C h a p t e r O ne

I n t r o d uc t io n t o E u r o pe a n U n io n L aw

I n t r o d uc t io n
The European Union is a geo-political entity covering the large portion of the
European continent. Visionary leaders came together to create an economic and
political stability to ensure long term peace in Europe.

The European Union has been founded upon numerous treaties and has undergone
expansions that have taken it from 6 member states to 28 majority member states in
the Europe.

T h e c o nc e p t o f a ‘ U n i t e d E u r op e ’ be f o r e 1 9 4 5
 The concept of a ‘United Europe’ was one which had been debated for hundreds
of years.
 Throughout history many attempts were made to form such a union.
 In the early 1800’s, Tsar Alexander, known as the most advanced internationalist
of the day, proposed the maintenance of international military forces to provide
recognized states with support against changes by violence.
 However, this idea of unifying Europe was disregarded (by majority) and it was
only after the conclusion of World War I, did the majority accept the need.
Nevertheless, real steps were taken only after World War II.
 The Two Key Features that sped up the process was:
1. The Treaty of Versailles failed and led to a rise in Nazism
2. It was therefore vital to bring Germany within the ‘European Partnership’
 Thus, the modern concept of a ‘United Europe’ was born out of the need to avoid
war.

F r o m 1 9 4 5 – 1 9 5 7 : T r e a t y o f P a r i s to t h e Tr e a t y o f R om e
1. Treaty of Paris
 The first steps towards integration in Europe was inspired by Robert
Schumen (French Foreign Minister at the time) and Jean Monnet
(administrator and businessman). According to the Schuman Speech,
Robert Schumen suggested putting coal and steel resources (especially
of France and Germany) under common ownership and control.
 Why? To do away with the rivalries of the two industries which
used the raw materials which produced the weapons of war;
coal and steel.

 On the basis of that speech, France, Italy, the Benelux countries

(Belgium, Netherlands and Luxembourg) and West Germany signed the

Chapter 01 pg. 1
 Treaty of Paris (1951) creating the European Steel and Coal
Community (“ECSC”).
 The significance of the ECSC is that it created Supranational
institutions, such as the High Authority (which was in charge of the
task of applying the treaty), an Assembly, a Council of Members and a
Court of Justice.
 The UK objected to the supranational element with it’s implications for
national sovereignty, and refused to join.

2. Treaty of Rome
 In the aftermath of WWII, and with the memory of war receding, the
economic construction of Europe was an overwhelming necessity. The
economies of the nation states’ were devastated and the creation of
the common market was perceived as a way of rebuilding these
economies and to make Europe economically independent from
America.

 The need for a war free Europe with an economic autonomy, led to the
signing of the Treaty of Rome in 1957, which established the European
Economic Community (“EEC”) and the European Atomic Energy
Community (“EUROTOM”).

 The aim of the EEC was to create a common market based on the
freedom of movement of goods, services, people and capital and
develop “customs union” between the members, while the EUROTOM
provided for the pooled control of the peaceful use of nuclear power.
Both these Communities were run by a Commission (each) as their
Administrative body.

Customs Union
A group of state that have agreed to charge the same import duties as each
other and usually to allow free trade between themselves.

1 9 5 8 – 1 9 7 2 : T he T h r e e C om m un i t ie s
3. Merger Treaty
 The two new communities (EEC & EUROTOM) were created separately
from the ECSC, although they shared the same courts and the
Common Assembly.
 The executives of the two communities were called the Commissions,
as opposed to High Authority.
 In 1965 an agreement was reached to merge the three communities
(ECSC, EEC & EUROTOM) under a single set of institutions and hence
the Merger Treaty was signed in Brussels and came in to force on the
1st of July 1967 creating European Communities.
Chapter 01 pg 2
 4. Although customs union had been introduced by the end of the 60’s. gaps
existed in the Common Market because of the prevalence of so-called non
tariff barriers which acted like obstacles to trade.
 E.g. Physical barriers in the form of frontier posts, and technical
barriers in the form of differing product standards.
5. This was a fertile period for European legal integration. Many of the
foundational legal doctrines of the Court of Justice was established in
landmark cases during this period, such as;
 Van Gend en Loos (1963) : that declared direct effect of European
law.
 Costa Vs ENEL (1964) : that established the supremacy of
European law over national law of the member states.

1 9 7 3 – 1 9 9 3 : F i r st E n l ar ge me n t t o S E A

6. With the advent of the first three new Member States (Denmark, Ireland
and the United Kingdom), followed by Greece in 1981, by Spain in 1986, by
Austria, Finland and Sweden. The communities faced difficulties in achieving
unanimity in Council meeting as more diverse interest are at stake.
7. As a result, the leaders realized that they needed to enhance free movement
of goods and services.
8. Single European Act (1986)
 Consequently, through the first major revision of the treaties since the
Merger Treaty, leaders signed the Single European Act (“SEA”)in
(February) 1986, which introduced more specific single market
objectives, which paved the way for more competition, better efficiency
and lower price.
 The Concept of “internal market” was introduced by the SEA (this will
be discussed thoroughly in the future chapters).

1 9 9 3 – 2 0 0 4 : C re a t i o n o f t he “ E u r op e a n U n io n ”
9. Maastricht Treaty 1992
 With the anticipation of more enlargements, the members of the
European Community signed the Treaty of Maastricht to further
European integration.
 This treaty is also known as the Treaty on European Union (“TEU”).
 The European Community was renamed the “European Union”.
 it created the three pillars structure of the European Union and led to
the creation of the single European Currency.
10. The Treaty of Amsterdam
 The Treaty of Amsterdam, was signed in October of 1997 (entered into
force from 1st May 1999).
 It made substantial changes, where the member states agreed to
devolve certain powers from the national governments to the European
Chapter 01 pg 3
 Parliament across diverse areas, including legislation and immigration,
adopting civil and criminal laws, and enacting foreign and security
policy, as well as implementing institutional changes for expansion as
new member nations join the EU.
 Incorporation of the Schengen Agreement in to the European Union
Law.
 The Treaty of Amsterdam treaty also undertook renumbering the TEU
and the EEC Treaty.
11. The Nice Treaty (2001)
 Streamlined institution system in a bid to maintain efficiency in
preparation for the 4th and largest enlargement of the EU, of 10 new
members.
12. Treaty of Lisbon (2007)
 The Treaty of Lisbon was signed by the EU member states on 13
December 2007, and entered into force on 1 December 2009.
 The Treaty of Lisbon (initially known as the Reform Treaty) is an
international agreement that amends the two treaties which form the
constitutional basis of the European Union (EU);
 the Maastricht Treaty (1993), known in updated form as
the Treaty on European Union (2007) or TEU; and
 the Treaty of Rome (1957), known in updated form as
the Treaty on the Functioning of the European Union (2007) or
TFEU.

T h e E u r op e an Un io n T o da y

 The European Union (EU) today encompasses 28 countries with a

combined population of nearly half a billion people.

 Within the boundaries of the European Union, an internal market has

been established.

 All trading barriers between the participating Member States have been
abolished and the entire area comprises an internal market for goods
and services

 Within most of the area, for workers, self employed persons and
companies.

 There are some restrictions on free movement of workers from the new
Member States which acceded to the Union in 2004 , 2007 and 2013.

 A single set of trade rules applies across the EU and there is a Common
Customs Tariff wherever goods from countries outside the EU enter its
borders.

 It is the largest trading block in the world, with the world’s greatest
overall GDP (one quarter of the global total).

The Legal System of the European Union

Chapter 01 pg 4
  The European Union is based on the rule of law.

 This means that everything that it does is derived from treaties, which
are agreed on voluntarily and democratically by all Member States.

 The two core functional treaties are;

 The Treaty on European Union (originally signed in

Maastricht); and

 The Treaty on the Functioning of the European Union

(originally signed under the Treaty of Rome establishing the
EEC).

 Previously signed treaties have been changed and updated to keep up

with developments in society.

 The legal system of the European Union has been described as ‘a new
legal order’ and ‘sui generis’ by the Court of Justice, meaning that it is ‘of
its own, unique type’, unlike any other legal system in the world.

 The Member States (now 28 of them) belong to a supranational

organisation governed by institutions to which the Member States have
transferred certain powers and to which they have also given competence

Supremacy of EU Law over National Law

 EU law is considered supreme over National law
 Where there is conflict between national law and EU law, EU law prevails
and national law must be disapplied.
 The judgments of the European Court of Justice are now the ultimate
authority in the judicial hierarchy of the UK.
 The role that EU law plays in the national legal systems is increasingly
important.
 The effectiveness of European Union law has been greatly increased by
the case law of the Court of Justice, the main court of the European legal
order and one of the original Community institutions, initially established
by the ECSC Treaty of Paris in 1951 and subsequently included in the
Treaty of Rome.
 In its early case law, the Court of Justice created two principles of
fundamental importance to the Community legal order, which are
essential to the effectiveness of Union law.
 The twin principles of ‘direct effect’ established in Case 26/62 van Gend
en Loos v Nederlandse Administratie der Belastingen [1963] ECR 1 and
supremacy of Union law, laid down in Case 6/64 Costa v ENEL [1964] ECR
585 highlights the importance
 The economic and social landscape of modern Europe has been shaped
by the law which flows from the European Community Treaty, the Treaty
of Rome.
 It is fast-changing, with the case law of the Court of Justice of the
European Union playing a very important role.
Chapter 01 pg 5
  There is an emergence and development of ‘a new legal order’ which is
still changing
 The impact of EU law on many aspects of life in the United Kingdom and
in the other Member States is significant and growing.

T r e a t ie s a n d th e i r s i g n i fi c an c e

 The European Economic Community (later called the European Community)

was established by the Treaty of Rome in 1957 (the EEC Treaty).

