fight back is a gentle way of saying the Commission is perhaps not
active enough in the fight against economic nationalism. Brexit, digital single market, purely
internal situations that is my in the last slide, horizontalization so the horizontal direct effect,
justification grounds :the question being if you have more and more horizontal direct effect
should you then not also have more and more justification grounds which can be applied by
persons; and not only by member states. I mean it is very difficult for a person, if you are under
attack by an internal market rule it's very difficult to say yeah but I did it for the public health,
public safety - that is for member states. Shouldn’t we not also writes justification grounds
which can be used by individuals as a counterweight to the horizontalization of the freedoms.
And how to deal with non economic values, interesting but no time to go into it. And there is no
time because we move now to tariff measures.

Free movement of goods (FMG) : Tariff Measures

What do you know about free movement of goods? You probably you know Dassonville, Cassis
de Dijon and Keck.

What does tariff mean? The word tariff means that it is a restriction which makes you pay. If you
want to move you pay, non tariff measures such as the ones in Keck, Dassonville etc.. they are
not about paying but about a general nature but never in terms of a customs duty that you have to
pay or charge that you have to pay no there will be more subtle. They will be like um we prohibit
you to engage in certain trading practices for example.

To make it all a bit more understandable, look at this hypothetical case you are at the French
German border and there is a bunch of cars coming in from Germany and this is what would be
said at the French border example, we have already 80,000 German cars this year that's enough
please go back; or we say yeah you can import them but please pay 5% of the price of each car;
or we say yeah you can import them but we have to keep statistics in an and registers of
everything and therefore please pay us $0.05 or $0.10 for every car that you import; or we could
say we cannot have these cars in in France because they lack the parking sensors that we believe
are crucial for safety so we don't want them on our roads; or we could say French cars we want
them to be produced by French monopoly; or we can say OK you can import them but once they
are in France their vehicle tax will be higher than for French cars; or you can say OK come on
get in but we don't want diesel cars anymore in France because we are environmentally friendly.
And then Lastly imagine that this would not be on the French German border but on the Flemish
Walloon border within Belgium what would then be the answer?

Free movement of goods: confusion?

If you can solve all these questions right now then it's fine you should not be here but the
problem is that for each of these questions you have a totally different article and a totally
different solution which you have to find either in article 30, 34, 37, 110, then they throw you
two different parts in the treaty or there is no article and you will have to find it in the case law.

And that is a bit the confusion in free movement of goods is that we have so many different
concepts which you see there on the slide and the trick will be to apply the correct article to the
correct situation. And that is what we will do in the in the coming hours.

The point of departure is article 28 that you see here on this slide article 28 refers us to the
customs union, customs duties, charges having equivalent effect and a common customs tariff.
This is the starting point for everything that is tariff measures, in other words measures that make
you pay when you cross a border or when you don't cross the border but you are still treated
differently on the basis of where your goods are coming from.

Schematically you could present it as have the overall the overarching customs union provision
in 28 and then you move to the right of the slides everything that is between member States and
third countries: that is the domain of the uniform customs quote: the common customs tariff,
harmonization, that is fully harmonized. Ah you want to import or exports this or that product
from the United states this will be your tariff harmonize.

Now we go to the rules between member States and there again you have to distinguish between
- what is harmonized and what is mostly positive integration:
- what is not harmonized; and
- what is negative integration you integrate by prohibiting certain behavior.

Positive integration harmonization is everything that are the rules on technical standards and
there are thousands and thousands of such rules, product characteristics. For example you have in
your reader the chocolate directive which tells you how much cocoa beans there should be in
your chocolate for you to have the right to call it chocolate etc… very very very very detailed
standards and product norms, they are all harmonized. So probably 80 or more percent of what
we are doing in tariff measures is harmonized. Nevertheless we always focus on that middle box,
which is not harmonized but which is negative integration.
These few treaty articles in the middle is what will keep us busy for the next few hours you see
the article 30 and article 110 that is everything that has to do with tariffs, payments to be made
and then articles 34,36 and 37 on monopolies are the rules which are non-ariff restrictions and
we will deal with those next week. So but please realize that this is only a small part of the
reality. If you come across an attorney specialized in customs, most of the time they are dealing
with the box on the right and with the box on the left and it's only in the most difficult cases you
could say that the middle box is at stake.

FMG: 3 steps of analysis

We move to are three steps and unfortunately for us in free movement of goods the first step is a
bit more complicated than in the other freedoms. Because after having checked whether we are
in the free movement of goods, the question will be where are you in free movement of goods? is
this a tariff measure? Is it an article 30 measure? Is it a 110 measure? Is it a non-tariff measures?
etc etc… So we will have two jobs in that first stage.