 The European Union itself was created by the Treaty on European Union
(TEU, the Maastricht Treaty) in 1993

 There are several treaties which together represent the Primary law of the
EU

 The main treaties are the following:

1. Treaty establishing the European Coal and Steel Community (1952)

2. Treaties of Rome - EEC and EURATOM treaties (1958)
3. Merger Treaty - Brussels Treaty (1967)
4. Single European Act (1986)
5. Treaty on European Union - Maastricht Treaty (1993)
6. Treaty of Amsterdam (1999)
7. Treaty of Nice (2003)
8. Treaty of Lisbon (2009)

Treaty establishing the European Coal and Steel Community (1952)- ECSC

Purpose: to create interdependence in coal and steel so that one country could no
longer mobilise its armed forces without others knowing. This eased distrust and
tensions after WWII. The ECSC treaty expired in 2002.

Treaties of Rome - EEC and EURATOM treaties (1958) – EC Treaty

Purpose: to set up the European Economic Community (EEC) and the European
Atomic Energy Community (Euratom).
Main changes: extension of European integration to include general economic
cooperation.

Merger Treaty - Brussels Treaty (1967)

Purpose: to streamline the European institutions.
Main changes: creation of a single Commission and a single Council to serve
the then three European Communities (EEC, Euratom, ECSC). Repealed by
the Treaty of Amsterdam.

Single European Act (1986) - SEA

Chapter 01 pg 6
 Purpose: to reform the institutions in preparation for Portugal and Spain's
membership and speed up decision-making in preparation for the single
market.
Main changes: extension of qualified majority voting in the Council (making it
harder for a single country to veto proposed legislation), creation of the
cooperation and assent procedures, giving Parliament more influence.

Treaty on European Union - Maastricht Treaty (1993)- TEU

Purpose: to prepare for European Monetary Union and introduce elements of
a political union (citizenship, common foreign and internal affairs policy).
Main changes: establishment of the European Union and introduction of the
co-decision procedure, giving Parliament more say in decision-making. New
forms of cooperation between EU governments – for example on defence and
justice and home affairs.

Treaty of Amsterdam (1999)- TOA

Purpose: To reform the EU institutions in preparation for the arrival of future
member countries.
Main changes: amendment, renumbering and consolidation of EU and EEC
treaties. More transparent decision-making (increased use of the co-decision
voting procedure).

Treaty of Nice (2003)- TON

Purpose: to reform the institutions so that the EU could function efficiently
after reaching 25 member countries.
Main changes: methods for changing the composition of the Commission and
redefining the voting system in the Council.

Treaty of Lisbon (2009)- TOL

Purpose: to make the EU more democratic, more efficient and better able to
address global problems, such as climate change, with one voice.
Main changes: more power for the European Parliament, change of voting
procedures in the Council, citizens' initiative, a permanent president of the
European Council, a new High Representative for Foreign Affairs, a new EU
diplomatic service.

T h e C o un c i l o f E u ro p e
 In 1949 the Council of Europe had been established.
 This is an entirely separate organisation from the European Community.
 It is an international organisation based in Strasbourg which aims to
strengthen democracy, human rights and the rule of law
 It is responsible for the European Convention on Human Rights and
Freedoms (ECHR) which was drawn up in 1950 and was ratified in 1953.

Chapter 01 pg 7
  It allows individuals from signatory countries who have exhausted their
domestic remedies to bring actions in the European Court of Human Rights in
Strasbourg (ECtHR), enforcing their human rights protected by the
Convention.
 The Council of Europe and the European Court of Human Rights are
institutionally entirely separate from the institutions and Court of Justice of
the EU.
 Article 6(2) of the Lisbon TEU now provides that the EU will accede to the
ECHR. This will happen in the future, but it is as yet unclear when this is
likely to be achieved.

Objectives of the European Union

 The objectives of the EU have modified and amended over time by the SEA
and then by the TEU
 The objectives of the EU after TOL are:
1. Free movement of citizens
2. Establishment of the internal market
3. Balanced economic growth
4. A competitive social market economy
5. Full employment
6. Social Progress
7. Protection of the environment
8. Promotion of scientific and technological advance
9. Combating social exclusion and discrimination
10. Promotion of social justice
11. Equality between men and women
12. Protection of the rights of children
13. Promotion of economic, social and territorial cohesion
14. Respect for cultural and linguistic diversity
15. Economic and monetary union

Summary

 How the concept of a ‘United Europe’ was born - The modern concept of
a ‘United Europe’ was born out of the need to avoid war
 Creation of the European Economic Community (EEC) was by the Treaty
of Rome in 1957 aiming to foster economic growth and increased
productivity among the six participating Member States
 Supremacy of EU Law over UK law
 Where there is conflict between national law and EU law, EU law prevails
and national law must be disapplied.
 The important treaties

Chapter 01 pg 8
  The significance of ECSC
 The significance Euratom
 The Council of Europe

BREXIT
What is known as the Brexit?

1. Brexit is the nickname for "British exit" from the EU.

2. The residents decided that the benefits of belonging to the unified monetary
body no longer outweighed the costs of free movement of immigration.
3. the June 23, 2016, referendum where the United Kingdom voted to leave
the European Union.

What did the UK want from Brexit?

1. On March 29, 2017, the U.K. Prime Minister Theresa May submitted
the Article 50 withdrawal notification to the EU.

2. It gave the United Kingdom and EU until March 29, 2019, to negotiate the
following six main points:

i. The U.K. does not want to continue allowing unlimited EU immigration.

ii. The two sides must guarantee the status of EU members living in the
U.K., and vice-versa. The same applies to work visas, which are not
currently required.
iii. The U.K. wants to withdraw from the European Court of Judgment.
iv. The U.K. wants a "customs union" with the EU. They will not
impose tariffs on each other's imports. They are free to tax imports from
other countries.
v. Both sides want to continue to trade.
vi. The EU will require a cash settlement from the U.K. to meet existing
financial commitments. Recent negotiations put the figure at 40 billion to
55 billion euros.

When is the Brexit taking place?

1. The withdrawal plan must be approved by the European Council, the 20 EU

countries with 65 percent of the population, and the European Parliament.

2. Then the United Kingdom will copy the EU laws into its laws, which can later be
amended or repealed. In March 2018, Prime Minister May said many laws would
be similar to EU laws so the U.K. can keep trade and capital access.

3. The hard Brexit means leaving the EU quickly with no restrictions other than a
new free trade agreement.

Chapter 01 pg 9
4. The soft Brexit would allow the U.K. to retain complete access to capital but
restrict the flow of immigrants. It would remain in the customs union. The U.K.
would allow European nationals to live and work in the country. It would also
abide by the European Court of Judgment and EU laws without being allowed to
vote. That is similar to Norway's relationship with the EU.

5. On March 19, 2018, the United Kingdom and the EU agreed to a 21-month
transition plan that is similar to a soft Brexit.

Chapter 01 pg 10
Competition Policy – Part 4

Article 102 TFEU

 This Article provides for the punishment of undertakings in a position of strength

on the market when they abuse their position. It is not dominance or strength
which is unlawful but its abuse.

 However, behaviour which may be lawful when practiced by a non-dominant

company may be unlawful when carried out by a company in a dominant position.

 Neither the Commission nor the General Court can reach a conclusion that a firm
has abused a dominant position without a detailed economic analysis.

 First the Commission or the Court must ascertain the extent of the relevant
product market and its geographic market and then assess the undertaking’s
market power (or share).

 Other factors are also considered when concluding whether or not the undertaking
is dominant (see below).

Dominant position

 In order to assess dominance within the meaning of Article 102 it is necessary to

examine the key factors of the relevant product and geographical market.

1. The relevant market

 The key question here is: which other products is this product in competition
with?
o If the product market is widely defined, it is less likely that a particular
undertaking will be dominant.
o Conversely, if the market is narrowly defined, the likelihood of dominance
increases.
o Products within one product market are those which are regarded as
‘interchangeable’ by consumers ‘by reason of their characteristics, price and
intended use’;
 In Case 27/76 United Brands [1978] ECR 207 the issue was whether,
in economic terms, there was cross-elasticity of demand between
bananas and other kinds of fruit. If the price of bananas rose
 significantly, would customers readily switch to buying other fruits
(i.e.seeing them as interchangeable)? Or did the banana have
particular characteristics distinguishing it from other fruits so that
customers would continue to buy bananas despite the price rise (i.e.
not interchangeable)?

HELD;
 The Court of Justice agreed with the Commission’s finding that
bananas are not interchangeable, fulfil specific consumer needs and
are in a product market of their own.
o The Commission and Court also consider questions of cross-elasticity of
supply: can suppliers of other products quickly and easily switch to making
the product in question? If so, they can readily compete in the same product
market;
 For example, in Case 322/81 Michelin v Commission [1983] ECR 3461
it was not easy to switch from producing tyres for cars to producing
tyres for heavy goods vehicles so there was no elasticity of supply
between them. They were therefore in separate product markets.
 In Case 6/72 Continental Can Co Inc v Commission [1973] ECR 215
the Commission’s decision, finding that Continental Can was
dominant on the market for light metal cans for meat and fish, was
annulled because, inter alia, it had not shown that customers could
not easily manufacture the required cans themselves.

 The Commission’s methodology is now set out in: Commission Notice on the
Definition of the Relevant Market for the Purposes of Community
Competition Law (1997) OJ C372.
o The Commission explains how it assesses substitutability of demand on the
basis of the ‘SSNIP’ test: if there is a ‘small but significant non-transitory
increase in price’, will so many customers switch to another product that the
price rise will have been unprofitable? Substitutability of supply is also taken
into account.

2. The geographic market

 The key question here is: over what geographical area are producers in
competition with each other?
o Some markets are global and others may be local.

o The relevant geographic market is the area in which available and

acceptable substitutes to the product exist. This is a practical, not
 theoretical, question which depends on empirical evidence of consumption
and production patterns, volume and purchasing habits.

 In Case 27/76 United Brands v Commission [1978] ECR 207, the

Court of Justice defined the geographic market as ‘an area in which
the objective conditions of competition are the same for all traders’.

 The Commission Notice on the Definition of the Relevant Market for the Purposes
of Community Competition Law (1997) OJ C-372 details the Commission’s method
of deciding the geographic market.

3. Dominance
o In United Brands, the Court of Justice defined a dominant position as

“A position of economic strength enjoyed by an undertaking which enables it

to prevent effective competition being maintain on the relevant market by
giving its power to behave to an appreciable extent independently of its
competitors, customers and ultimately consumers”

4. Market share
o Dominance is determined firstly by the undertaking’s market share of the
relevant market.
 In Case 62/86 AKZO Chemie v Commission [1991] ECR I-3359, the
Court held that a company with a 50 per cent share or above will
normally be dominant.

 The market share must have been held for a period of time;

Case 85/76 Hoffmann- La Roche v Commission [1979] ECR 461)

 o It is also important to compare the market shares of other companies on the
market.
 For example, in Case C-95/04 British Airwaysv Commission [2007]
ECR I-2331, the Court of Justice found British Airways to be dominant in
the market for air travel agency services, where it had a share of 39.7 per
cent. The Court took into account the fact that the nearest rival, Virgin,
had only a 5.5 per cent share.

5. Barriers to entry
o In assessing the dominance of an undertaking, barriers to the access to the
market of new companies must be taken into account. This requires an
assessment of the prevailing barriers to entry for potential competitors which
might enter the market.

o Whether the barriers are high or low affects the constraints on the dominant
company and will determine the ambit of its autonomy.

 Possible ‘barriers to entry’ include:

Barrier Case Facts

Legal provisions 333/94P Tetra Pak Int
SA v Commission
[1996] ECR I-5951

Superior technology United Brands v

Commission [1978]
ECR 207;
 Case 322/81 Michelin v
Commission [1983]
ECR 3461

Case 85/76 Hoffmann-

La Roche v Commission
[1979] ECR 461

Deep pocket Case 27/76 United

Brands v Commission
[1978] ECR 207
 Case 6/72 Continental
Can Co Inc v
Commission [1973]
ECR 215.

Economies of scale, Case 27/76 United

vertical integration and Brands v Commission
well-developed [1978] ECR 207
distribution systems
 Case 85/76 Hoffmann-La
Roche v Commission
[1979] ECR 461

Product Case 27/76 United

differentiation/brand Brands v Commission
image [1978] ECR 207
6. ‘Substantial part’ of the common market

o Article 102 TFEU also requires that an undertaking must be dominant ‘within the
internal market or in a substantial part of it’. This has been interpreted as a de
minimus threshold.

o Part of a Member State is ‘substantial’. See, for example, Cases 40 etc/73 Suiker
Unie [1975] ECR 1663 in which Southern Germany was sufficient to fulfil the
requirement.

7. Collective dominance
o Until the early 1990s, Article 102 could only be applied against single dominant
undertakings.
o However, the General Court signalled a change in this position in Joined Cases T-
68/89 and T-77-78/89 Societa Italiano Vetro SpA v EC Commission (Flat Glass)
[1992] ECR II-1403 in which it stated (obiter) that there is;

“nothing in principle to prevent two or more independent undertakings on a

specific market being united by such economic links that together they hold a
dominant position vis-à-vis other operators”

o The precise nature of the links required is not defined and can vary from case to
case.

o The emphasis instead is on the result of those links, namely that ‘in order for
collective dominance to exist, the undertakings in the group must be linked
in such a way that they adopt the same conduct on the market’
 Case 393/92 Municipality of Almelo v Energiebedrijf IJsselmij NV [1994] ECR
I-1477).

o The first time the Court of Justice upheld a finding of collective dominance was in
Joined Cases C-395/96P and C-396/96P Compagnie Maritime Belge v
Commission [1996] ECR II-1201 (the Almelo case was a preliminary reference
ruling and so the decision was left to the national court).
 The Court held that

“ A dominant position may be held by two or more economic entities legally

independent of each other, provided that from an economic point of view
they present themselves or act together on a particular marker as a
collective entity. That is how the expression of collective dominant
position…should be understood”

 What was required to establish such a collective entity was whether there
were ‘links’ or other ‘factors which give rise to a connection between the
undertakings concerned’ which ‘enabled them to act together
independently of their competitors, their customers and consumers’.

 The Court stated that the existence of an agreement or concerted practice

between the undertakings does not necessarily create such economic links.

 However, an agreement or concerted practice between the undertakings

can ‘result in the undertakings concerned being so linked as to their conduct
on a particular market that they present themselves on that market as a
collective entity vis-à-vis their competitors’.
 o The Court then made it clear that the ‘parallel behaviour’ of oligopolies, which is
legal under Article 101, may be scrutinised under Article 102 to see whether it
constitutes collective dominance.

In Case C-497/99 P Irish Sugar v Commission [2001] ECR I-5333,

 the Commission’s finding of ‘vertical’ collective dominance between Irish
Sugar and a distributor of sugar, Sugar Distributors Ltd, was upheld by the
General Court.
 Factors that contributed to its decision were the structure of policy-making
between the companies and the direct economic ties between them.
 The Court also held that it is possible to establish abuse of a dominant
position in a case of collective dominance whether there has been ‘joint’ or
‘individual’ abuse. That is, it is only necessary for one of the companies to
have carried out the abuse.

8. Definition of abuse

 As mentioned above, Article 102 does not prohibit dominance, but rather the
abuse of a dominant position. What constitutes ‘abuse’ is flexible.

 Article 102 lists some examples but this list is not exhaustive. In case 85/76
Hoffmann-La Roche v Commission [1979] ECR 461 the Court of Justice has
defined it broadly as behaviour which has ‘the effect of hindering the maintenance
of the degree of competition still existing in the market or the growth of that
competition’

 Normal competitive activity, such as offering better quality products or lower prices
than your competitors, is not an abuse. That is ‘competition on the merits’. An
abuse is where the dominant company uses other means to outflank or exclude
competition.

 Article 102 covers not only ‘exploitative’ abuses which exploit consumers, such as
excessive prices, but also ‘anti-competitive’ abuses which affect the competitive
structure of the market by excluding actual or potential competitors (see para.70
of the judgment in Michelin).

 Although dominance is not illegal in itself, the Court held in Michelin that a
dominant company has a ‘special responsibility’ not to act in a way that will lead
to a decrease of competition on the market.
 There is no equivalent of the exemption in Article 101. Instead, abuse can never be
exempt from Article 102. However, conduct which might in some circumstances
amount to abuse may, in other circumstances, be ‘objectively justified’.

8.1. Types of abuse

8.1.1. Excessive prices

 Using your power on the market to charge customers excessively high

prices is an abuse, albeit difficult to prove.
 The Court of Justice said in United Brands that it was necessary to work
out the difference between the production costs and the selling price
to see if the company was making ‘super-profits’.
 Despite this, economists have argued that the market price of goods is
not just a question of production costs but also of supply and demand.

8.1.2 Predatory pricing

 Price cuts designed to drive out the competition constitute abuse.

Case 62/86 AKZO Chemie v Commission [1991] ECR I-3359).

 Again it can be difficult to decide whether the lower price is the result of ‘fair’
competition (i.e. the dominant company is simply more efficient and able to
produce the goods more cheaply), or whether it is a below-cost price to force
competitors out.
 In Akzo, the Court of Justice decided that pricing below ‘average variable
costs’ was automatically an abuse because the only reason a company would
charge less for a product than the cost of the materials/labour used, would
 be to drive out competitors. However, pricing below ‘total’ costs (i.e. including
a proportion of overheads) was not conclusive and evidence of an actual plan
to drive out competitors had to be shown.

8.1.3 Selective pricing

 In Case T-228/97, Irish Sugar offered lower Irish Sugar v Commission [1999]
ECR II-2969 prices to its competitors’ customers while maintaining higher
prices for its regular customers. The Court held this policy of selective pricing
was abuse.

8.1.4 Fidelity discounts

 Offering discounts in return for customers agreeing to buy all their vitamins
from the dominant company was condemned as abuse in Case 85/76
Hoffmann-La Roche & Co AG v Commission [1979] ECR 461. It deprived
competitors of the opportunity of selling to those customers.

 Alternatively, a straightforward ‘volume’ discount – whereby the customer

obtains a bigger discount if they buy a large quantity of the goods – is not
abuse because it is simply a way of passing on to the customer some of
the savings in transaction costs.

 This type of discount does not exclude competitors a priori as they are free to
compete for that customer’s order.

 Other examples of discount systems which had the effect of tying customers to
the dominant supplier can be found in Cases 322/81 Michelin v Commission
[1983] ECR 3461 and

310/93P BPB Industries and British Gypsum v Commission [1995] ECR I-

865.
  In Case C-95/04 British Airways v Commission [2007] ECR I-2331
 British Airways abused its position in the air travel agency market by
offering travel agents loyalty payments and commissions which were not
related to increased efficiency. These effectively tied travel agents to
British Airways.
 The Court of Justice upheld the Commission’s finding that the incentive
schemes offered were also contrary to Article 102(c) since travel agents
who sold the same number of tickets received different commission
rates.

 And, in Case C-209/10 Post Danmark [2012]

 the Court had to consider a policy pursued by an undertaking in a
dominant position of charging low prices to certain former customers of
a competitor.
 The Court held that such a policy cannot be considered to amount to an
exclusionary abuse merely because the price the dominant undertaking
charged was lower than the average total costs of the activity concerned.
 Instead, it was necessary to consider whether that pricing policy
produced an actual or likely exclusionary effect, to the detriment of
competition and, thereby, consumers’ interests.
 Furthermore, the Court also ruled that it is open to an undertaking in a
dominant position to provide justification for behaviour liable to be
caught by the prohibition laid down in Article 102 either by
demonstrating that its conduct was objectively necessary or that the
exclusionary effect produced may be counterbalanced or outweighed by
advantages that also benefit consumers.