And the first job will be to check whether the general conditions of free movement of goods are
fulfilled and if that is so then we will find the correct article.

General conditions: so what are these general conditions So what will you need in your case for
free movement of goods to apply. Well obviously, it will have to be about:
- goods
- there will have to be member state behavior, and
 - there will have to be a cross border elements. And if those are all present then only can
we determine is it article 30 is article 110.

1. Goods

Commission vs. Italy: Italy was upset with citizens from other member states exporting its art
treasures and wanted to protect them. And it's claimed that an art treasure is not a good, it's too
important to be a good under free movement of goods. And that is an important case because it
gives us a definition of what a good is “it is a product which can be valued in money and riches
capable as such of forming the subject of a commercial transaction” in other words and here
again you could see beautiful parallels with competition law, in other words we have a very
broad understanding of what a good is. Animals life animals are goods, body parts are goods,
OK is it not a bit bizarre we have a PhD student writing a thesis with the thesis that animals are
not good well under the current caselaw they still are. Should we be shocked? No of course not
it's the same as in competitional you have a very broad field of application and then later on of
course we will not deal with animals same way as we deal with other goods.

C-338/95 Wiener: And this leads to discussions the case I give you there is funny case that's
why I give it to you it doesn't have great value but it's a nice discussion about whether something
under the classification is a nightgown or lingerie. And they are subject to different tariffs. This
kind of qualification cases are endless, don't think that the Court of Justice is only dealing with
interesting and principled cases much of the work is about classification issues. So but we know
now what's a good is so multiple choice question what of which one of these is not a good:
nuclear waste Costa in our electricity Prince by the street artists ROA or a €50 cent coin? And
the answer is there are all goods even electricity is a good except for the last one, a currency that
is that is actually in use still is not a good but comes under capital. But for the remainder in a
very very broad idea of what a good is.

2. Member State Behavior

Second element, we need member state behavior. We need member state behavior and that is
already apparent from the Dassonville formula all trading rules enacted by member states.
However as I told you, this is being eroded, the concept of member state is being a member state
is eroded. First of all because we interpret it again very broadly, regional authorities public,
undertakings, private bodies authorized by member states, are all considered member states
Secondly because we start applying free movement of goods to each other. The most important
case of horizontal direct effect of free movement of goods is the Fra Bo case I am not going to
set it out I'm asking you to read it yourself if you haven't heard about it read it. If you have
questions bring them to class. End please be aware that Fra Bo is not at all the first case which
was horizontal There are many cases in free movement of goods which were horizontal and
which are much much older than Fra Bo. For example this Delhaize Case.

Delhaize case: a case between a Belgian supermarket and a wine trader somewhere in Spain and
the case is won and lost on the basis of free movement of goods provisions. So it's a horizontal
case one party wins the other one loses and this is on the basis of free movement of goods.

So do not be convinced that Fra Bo is the first case of direct horizontal effect of free movement
of goods. Nevertheless there is a difference between Delhaize and Fra Bo, for those of you who
have already studied free movement of goods, Rau, is another such case which is basically
horizontal case, yet it is a little bit different from Fra Bo. What is the difference? You will tell
me later .
 3. Cross-Border

The third element is a cross border element however this too is being eroded we don't we no
longer needs cross border in the sense of a member state border. A case can be an internal market
case solved under the internal market case law of the Court of Justice and deal with an internal
border A prime example of such a case was the Marvel tax case that you see listed there, in 2004
the marvelous carrara the famous marble will the famous marble is pleasant for everyone except
for that commune, city why? Because they have all these extremely heavy lorries driving up and
down there little beautiful community and yeah that is devastating for the roads so at one point
they impose a text and they say whomever takes away marble from our city to the outside world
regardless of whether you bring it to another part in Italy or you bring it to Belgium or another
member state you will pay this tax. And the text was successfully attacked under EU internal
market law free movement of goods. It is not only about borders between member states it can be
a border as small as a border of a city which is nice that brings us new possibilities in life.

The court saying yeah the reason that these articles make reference only to trade between
member states is because the framers of the treaty could not imagine that a customs duty would
be in existence within a member state. Well then why didn't we change the tree yeah because it's
still the same today so it's not perhaps the strongest of arguments but it is good law and it
proves that the cross border can be cross border within one member state again same in
Delhaize.

So what do you do first? You check whether you have a good, whether you have member state
behavior knowing that this is a bit eroded and whether there is a cross border element knowing
that this does not have to be across border element between member states, it can also be within
one member state. If you have these three features you can apply free movement of goods and
then the next question will be, which parts of the freedom do you apply?

Step 1b: choice of applicable Article

And here you have that major distinction between tariff and non-tariff. Tariff today and non-
tariff next week.