8.1.5 Tying

 This occurs when a dominant company obliges customers to buy another

product as a condition of supplying the ‘main’ product.
 This has the effect of extending the dominance from the main product market to
the second product.
o Case 333/94P Tetra Pak v Commission [1996] ECR I-5951 in which Tetra
Pak insisted that buyers of its machines for filling cartons (‘aseptic
packaging machines’) should buy all their cartons from Tetra Pak as well.
 This was an abuse because there were other manufacturers of
suitable cartons who were thereby excluded from competing to
supply those customers (see Article 102(d)).
 o In T-201/04 Microsoft v Commission [2007] ECR I-2049 the General
Court approved the Commission’s conclusion that Microsoft engaged in the
abusive bundling of its media player with the Windows operating system.
 The Court gave broad support for the four conditions upon which
the Commission based its finding:

(i) that the undertaking concerned must have a dominant

position on the market for the bundling product;
(ii) that the bundling product and the bundled product must be
two separate products;
(iii) that consumers must not have a choice to obtain the bundling
product without also obtaining the bundled product; and (iv)
that the practice must foreclose competition.
 The Court agreed with the Commission that the four conditions were
indeed present in Microsoft’s case. The bundling practice enabled the
company to obtain an unparalleled advantage in distributing its
products and ensuring the ubiquity of Windows Media Player on
client PCs throughout the world.
 It was also noted that the Windows operating system is system
software, whereas Windows Media Player is application software. The
two components were therefore separate products. As such, the
bundling of application software that could be made available on a
stand-alone basis had the effect of excluding competitors who did
not enjoy the same distributional network, thereby distorting market
competition. This decision was later upheld in Case T-167/08
Microsoft Corp v Commission [2012].

8.1.6 Refusal to supply

 It is an abuse for a dominant supplier of raw materials to cut off supplies to

a company which uses those materials to make another product, so that the
dominant company can start making that product itself without competition
from that other company.

o Case 6 & 7/73 Commercial Solvents v Commission [1974] ECR 223.

 It is also an abuse to refuse to supply a distributor in order to punish them
for promoting a competitor’s products.
o In Case 27/76 United Brands v Commission [1978] ECR 207, the Court
held that it is an abuse to refuse to supply ‘a long-standing customer who
abides by normal commercial practice’.. See also Case 310/93P BPB
Industries and British Gypsum v Commission [1995] ECR I-865.

8.1.7 Refusal to supply ‘essential facilities’

 In Case T-69 etc/89 RTE, BBC & ITP v Commission [1991] ECR 61-485, the
Court made clear that an abuse does not only arise where the refusal to supply
is against a ‘longstanding’ customer. Refusing to grant a copyright licence to
a new customer was also an abuse since it prevented the emergence of a new
product for which there was customer demand.

 The extent to which competition law should oblige a dominant company to share
its facilities with other companies to enable them to compete is controversial.

For example, if a company owns a port facility and operates ferry services from that
port, is it obliged to allow another company access to that port so that it can
provide a competing ferry service?

 Although the Commission has held in several decisions that to refuse access to
such facilities is an abuse, the Court of Justice has adopted a cautious approach.

o In Case 7/97 Bronner v Mediaprint [1998] ECR I-7791 the Court laid down
the strict test that the facility must be indispensable and that there are
‘technical, legal or even economic obstacles capable of making it
impossible, or even unreasonably difficult’ to compete without access to the
facility concerned.
o Case 418/01 IMS Health [2004] ECR I-5039 concerned a refusal to grant a
licence for a data system which was protected by copyright. The Court held
that for a refusal to supply to be abusive, three cumulative conditions had
to be fulfilled:
a) the refusal must prevent the emergence of a new product for which
there was a potential consumer demand
b) the refusal must be unjustified
c) the refusal must exclude any competition on the secondary market.
 A case on Microsoft

 In a 2004 decision the Commission found that Microsoft enjoyed a ‘quasi-

monopoly’ position in the market for client PC operating systems and that it was
leveraging that dominance onto the markets for work group server operating
systems.

 Work group server operating systems are operating systems running on central
network computers that provide services to office workers around the world in
their day-to-day work. By refusing to supply interoperability information to
competitors so that their work group servers could achieve interoperability with
Windows PCs and servers, Microsoft was found to have abused its dominant
position and was fined €497 million.

 The Commission decision ordered Microsoft to disclose complete and accurate

interface documentation to its competitors in the work group operating systems
market for which it would be entitled to ‘reasonable remuneration’ for licensing its
software. When Microsoft failed to comply, a further decision was taken in
November 2005 in which the Commission warned Microsoft that it would impose
a daily fine of up to €2 million under its powers in Article 24(1) of Regulation
1/2003. In July 2006,

 Microsoft was fined €280 million for its failure to comply.

o In Case T-201/04 Microsoft v Commission [2007] ECR II-2977 (above)

the General Court upheld the Commission’s 2004 decision and fine. It held
that while the
“refusal by the owner of an intellectual property right to grant a licence,
even where it is the act of an undertaking in a dominant position, cannot in
itself constitute an abuse of a dominant position, the exercise of the
exclusive right by the owner might, in exceptional circumstances, give rise
to abusive conduct.” (above) IMS test must be fulfilled.

 Applying the IMS test, the Court held that whereas the refusal to supply in this case
did not prevent the appearance of ‘a new product’, the prevention of the
appearance of a new product was not the ‘only parameter which determines
whether a refusal to license an intellectual property right is capable of causing
prejudice to consumers within the meaning of [Article 102 TFEU]’. It was sufficient
that the refusal to supply ‘limited technical development to the prejudice of
consumers’.
  It was also not necessary that the refusal to supply eliminated all competition;
rather, ‘what is required is that the refusal to supply the licence … is liable to,
or is likely to, eliminate all effective competition on the market’. By refusing
to license the interoperability information, Microsoft was effectively able to
eliminate competition in the relevant market.

9 Compensation
 Infringements of antitrust law can cause serious harm to consumers and
businesses.
 Under EU law the victims of infringements of competition law can claim
compensation for the actual loss, for loss of profit and payment of interest accruing
from the moment of time the harm occurred until the moment compensation is
paid.
 Actions for damages for an infringement of national and EU antitrust law are
governed by the national law of the Member States. To ensure the effectiveness of
the right of the victims to claim damages the European Commission presented on
11 June 2013 a proposal for a directive (COM (2013) 404 final). The proposal
provides for the following changes:
o improved rules of disclosure of evidence
o extension of time for victims to start proceedings after an infringement has
occurred
o if an infringement is caused by several undertakings which were operating
jointly, an obligation on the Member States to ensure that each of these
undertakings can be held jointly and severally liable for the damage
o an obligation on Member States that findings of infringement by one
Member State NCA automatically constitutes proof in court proceedings in
all Member States.

 The proposal for a directive is accompanied by a Commission Communication on

quantifying damages caused by infringements of antitrust rules.

Mergers

 . The EU Treaties do not contain any express provision to deal with mergers
and acquisitions, even though these can have important consequences for
competition
 Despite this, attempts were made to use Articles 101 and 102 to fill this gap.
o In Case 6/72 Continental Can [1973] ECR 215, the Court of Justice held
that it is an abuse of a dominant position under Article 102 for a dominant
company to take over a rival company on that market.
o However, Article 102 could only apply to mergers where one of the
parties was in a dominant position.

o In Cases 142 and 156/84 BAT [1987] ECR 4487, it was suggested that
Article 101 might apply where companies acquired cross-shareholdings as
this would reduce competition between them.

o The precise circumstances in which Article 101 would be breached were

unclear, however, and this led to considerable uncertainty.

o Finally, in 1989 the Council enacted the Merger Regulation 4064/89 on the
control of concentrations between undertakings. This has now been
replaced by Council Regulation (EC) No.139/2004 of 20 January 2004. The
detailed examination of its provisions and application are beyond the scope
of this course.
 Competition Policy

Introduction

 Articles 101 to 109 of the Treaty on the Functioning of the European Union (TFEU) contain rules
on competition in the internal market, prohibiting anti-competitive agreements between
undertakings.

 Businesses with a dominant market position must not abuse their position in a way which
adversely affects trade between Member States.

 Mergers and takeovers with an EU dimension are monitored by the European Commission (‘the
Commission’) and may be prevented in certain cases.

 State aid to given undertakings or products is prohibited when it leads to distortions of

competition but can be authorised in specific cases.

 Competition rules also apply to public undertakings, public services and services of general
interest. However, exceptions may be granted where application of the rules would jeopardise the
realisation of the objectives of those services.

Legal Basis
 Articles 101 to 109 TFEU and Protocol No 27 on the internal market and competition, where it is
made clear that fair competition is included in the objective of the internal market in
Article 3(3) TFEU;

 Merger Regulation (Regulation (EC) No 139/2004));

 Articles 37, 106 and 345 TFEU for public undertakings and Articles 14, 59, 93, 106, 107, 108 and
114 TFEU for public services, services of general interest and services of general economic interest;
Protocol No 26 on services of general interest; Article 36 of the Charter of Fundamental Rights.

Objectives

The fundamental objective of EU competition rules is to prevent distortion of competition. This is

not, however, an end in itself. It is rather a condition for achieving a free and dynamic internal
market and is one of several instruments promoting general economic welfare. Since the Lisbon
Treaty came into force, this objective has no longer been set out expressly in Article 3 TFEU but

1
subsumed into the term ‘internal market’ under Protocol No 27. This is not expected to have any
practical implications, as no changes have been made to the competition rules themselves. The
conditions for the application of these rules and their legal effects have become so entrenched in
the Commission’s administrative practice over many years, and in the case law of the European
courts, that they may be regarded as fixed.

What is Competition Law?

Competition law exists to protect the process of competition in a free market economy.

Free Market Economy:

An economy where, the allocation of resources is determined solely by supply and

demand in the free markets.

Why is Competition needed?

This encourages enterprise and efficiency, creates a wider choice for consumers and helps
reduce prices and improve quality.

1. Low prices for all: the simplest way for a company to gain a high market share is to
offer a better price. In a competitive market, prices are pushed down. Not only is this
good for consumers - when more people can afford to buy products, it encourages
businesses to produce and boosts the economy in general.

2. Better quality: Competition also encourages businesses to improve the quality of goods
and services they sell – to attract more customers and expand market share. Quality can
mean various things: products that last longer or work better, better after-sales or
technical support or friendlier and better service.

3. More choice: In a competitive market, businesses will try to make their products
different from the rest. This results in greater choice – so consumers can select the
product that offers the right balance between price and quality.

4. Innovation: To deliver this choice, and produce better products, businesses need to be
innovative – in their product concepts, design, production techniques, services etc.

2
 5. Better competitors in global markets: Competition within the EU helps make European
companies stronger outside the EU too – and able to hold their own against global
competitors.

What is Competition in the Market?

Economists make the assumption that there are a large number of different buyers and sellers in
the marketplace for each good or service available. This means that we have competition in
the market, which allows price to change in response to changes in supply and demand. For
example, if the price of a good is very high and some firms are making extra profits in that sector,
other firms will be induced to start producing that same good – in competition with the others –
which will increase supply and reduce the selling price. Furthermore, for almost every product
there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper
substitute instead (recall the section on elasticity). In a market with many buyers and sellers, both
the consumer and the supplier have equal ability to compete on price.

In order for competition to take place, there are three pre-conditions that should be met;

a) Possibility to enter the market (market access);

b) Freedom to act on the market (commercial freedom);
c) Competitive market structure (number and sizes of the entities present in the market).

The Three Pillars of EU Competition law

Competition law governs behavior/ conduct of undertakings in the market, and can be
catergorised as;

1. Prohibition of anti-competitive agreements and concerted practices;

2. Prohibition of abuse of dominant position;
3. Merger Control.

TFEU Competition Rules – An overview

 Article 101 TFEU

 Article 101 (1) : prohibits agreements and concerted practices;
 Article 101(3) : exemptions to article 101(1).
 Article 102 TFEU:
 Prohibits abuse of dominant position in the market.
 Merger Regulations;
 Prohibits concentrations that significantly impedes effective competition.

3
S.C.P Paradigm
Structure

Conduct

Performance

Key Economic Concepts governing Competition

 Long-run equilibrium in perfectly competitive markets meets two important conditions:

allocative efficiency and productive efficiency.

 These two conditions have important implications. First, resources are allocated to their
best alternative use. Second, they provide the maximum satisfaction attainable by
society.

1. Allocative Efficiency;

Allocative efficiency means that among the points on the production possibility frontier, the
point that is chosen is socially preferred—at least in a particular and specific sense. In a
perfectly competitive market, price is equal to the marginal cost of production. Think about
the price that is paid for a good as a measure of the social benefit received for that good; after
all, willingness to pay conveys what the good is worth to a buyer. Then think about the
marginal cost of producing the good as representing not just the cost for the firm but, more
broadly, as the social cost of producing that good.

2. Productive Efficiency;

Productive efficiency means producing without waste so that the choice is on the production
possibility frontier. In the long run in a perfectly competitive market—because of the process
of entry and exit—the price in the market is equal to the minimum of the long-run average
cost curve. In other words, goods are being produced and sold at the lowest possible average
cost.

3. Dynamic Efficiency;

4
Dynamic efficiency occurs over time and is strongly linked to the pace of innovation within a
market and improvements in both the range of choice for consumers and also the
performance / reliability / quality of products.

5
Theories of Harm: How can competition be harmed?

1. Unilateral effects (by one undertaking)  Article 102 TFEU

a. Single undertaking exercising market power;
b. Exploitation;
c. Foreclosure.

2. Coordinated Effects (collective restrictions)  Article 101 TFEU

a. Tacit collusion;
b. Explicit collusions.

Basic Distinctions and Examples;

1. Horizontal and Vertical Restraints;

2. Intra Brand and inter brand Competition;

6
 3. Input Foreclosure and Customer foreclosure;

4. Hardcore and Softcore Restraints

The importance of the economic context

 Competition law is distinctive when compared to other forms of EU law in various ways,
but specifically by reference to the relationship with economic theory and understanding
and the application of competition law.
 The application of this competition law provisions can depend on an economic analysis
of relevant markets and market behaviour.
 The context in which they are applied is affected by economic theories, which are not
static but change.

E.g. the approach of Article 101 on Vertical Agreements was based on an economic
approach;

7
 In British Airways v Commission (2003), the General Court stated that;

“ the protection of competition is not an aim itself. As means of both consumer welfare,
and ensuring ab efficient allocation of resources, competition helps to prevent other
welfare-reducing effects. Society as a whole, including consumers, in this way benefits
from competition”

The role of the Commission  Check extract of textbook

Article 101 of the TFEU

Article 101

1. The following shall be prohibited as incompatible with the internal market: all
agreements between undertakings, decisions by associations of undertakings and
concerted practices which may affect trade between Member States and which have
as their object or effect the prevention, restriction or distortion of competition
within the internal market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically

void.

3. The provisions of paragraph 1 may, however, be declared inapplicable in the case

of:

- any agreement or category of agreements between undertakings,

- any decision or category of decisions by associations of undertakings,

8
- any concerted practice or category of concerted practices,

which contributes to improving the production or distribution of goods or to

promoting technical or economic progress, while allowing consumers a fair share of
the resulting benefit, and which does not:

(a) impose on the undertakings concerned restrictions which are not indispensable
to the attainment of these objectives;

(b) afford such undertakings the possibility of eliminating competition in respect of

a substantial part of the products in question.

9
Competition Policy – Part Three

Article 101 (Contd…)

Ancillary restraints

 Restrictions which are objectively necessary to the main agreement and essential
for its operation will be considered with the agreement under Article 101.

 In Case C-309/99 Wouters [2002] ECR I-1577 the Court expanded this rule
to encompass non-economic objectives. The Court was asked about the
compatibility with EU law of restrictions imposed by the Dutch Bar
Association preventing lawyers from entering partnerships with
accountants. The justification for such a rule was to avoid any risk of conflict
of interest and to observe strict professional secrecy. The Court held that
the rule did not infringe Article 101(1), despite ‘the effects restrictive of
competition that are inherent in it [as] it was necessary for the proper
practice of the legal profession, as organized in the Member State
concerned.’
 Similarly, in Case C-519/04 Meca-Medina v Commission [2006] ECR I-
6991, a case dealing with anti-doping sanctions, the Court held that the
sport precluded the application of Article 101(1).

 These cases demonstrate that the Court is adopting a sort of ‘rule of reason’ test
balancing the protection of certain public aims against the preservation of fair
competition. Richard Whish has suggested that such justifications are
conceptually similar to those cases which are concerned with ‘commercial
ancillarity’ where ‘restrictions necessary to achieve a legitimate commercial
purpose fall outside Article [101(1)]’.
 However, Horspool and Humphreys note that Wouters and Meca-Medina
concern ‘regulatory’ ancillarity whereby the restrictions are ancillary to the
legitimate objectives pursued by the regulatory body and hence do not
infringe Article 101(1).

The per se prohibition versus the rule of reason test

 The Commission’s broad interpretation of Article 101 has meant that a vast array
of ordinary commercial agreements (such as franchises, exclusive purchase/supply
or distribution agreements) were prima facie illegal under EU law.
 In the real world, however, business cannot function without such agreements.

 Agreements that are prohibited under Article 101(1) can be exempted under
Article 101(3). In order to permit exemption under this provision, it was
considered necessary to weigh up the pro- and anti-competitive effects of the
agreement concerned.

 Under such a system, there is a two-step process, whereby an agreement must

first be considered as prohibited by Article 101(1) before it can be considered
for exemption under Article 101(3) through an analysis of its pro- and anti-
competitive effects.

 This two-stage process can be contrasted with the US ‘rule of reason’ approach
which balances the pro- and anti-competitive consequences of an agreement
before a finding of infringement is made.

 The General Court confirmed the two-stage approach and rejected the ‘rule of
reason’ alternative in Case T-112/99 Metropole Television (M6) v Commission
[2001] ECR II-2459.

 The Court then went on to say that those cases where the courts had shown a
flexible approach to the application of Article 101(1) ‘cannot be interpreted as
establishing the existence of a rule of reason in Community competition law’.
However, Article 101(1) could not be applied, ‘wholly abstractly and without
distinction’ to any agreement restricting freedom of action of one or more parties.

 Therefore a certain measure of economic analysis can take place in the initial
application of Article 101(1) but ‘it is only in the precise framework of [Article
101(3)] that the pro- and anti-competitive aspects of a restriction may be weighed’.

 Other cases where the Court has said that an agreement must be examined in its
economic context before deciding whether a restriction on conduct actually
results in a restriction of competition include those involving exclusive
purchasing agreements (such as pubs which agree to buy all their beer from one
brewer, or petrol stations supplied by one oil company).

 These will only harm competition if so many outlets are ‘tied’ to particular
suppliers that it is virtually impossible for new suppliers to enter the market. Some
cases in which economic analysis of the effects of the agreement has been required
by the Court of Justice include 23/67 Brasserie de Haecht v Wilkin [1967] ECR 407;
 258/78 Nungesser [1982] ECR 2015; 161/84 Pronuptia [1986] ECR 353; and C-
234/89 Delimitis v Henninger Brau [1991] ECR l-935.

Exemption under Article 101(3) TFEU

Individual exemptions

 Agreements or decisions which fall within the prohibition of Article 101(1)

are void under Article 101(2), unless it is possible to sever the offending
clause (Consten and Grundig).

 Article 101(3) provides instead that agreements that satisfy four requirements are
not void under Article 101(1). There are two positive and two negative
requirements.

o The positive requirements are:

1. The restriction contributes to improving the production or distribution of
goods or to promoting technical or economic progress.

2. Consumers receive a fair share of the resulting benefit from the restriction.

o The negative requirements are:

1. The restriction on competition must be indispensable for the achievement
of the improvement or progress claimed in (1) above (i.e. there must be a
causal link between the restriction on competition and the improvement
gained).

2. The restriction must not put the parties in a position to eliminate

competition ‘in respect of a substantial part of the products in question’.

 Until 1 May 2004, Article 4(1) of Regulation 17/62 (now repealed) provided the
system for exemption. The Commission had exclusive power to grant exemptions
after prior notification of the agreement from the undertakings. Such notification
resulted in immunity from fines, even when the agreement was later found to be
in breach of Article 101(1).

 In 1999 the Commission published a White Paper on the modernisation of these

rules. Based on the White Paper, a new system of enforcement has been applied
since 1 May 2004 under Regulation 1/2003. Under this new regime, the
 requirement for prior notification has been abolished and Article 101(3) is
now directly effective, meaning that a national competition authority, court
or tribunal can grant individual exemptions.

Block exemptions for vertical agreements: Regulation 2790/99

 In order to reduce the quantity of applications for exemption, the Commission

issued a number of ‘block exemptions’. These were regulations which set out a
number of requirements and prohibited clauses for contracts, which, when fulfilled,
automatically lead to exemption from the application of Article 101(1).