And within non-tariff measures you have another red line and the red lines are mutually
exclusive. So your case can never be a case which is at the same time under 30 I wanted and it
can never be a case which is at the same time under 30 and 34 tariff and non-tariff are mutually
exclusive 30 crossing a border 110 within 1 member states are mutually exclusive. OK will you
Please remember that in life will become easier

Art 30: this is about customs duties. What is a custom duty? It is a tariff measures ,in other
words it is a payment, you will make because you cross a border. And because you have some
legal texts telling you that if you cross that border, you should make that payment. That is a
customs duty it is in your customs code. What is a CEE: a charge having equivalent effect, it
is a customs duty which we do not call a customs duty, but which we call something else but it
has the same features: it is a payment you make because you cross a border but it's now not in
your customs code it's somewhere else and we don't call it customs duty.

Art 110: this is not a payment you make at the moment of crossing that border, but this is
discrimination after your product is already in the host state, but your product is still
discriminated against because it comes from a different member state. and now you have in a
neutral the difference between customs duty charge having equivalent effect and internal taxation
measures. And all of these are different from the Dassonville, Cassis de Dijon et Deck.
Customs duties (CD)

Van Gen den Loos: is a customs duty case we know it is a direct effect case but it was effective
customs duty case. You have a Dutch company, they are importing a product and when they
cross the border they find out that they have to pay more this time then the last time. And they
say that is impossible because article 12 (at the time) said member states shall refrain from
introducing new customs duties or from increasing customs duties. They say so you're breaching
this provision and of course is yes you're right and by the way you have the right to invoke that
provision - ah direct effect

Of course now it is formulated completely differently, the prohibition is much stricter than it
used to be at the time “customs duties on imports and exports shall be prohibited” it's a simple
assist no more talk about standstill as in article 12 no just a plain and simple prohibition.

“Introducing a new charge or changing the qualification as was the case in van Kenton loss leads
to the same result namely a customs duty” well they're wrong they are prohibited, this is about
customs duties.

Charges having equivalent effect (CEE)

A little bit more difficult, but not so much are the charges having equivalent effect. By the way a
charge having equivalent effects is completely different from a measure having equivalent
effects. A measure having equivalent affect this non-tariff, a charge having equivalent effect is
tariff . What is the tarrif having equivalent effect it's a customs duty which you call differently.
OK I'm read this but I'm not going into all the details important is what you see there in the
middle it seeks to fill a loophole. If we didn't have this, the member states would say OK we
impose the charge but we don't write it into our customs codes, and then we will escape. No of
course, charges having equivalent effect are there to make sure that everything that amounts to a
customs duty is also prohibited. And then you have a long line of cases we remember states tell
us, you have to pay a little bit small pecunia recharge because we have to keep statistics or
because we have to test your product before we let it into our great nation. All of that is
prohibited.

What do we need?
 - we need a payment: the payment is imposed unilaterally by the states where you bring
your product;
- it is at the time of crossing a frontier very important element; and
- why you do this it's totally irrelevant: so however small it is however you call it even if
you don't do it for your own profit even if there is no competing domestic product it is
always and by definition wrong.

Can you justify it? In theory no. We believe in the EU that the prohibition on customs duties and
charges having equivalent effect is so fundamental in our customs union that we will not allow
any justification. Nevertheless there are a few situations where article 30 will not apply (see
slides):
- if you are if it's not a charge but it's actually remuneration for a service that is actually
paid for example you have to stock your goods in a warehouse and you pay for that
service;
- or if it is an inspection not permitted but required by EU law;
- or if it's an internal taxation measure in other words it is not at the moment when you
cross the border.

In all these cases the court doesn't see that as justifications they say this brings the case outside
the scope of article 30.

That is why my zone of justifications is a bit blurred, formally there are no justifications; for
article 30 there are just three cases outside the scope of article 30.
Well this helps us solve already t3of our 8situations situation:
- Situation 2: can be either a customs duty if it's in your customs code or a charge having
equivalent effect if it's not in your customs code but it has the same effect
- Situation 3: that is clearly a charge having equivalent effect
- Situation 8: situation will be identical because we don't need across member states border
-
OK we remain now within the terrorist various but we move to article 110. And you know what
the difference is article 110 is situations where you pay but not because you cross the board ,not
at the time of crossing that border.

Internal Taxation

Look at the text of article 110: no internal taxation of any kinds in excess of that imposed
directly or indirectly on similar domestic products. In other words if you have two products one
is domestic and one is foreign and the two products are similar, meaning also in terms of product
characteristics, then you cannot tax the foreign product more than you tax your own. Second
paragraph: the second paragraph is not about similar products, but it is about products coming
from other member States and that are in competition with your own products. In that case you
cannot in order to offer protection to your own products ask more for the foreign products.