 However, following criticism of these regulations, the Commission initiated a

reform, most important outcome of which being the general block exemption
on vertical agreements and concerted practices, Regulation 2790/99.

 Regulation 2790/1999 replaces the separate block exemptions and covers all
types of vertical restraints, including selective distribution agreements (i.e.
agreements which restrict the number of authorised distributors).

 It represents a more market orientated, economics-based approach in which

eligibility for exemption is based on a 30 per cent market share threshold,
recognising that the behaviour of companies with little market power has little
significant impact on competition in the market.

 It also allows companies which do not have market power (i.e. those who have less
than 30 per cent of the market) to benefit from a ‘safe haven’ within which they are
no longer obliged to assess the validity of their agreements under the EU
competition rules.

 However, as with the de minimis notice, there are some clauses (‘hard-core
restraints’) which are excluded. Therefore the Regulation is accompanied by
Guidelines on Vertical Restraints (OJ C 291, 13 October 2000, p.1) designed to help
undertakings to carry out their own assessment of their position in respect of
Article 101.

 The new approach in Regulation 2790/99 was described in the Commission’s

Guidelines on Vertical Restraints in EC Competition Policy (2000), which were
revised in 2010 and accompanied Regulation 330/2010 on the application of Article
101(3) to categories of vertical agreements and concerted practices.
  The revised Guidelines contain a notable new departure, stating that bans on
passive sales, one of the hard-core restrictions under the Block exemption, may not
fall within the scope of Article 101(1) at all for the first two years of operation of a
new exclusive distributorship where substantial investment by the distributor is
necessary to launch the products.

Block exemptions for horizontal agreements

 There are also block exemptions for horizontal agreements:

 Regulation 771/2004 relates to categories of technology transfer.
 Regulation 1217/2010 relates to categories of research and development
agreements.
 Regulation 1218/2010 relates to categories of specialisation agreements.

Enforcement: Regulation 1/2003

1. Key articles of Regulation 1/2003

 Regulation 1/2003 marked a major decentralisation of the enforcement of EU

competition rules. The move was intended to relieve the Commission of its huge
workload and allow it to concentrate its resources on investigating the most serious
infringements.
 The system currently in place is one of ‘parallel competences’ in which a case may
be dealt with
o by a single National Competition Authority (NCA), or
o by several NCAs in parallel or
o by the Commission.
 The Commission and NCAs together form the European Competition Network
(ECN), applying the EU competition rules in close cooperation.

 The system places responsibility on the undertakings themselves to assess whether

their agreements or activities are compatible with the EU competition rules.

 Some of the key articles of the Regulation are as follows.

o Article 1: provides that the whole of Article 101 is directly effective. Once
an infringement has been established, the Article 101(3) defence is available.
 o Article 3: states that whenever dealing with an agreement or practice
covered by Article 101 or 102 which may affect trade between Member
States, NCAs are obliged to apply EU competition law, either on its own or
alongside their national provisions. However, the supremacy of the EU rules
over any conflicting national provisions is protected.

o Article 5: NCAs can apply Articles 101 and 102 in individual cases; decide
whether the conditions of Article 101(3) are satisfied; order the ending of an
infringement; order interim measures; accept commitments; and impose
fines, penalty payments or other national law penalties.

o Article 6: now gives the national courts the jurisdiction to apply Article
101(3) as well as Article 101(1) and (2) and Article 102.

 The Commission can take four decisions under the new regime, which are the
following:
o Article 7: includes a new power to impose ‘behavioural or structural
remedies’. Previously the Commission could only impose fines.
o Article 8: allows the Commission to order interim measures in cases of
urgency ‘due to the risk of serious and irreparable damage to competition’.
o Article 9: allows the Commission to accept commitments from the
undertaking(s) to meet its concerns.
o Article 10: allows the Commission to decide that there has been no breach,
or that the Article 101(3) conditions for exemption are fulfilled.

 Chapter IV lays down the rules for the close cooperation between the Commission
and the NCAs:

o Article 11: includes various requirements to exchange information and to

inform each other before adopting any decisions.
o The detailed arrangements for the allocation of cases between the
Commission and the NCAs are set out in a separate notice: Commission
Notice on Co-operation within the network of Competition Authorities
[2004] OJ L 1123/18. Article 8 of this Notice introduces the concept of the
‘well-placed authority’ for dealing with a case.
o The Commission will be ‘well-placed’ if the agreement or practice has effects
in more than three Member States.
o Article 12: provides for the exchange of information between the
Commission and the NCAs.
 o Article 13: deals with the situation where two or more NCAs all receive the
same complaint.
o Article 14: states that representatives of the NCAs make up the Advisory
Committee on Restrictive Practices and Dominant Positions which must be
consulted and may give an Opinion before the Commission takes any
decision on a case.
o Article 15: provides that a national court can ask the Commission for
information or an opinion on a case before it and must send copies of its
judgments under Article 101 or 102 TFEU to the Commission without delay.
NCAs and the Commission can submit observations to the national court
where relevant.
o Article 16: imposes on national courts and NCAs an obligation not to take
decisions that conflict with decisions of the Commission. The Commission’s
powers to search business premises under Regulation 17/62 were extended
in Chapter V of Regulation 1/2003:
o Article 20(5): states that officials of the NCAs are obliged to assist the
Commission in carrying out searches, affirming the duty of Member States
under Article 105 TFEU to afford assistance to the Commission in the
exercise of its functions under the Treaty.
o Article 21: provides the right to search the homes of directors, managers
and other members of staff where a reasonable suspicion exists that certain
documents which might be relevant to the investigation are stored there.
This power is subject to review by the Court of Justice.

 Chapter VI deals with penalties:

o Article 23(1): increases the maximum fine for supplying incorrect or

misleading information and other procedural offences to 1 per cent of the
total turnover in the preceding business year.
o Article 23(2): empowers the Commission to impose fines of up to 10 per
cent of the total turnover in the previous business year of each of the
undertakings involved in an infringement of the competition rules.
o Article 24: increases the periodic penalty payment which can be imposed
to compel undertakings to terminate such breaches to a maximum of 5 per
cent of the average daily turnover in the previous business year.

2. Guidance notices for Regulation 1/2003

 The Commission, in April 2004, issued a raft of new Notices to provide guidance
and to try and achieve consistency of approach. These include:
o Commission Notice on cooperation within the network of National
Competition Authorities (Antitrust) Guidelines [2004] OJ C-101/43, [2004] 4
CMLR 32-1651, dealing with the European Competition Network, work-
sharing, exchange of information, pending cases, evidence, fines, leniency.

o Commission Notice on the cooperation between the Commission and the

Courts of the EU Member States in the application of Articles 81 and 82 EC,
[2004] OJ C-101/54,[2004] 4 CMLR 33-1669.

o Other Notices on:

 handling of complaints by the Commission
 novel questions that arise in individual cases
 the effect on trade concept
 guidelines on the application of Article 81(3) EC [Article 101(3) TFEU].
o There is also procedural Regulation 773/2004, [2004] OJ L123/11, which deals
with the initiation of proceedings, complaints, access to the file, rights of the
defence, hearings and confidentiality.
 Derogations from the Free movement of Services

Introduction
 The tension between the general right to provide and receive services and state regulation
of certain activities is similar to the developed case law on free movement of goods, where
a general right to trade is set against limits imposed on the free movement of goods
because of important national interests (e.g. the state may have determined that certain
activities are illegal, or that consumers need protection in certain service sectors).

 Treaty provisions:

o Article 51 TFEU: allows M/S to exclude activities ‘connected even occasionally with
the exercise of official authority’
o Article 52 TFEU: provides for derogation from the right to establishment and the
right to provide/receive services on the same grounds as for workers, namely:
 Public policy;
 Public security; and
 Public health.

 The Court’s approach is to set out the general right to provide or receive services, but to
acknowledge that certain obstacles to service provision can be acceptable. As with the law
on FMG;

o discriminatory measures can only be justified under the specific treaty provisions;
and

o where measures apply in a non-discriminatory way, indistinctly applicable

measures or measures with an effect on trade can fall foul of article 56 TFEU, but
can be objectively justified, if proportionate.

 Sager v Dennemeyer & Co (1991), the court stated that;

“the freedom to provide services may be limited only by rules which are justified by
imperative reasons relating to public interest and which apply to all persons and
undertakings pursuing activity in the State of destination in so far as the interest is not
protected by rules to which the person providing the service is subject in the State in which
he is established. In particular, these requirements must be objectively necessary in order
to ensure compliance with professional rules and must not exceed what is necessary to
attain these objectives”
  Discriminatory measures can only be justified under specific treaty provisions, whereas
measures applying in a non discriminatory way, indistinctly applicable measures or
measures with an effect on trade can fall foul of Article 56 provided that are not objectively
justified [Sager (1991)].
 A national rule restricting freedom to provide services must be compatible with the
requirements of Article 56. To do so it must satisfy a four-part test as established in
Gebhard (1995);
o The rule must be non – discriminatory;
o The rule must be justified by imperative requirements in the general interest;
o The rule must be suitable for the attainment of objectives it pursues;
o The rule must not go beyond what is necessary to attain it’s objectives.

Public Interest Grounds

 Restrictions to the freedom to provide services may be justified by the general good.

In Case C-113/89 Rush Portuguesa [1990] ECR I-1417

Facts:

Portuguese workers employed by a company providing services in Belgium were required

to be in the possession of work permits at a time when the Portuguese did not have the
full free movement rights in community law because of transitional arrangements
associated with Portugal’s accession to the Community.

Held:
the Court held that the right of a Portuguese company to provide construction services in
France under Article 56 TFEU included the right for it to use its own employees to provide
the services. The Court dismissed France’s concern that this might threaten the stability of
the labour market in France, as the activity would only be temporary.

Must be contrasted with Webb (1981)

 In Cases 369/96 and 376/96 Arblade and Leloup [1999] ECR I-8453,

Held:
two French companies providing services in Belgium were prosecuted for their failure to
comply with Belgian social legislation governing employment. Requirements to issue each
worker with an individual record and other paperwork formalities in Belgium were held to
be prohibited by Articles 56 and 57 TFEU since such paperwork was already maintained in
the home state (i.e. it was imposing a dual regulatory burden). However, it was lawful to
require that the companies kept such documentation available in the host state so that the
latter could monitor compliance with national legislation on the safeguarding of workers.

 However, the consideration of employee protection as a cross-border service rather than

as a free movement of workers’ issue can create problems.

Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareforbundet [2007] ECR I-

11767

Facts:
 The case concerned a collective action organised by the Swedish building and
public works trade union, against a Latvian company, Laval, which had posted
construction workers from Latvia to work on its building projects in Sweden.
 The Swedish unions sought to impose a blockade against the Latvian company,
intending to force the company to sign a collective agreement respecting Swedish
wage conditions and employment terms.
 Laval asked the police for assistance but they explained that since the collective
action was lawful under national law they were not allowed to intervene.
 The company was eventually forced to withdraw its work force and declared
bankruptcy. The reference was from a court hearing its action for damages.
 Because of the temporary nature of the Latvian company’s operations, the matter
concerned the free movement of services under Article 56.

Held:
  The Court of Justice ruled that since the Latvian company protected its employees
to the standards required by EU law, an attempt to force it to comply with further
standards in Sweden breached its rights under Article 56 TFEU.
 The CoJ ruled that collective employment agreements cannot be imposed on
companies providing services even where the provision of service entails workers
moving to a state where different employment conditions prevail.
 In deciding this, the Court held that Article 56 TFEU had horizontal effect.

Case C-346/06 Ruffert (2008)

Facts:
 A Polish provider of building services was contracted in Germany.
 The German Contract contained a declaration regarding compliance with collective
agreements , more specifically, regarding payment to employees of atleast the
minimum wage in force at the place where those services were to be performed.
 This was consequently higher than the polish statutory minimum wage.
 The company using workers from Poland who were paid at the Polish minimum
wage rate was fined for breach of contract.

Held:
 The Court held that by requiring companies performing public works contracts to
apply the minimum wage laid down by the ‘Building and public works’ collective
agreement, the law may impose on service providers established in another
member state where minimum rates of pay are lower, an additional economic
burden that may prohibit, impede or render less attractive the provision of their
services in the host member state.

 In addition to the protection of workers, the Court has recognised the following public
interest grounds -> CHECK LAST PAGE

 Where member states rely on overriding requirements in the public interest in order to justify
rules which are liable to obstruct the freedom to provide services, such justification must be
interpreted in the light of the general principles of EU Law, in particular the fundamental rights
guaranteed by the Charter.

C-390/12 Pfleger (2014)

Facts:
o The restriction on services related to a requirement that gaming machines be licensed.

Held:
 o The court agreed that this licensing requirement fell within the scope of Article 56 of the
TFEU.
o The court then noted that the restriction of supply of games of chance and the fight
against crime connected with the gams were both capable of justifying on fundamental
freedoms in the sector of games of chance.
o The court then determined that the national court should consider if the aim of the
licensing requirement was genuinely the combatting of crime and supplying of such
games.
o If the national court considers that the real objective of the restrictive system is to
increase the State tax revenue, the system in question must be regarded as being
incompatible with EU Law.

Proportionality and the Public Interest justifications

 Where the Member state has invoked a public interest requirement which has been
accepted by court, any steps taken to guard the interest will be assessed in the light of the
principle of proportionality.

 The Principle of proportionality raises questions as to whether;

o The measures are suitable for securing the attainment of the objective;
o do these measures go beyond what is necessary in order to attain it.

Case C-17/00 De Coster [2001] ECR I-9445

Facts:
This case concerned the differential taxation of cable and satellite services. The Court
found that, because cable services were not subject to the same taxation, the tax on
satellite services interfered with the provision of services. The Belgian authorities justified
the rule on the grounds that it was necessary to control the uncontrolled proliferation of
satellite dishes and, thereby, preserve the quality of the environment.

Held:
The Court decided that the tax exceeded what was necessary to achieve the objective of
protecting the urban environment as there were a number of other less restrictive
measures by which the aims could be achieved.

C-167/13 Blanco and Fibretti

Facts:
 Held:

Case C-234/12 Sky Italia srl v Autorita per le Garanzie nelle Comunicazioni [2013]

the Court found that although the protection of consumers against abuses of advertising
constituted an overriding reason relating to the general interest which may justify such a
restriction, it was subject to the principle of proportionality. Therefore, an Italian measure on
television advertising, which lay down hourly limits for advertising for pay-TV broadcasters and
not for free-to-air broadcasters, was found to be, in principle, compatible with EU law.

Facts:

Held:
 Illegal Services
 Illegal services, such as betting or gambling, do not escape the application of Article 56. Yet it is
often the case that such restrictions are based on the desire to protect the consumer and, in order
to be justified on these grounds they must be consistent with the principle of proportionality.

In Case 159/90 Society for the Protection of the Unborn Child (SPUC) v Grogan [1991] ECR I-
4685

an Irish student organization illegally distributed leaflets in Ireland about abortion services
available in the UK. The Court avoided having to decide whether a legitimate interest was
being protected by holding that as the students were not themselves connected with the
service providers, they were not covered by Article 56 TFEU.

Note: the Advocate General van Gerven, who examined the merits of this case, concluded
that, protection of the unborn child was a legitimate objective and that the restriction was
justified under Article 52 (public policy exception) as a moral or philosophical choice which
member states were entitled to make.

In Case 275/92 Customs and Excise Commissioners v Schindler and Schindler [1994] ECR I-
1039

Facts:

o The promotion and sale of lottery tickets by agents of a German company were at issue
since, at the time, lotteries were prohibited in the UK.
o MS intervening in the case argued that lotteries are mostly subject to strict control and,
indeed, generally run by public authorities,
o Schindler were agents of SKL, a public body responsible for organizing lotteries on behalf
of Germany.
o They sent advertisements and application forms to the UK, inviting people to participate in
the German lottery, and subsequently, were prosecuted for breaching (the then) national
law banning lotteries.
 Held:

the Court held that the UK rules against large-scale lotteries, which prevented the
promotion in the UK of a German lottery, were justified ‘in the light of the specific social
and cultural features of each Member State, to maintain order in society’.

Case C-67/98 Questore di Verona v Zenatti (1999)

Facts:
Case related to Italian legislation reserving to certain bodies the right to take bets on
sporting events was also seen as fulfilling a public interest.

Held:
The court stated that it was for the national court to verify whether, having regard to the
specific rules governing its application, the Italian legislation concerned was genuinely
intended to realize the objectives justifying it and whether restrictions it imposed were
proportionate in the light of those objectives.

In Case C-6/01 Anomar v Portugal [2003] ECR I-8621

Facts:
o Portuguese legislation restricted the running of games of chance to casinos within gaming
zones created by decree.
o ANOMAR, an association of gaming machine operators in Portugal, challenged the
restriction on the grounds that it breached the freedom to provide services.

Held:
o The court held that the Portuguese legislation was capable of restricting freedom to
provide services, as it prevented operators from providing gambling machines outside the
zones.
o The court then concluded that the Portuguese policy was justified on the grounds of
consumer protection and the maintainence of order in society.
o Portuguese rules restricting gambling to casinos or other licensed venues fell within the
margin of discretion enjoyed by Member States on grounds of social policy and the
prevention of fraud.

 However, in Case C-42/02 Lindman [2003] ECR I-3519, Finnish rules that considered winnings
from lotteries held in other Member States as taxable income while holding that winnings from
lotteries held in Finland were not taxable, were contrary to Article 56 TFEU.
Case 124/97 Laara [1999] ECR I-606

Facts:

In Finland, under legislation on gaming which is intended to restrict the potential profit to
be made from exploitation of the desire to gamble, a single public body is authorised to
organise lotteries and betting, to manage casinos and to run the operation of slot
machines. The holder of the requisite administrative authorisation is obliged to collect
funds for non-profit-making causes.

The public body to which such authorisation has been issued is the RAY, an association of
96 organisations operating in the fields of health and social activities.

In 1996 the English company CMS concluded a contract with the Finnish company TAS
whereby the latter was given the exclusive right to install and operate in Finland slot
machines manufactured and supplied at moderate prices by CMS. The contract provides
that the machines are to remain the property of CMS and that TAS is to receive, by way of
remuneration, a commission representing a percentage of the profit made from the
machines installed.

Mr Läärä, the chairman of TAS, was fined for infringement of the Finnish legislation on
gaming. In the proceedings pending before the Finnish Court of Appeal, Mr Läärä
maintained that the Finnish legislation is contrary to the principles of Community law
relating to the free movement of goods and services.

The national court requested the Court of Justice to rule on the question whether national
legislation which grants to a single public body exclusive rights to operate slot machines
for the achievement of objectives in the general public interest is contrary to, in particular,
the rules on freedom to provide services.

Held:

In the Court's view, national legislation such as the Finnish legislation involves no
discrimination on grounds of nationality, inasmuch as it applies without distinction to all
economic operators, whether they are established in Finland or in another Member State.
However, such legislation constitutes an obstacle to freedom to provide services in that it
directly or indirectly prevents operators from making slot machines available to the public.
Consequently, the Court examines whether that obstacle is justified under Community law.

The Court considers that it is for each Member State to assess whether, in order to achieve
the objectives aimed at, it is necessary to adopt regulations imposing a code of conduct on
the economic operators concerned or, alternatively, to grant an exclusive operating right
to a licensed public body. Whichever option is chosen, it must, if it is to comply with
Community law, be proportionate to the aim pursued.
As it is, the restriction on freedom to provide services, which is designed to limit the risk to
the social order inherent in gambling, is justified, since it is intended to protect consumers.
Thus, a measure whereby a Member State, instead of imposing a total ban on gaming,
regulates it by means of a limited authorisation falls within the ambit of the prevention of
the risk of crime and fraud involved in an activity.

Consequently, the Court has ruled that the solution adopted in Finland, namely to grant to
a single public body exclusive rights to operate slot machines and to place a strict limit on
the lucrative nature of that activity, is not disproportionate to the objectives pursued.