A general system of internal taxation: here my marble case would not qualify because it has to be
general. And why do we have this? We want to guarantee the complete neutrality of internal
taxation the no discrimination disguised or not disguised against foreign products. Products you
can read as goods, yeah you can use them as synonyms to products here are goods that we
defined earlier.
Art 110: two paragraphs one is about similar products the other one is about products in
competition. Now you will tell me are similar products not always in competition probably yes
but the opposite is not true.

What do we do with these we prohibit all discriminatory or protective taxation can we justify our
discriminatory or protective taxation? No, formally not. But one nuance later.

Question: What about VAT? Because VAT is also an indirect tax measure applicable to
products. Does VAT come under the scope of article 110? Answer = non, because VAT in the
European Union is completely harmonized. We don't need a treaty article if we have
harmonization even when it is lower in the hierarchy of norms we will apply the harmonized
regime. So VAT is not what we are looking at under article 110.

Commission vs. France: whiskey and cognac where France builds an entire theory about the
distinction one should make between aperitif, digestif and the reason is they want to raise higher
taxes on alcoholic products based on grain then on alcoholic products based on grapes. Based on
grain: think of whiskey etc .. so not being French and based on grapes: think of cognac and all
these other beautiful things based on national product. And so there is much higher taxation of
these alcoholic drinks based on grain than those based on grapes. And the Commission goes after
this and says no this is discriminatory taxation you do this to protect your own projects against
outside products. And then you get really wonderful statements by France about new this is all
justified because products are not the same they serve different functions. And the Commission
says well in the courts as well in the end OK maybe there is a big distinction between aperitif
and digestif but in the end they fulfill more or less the same need. So they do not allow any
discrimination under article 110.

Commission v. Italy: are bananas the same as apples this could be a competition case. I mean
we've had this story in competition law as well. They said no, bananas have different distinct
product features. Similar case here the thirst quenching characteristics of bananas may be
different than those of other fresh fruits but nevertheless there are rather similar. So it is difficult
if you are Italy to tax bananas much more than you tax your own homegrown fresh fruits that is
what these cases are about and then you have a whole history of cases dealing with the
registration tax on cars .

Humblot v. France: France I had a system of registration tax where you paid relatively little up to
a certain motor engine size and then you paid a lot, a fortune. And then one of these buyers of
Ferrari, or I don't know what he objected to the system. He said well that this discriminatory
taxation why because you only produce cars up to that limited engine size, and all the bigger cars
the Ferraris etc are not French but come from other member States. And so you just do this too as
a protectionist measure to protect your own car industry. And Humblot won that case. The court
agreed, later on as you will read, the court has mitigated its position

Commission v. Greece: The court did not recognize similar discriminatory tax system and also
important is De Danske.

De Danske: a case against the extremely high registration tax on cars in Denmark. As somebody
attacked this under article 110 and there other court rules this cannot possibly be a conflict with
article 110 because Denmark has no internal production of cars if you have no internal
production then they cannot be discrimination then 110 cannot apply so if you have no internal
production you are safe under article 110.

Vinal: Finally can you justify a discriminatory taxation. I've already told you formally it's
impossible to justify but nevertheless in a case where Italy text synthetic alcohol much more than
natural alcohol the court accepted the Italian text system saying that there was an objective of
legitimate industrial policy. And therefore the court said not we are going to justify the measure
no, again they said there is no restriction. So they brought it just as they did under article 30
under Step 2 instead of Step 3. So again here we have to say formally there is no justification but
in certain circumstances when you have this objective legitimate objective then we can rule that
there is no restriction in the first place
If you know the three conditions to bring something under free movement of goods: goods,
member state behavior, cross border elements and then you know when to apply which blocks
you should be fine.

Know that:
- ustification formally does not exist, but in practice it exists a little bit but then under step
2 and not under step 3; and
- that by now we have dealt with four of these situations a different registration tax on cars
for France and Germany would probably not pass because it would come under the scope
of article 110.

Take-away
 - Classical free movement of goods laws as we know it Dassonville, Cassis de Dijon,
Keck, that came into is only 1/3 of reality, the other 1/3 is through this uniform customs
code and the other 1/3 is harmonized product standards and product norms.
- 3 steps in every case
- within step 1 summa divisio tariff/non-tariff mutually exclusive
- within tariff mutually exclusive 30 and 110
- what are the differences between 30 and 110:
o 30:
 when you cross the border,
 per se breach
 will not be safe if you have no internal production under 30
o 110:
 you don't cross the border you already in;
 not a per se breach, you have to show that there is this protectionist
element;
 will be safe if you have no internal production

Questions on the last slides will be corrected next class.