Case C-243/01 Gambelli [2003] ECR I-13031

Facts:
Concerned Italian rules restricting the provision of internet gambling services to state – run
or state-licensed organisations.

Held:

“in so far as the authorities of the Member State incite and encourage consumers to
participate in lotteries, game of chance and betting to the financial benefit of the public
purse, the authorities of that state cannot invoke public order concerns relating to the need
to reduce opportunities for betting in order to justify measures such as those in the main
proceedings”.

Case C-203/08 The Sporting Exchange Ltd, trading as Betfair v Minister van Justitie and
Ladbrokes Betting & Gaming Ltd;

Facts:

C-258/08 Ladbrokes International Ltd v Stichting de Nationale Sporttotalisator [2010] ECR I-

4757.

Facts:
 HELD:

 In both cases, the Court confirmed that it was legitimate for a Member State to restrict the
ability of operators to organise gambling, and that it was permissible for the state to issue
exclusive rights to do so.
 While it constitutes a restriction of free movement rights, this could be justified for public
order and consumer protection reasons.
 The Court found that the Netherlands was not obliged under the principle of mutual
recognition to recognise the licences to operate granted in other Member States, given
the necessity to protect national consumers.

 The Court’s reasoning contrasted ‘controlled expansion’ with the dangers of gambling by
applying the proportionality test

Cases C-42/07 Lisa Portugesa de Futebol Profissional [2009] ECR I-7633;

Facts:

Held:

C-6/01 Associacao National de Operadores de Maquinas Recreativas [2003] ECR I-8621;

Facts:
Held:

C-447/08 and C-448/08 Sjoberg and Gerdin [2010] ECR I-6921).

Facts:

Held:
 Lastly, in Case C-176/11 HIT and HIT LARIX v Bundesminister fur Finanzen [2012] the Court of
Justice held that a national measure prohibiting advertising of foreign casinos, although
restricting the freedom to provide services, was justified by the objective of consumer
protection.

 For a case concerning a different illegal activity:

Marc Michael Josemans v Bugemeester van Maastricht [2010] ECR I-13019.

Facts:
Netherlands prohibited marketing of marijuana, but tolerated by law. Municipal legislation
in Maastricht limited access to marijuana cafes to residents only. Josemans, who ran a coffee
shop selling marijuana, claimed that this prohibition contravened the freedom to provide
services under TFEU article 56, and this it would have to be justified.
Here, the Court was asked whether a prohibition restricting access to Dutch coffee-shops to
residents only fell within the scope of Article 56 and, if so, was it justifiable on grounds of
reducing drug tourism and public nuisance?

Held:
o the Court of Justice, Second Chamber, held that TFEU article 56 could not be relied on
to challenge municipal laws. Legislation restricting free movement of services was
justified by the need to combat drug tourism.

“ 63 In the present case, it is common ground that the rules at issue in the main
proceedings are intended to put an end to the public nuisance caused by the large
number of tourists wanting to purchase or consume cannabis in the coffee-shops in
the municipality of Maastricht. According to the information provided by the
Burgemeester van Maastricht at the hearing, the 14 coffee-shops in the municipality
attract around 10 000 visitors per day and a little more than 3.9 million visitors per
year, 70% of which are not resident in the Netherlands.

74 In the present case, it cannot be denied that the policy of tolerance applied by the
Kingdom of the Netherlands with regard to the sale of cannabis encourages persons
who are resident in other Member States to travel to that State, and more specifically
to the municipalities in which coffee-shops are tolerated, in particular in border
regions, in order to buy and consume that drug. Furthermore, according to the
information in the case-file, some of those persons purchase cannabis in such
establishments in order to export it illegally to other Member States. ”
 75 It is indisputable that a prohibition on admitting non-residents to coffee-shops, such
as that which is the subject-matter of the dispute in the main proceedings, constitutes
a measure capable of substantially limiting drug tourism and, consequently, of
reducing the problems it causes.
76 In that connection, it is important to point out that the discriminatory nature of the
rules at issue in the main proceedings does not, on its own, mean that the way in which
they pursue the intended objective is inconsistent. Although the Court took the view
in Adoui and Cornuaille that a Member State cannot validly rely on grounds of public
policy with regard to the behaviour of a non-national inasmuch as it does not adopt
repressive measures or other genuine and effective measures with respect to the same
conduct on the part of its own nationals, the fact remains that the dispute in the main
proceedings is part of a different legal context.
77 As was pointed out in paragraph 36 of this judgment, there is, under international
law and European Union law, a prohibition in all the Member States on marketing
narcotic drugs, with the exception of strictly controlled trade for use for medical and
scientific purposes. By contrast, prostitution, the behaviour referred to in Adoui and
Cornuaille, aside from trafficking in human beings, is tolerated or regulated in a
number of Member States (see, to that effect, Case C-268/99 Jany and Others [2001]
ECR I-8615, paragraph 57).
78 It cannot be held to be inconsistent for a Member State to adopt appropriate
measures to deal with a large influx of residents from other Member States who wish
to benefit from the marketing – tolerated in that Member State – of products which
are, by their very nature, prohibited in all Member States from being offered for sale.
[...]
83 In such circumstances, it must be stated that rules such as those at issue in the main
proceedings are suitable for attaining the objective of combating drug tourism and the
accompanying public nuisance and do not go beyond what is necessary in order to
attain it.
84 Having regard to all of the foregoing considerations, the answer to the second
question is that Article 49 EC must be interpreted as meaning that rules such as those
at issue in the main proceedings constitute a restriction on the freedom to provide
services laid down by the EC Treaty. That restriction is, however, justified by the
objective of combating drug tourism and the accompanying public nuisance.

Significance
The case has been criticised for its inconsistency on previous Court of Justice cases
on illegal services. For example, De Witte writes the following.
 “ The Court’s logic in Josemans, however, presumes that only residents are allowed to act in
certain ways, and, conversely, that foreign residents are bound by limits to permissible
behaviour from their home State even when they are abroad. The absurdity of this “logic”
becomes clear quickly if we transpose it to different policy areas. It would presume, for
example, that only German residents may drive 160 km/h on the autobahn, only Spanish
residents can be a matador, or only Slovak residents are allowed to smoke in a bar in
Bratislava. Equally, it entails that German residents may not play laser games in Sofia, that
Irish residents may not have an abortion in Stockholm, that a Swedish tourist may not buy
alcohol in an off-licence in Firenze, and that his British friend must leave the pub there at
11pm.

Protection of human rights

 the Court of Justice accepted that constitutional values protecting fundamental human rights
could give rise to a justifiable limitation of the freedom to provide or receive services.

In Case C-36/02 Omega Spielhallen v Bonn [2004] ECR I-9609

Facts:
In the UK, laser games in which people simulate gun-battles with each other are a popular form
of entertainment. Yet in Germany, such games are regarded as trivialising violence and infringing
the fundamental right of human dignity guaranteed in the German Constitution.

Omega argued that the German measure prohibiting them from introducing such a game in its
‘laserdrome’ was in breach of Article 56 TFEU.

Held:
The Court said that the protection of fundamental human rights is an obligation imposed by
Community law, even in relation to the four fundamental freedoms. However, the way such rights
were protected might vary between Member States:

“ it is not indispensable in that respect for the restrictive measure issued by th authroities of
Mmeber States to correspond to a conception shared by all member states as regards the precise
way in which the fundamental rights or legitimate interest in question is to be protected”

The German prohibition was therefore justified under Article 52 TFEU on public policy
grounds.

 From the cases in the above sections, we can see that in applying the proportionality test to rules on
services, the Court pays great attention to the nature of the services involved: the more serious the
risk of harm to the public, the more likely it is that restrictions will be allowed. The less the risk, the
more likely that the restriction will be considered as in breach (see Cases C-154, 180, 198/89
Commission v France, Italy and Greece [1991] ECR I-659, 709, 727.)
Public interest grounds Case Facts Held

Professional rules Joined Cases Ministere Public

intended to protect the v Willy van Wesemael and
recipients of Services others [1979] ECR 35
 Reiseburo Broede v Sandker Court developed a
[1996] ECR I-6511) justification specifically in
relation to practice of law in
light of sound
administration of justice

Case 62/79 Coditel [1980] ECR

Protection of Intellectual 881
Property
Consumer Protection Case C-180/89 Commission v
Italy [1991] ECR I-709 (tourist
guides)

205/84 Commission v
Germany [1986] ECR 3755 (on
insurance policies)

Case C-42/07 Liga Portuguesa

de
Futebol Proffissional [2009]
ECR I-7633 (Consumer
protection and fight against
crime).

Italia srl v Autorita per le

Garanzie nelle Comunicazioni
[2013]
Conservation of national Case C-180/89 Commission v
historic and artistic Italy [1991] ECR I-709
heritage

Dissemination of Commission v France [1991]

knowledge of the artistic ECR I-659
and cultural heritage of
the country

Commission v Greece [1991]

ECR I-727

Cultural Policy Gouda [1991] ECR -4007

Commission v Netherlands
[1991] ECR I – 4069
 Direct Effect, Indirect Effect and State Liability (Contd…)

Incidental Horizontal Effect:

 Directives can not be given (horizontal) effect in disputes between private parties but in
some cases the clarity of the principal has been eroded.
 Incidental effect is a concept in European Union law that allows the use of indirect
effect of EU directives in private legal actions. While an individual cannot be sued for
failure to comply with an EU directive, the state's failure to comply can be an incidental
factor in a suit against an individual, where it will not impose legal obligations upon them.
 The concept was defined by the European Court of Justice in Case C-194/94 CIA
Security International SA v. Signalson; CIA had attempted to market a burglar alarm in
Belgium that was not compatible with Belgian technical specifications. However, the
Belgian government had failed to report these specifications to the EU, as required by a
directive in 1983. The court ruled that this constituted a substantial degradation of the
effectiveness of the directive, which was intended to lower barriers to trade, and that the
Belgian government's breach of the directive made the Belgian law inapplicable to the
individual.
 Thus, in cases of ‘incidental’ horizontal Direct effect, the court allows for Horizontal DE if
no particular obligation placed on the defendant.

Unilever Italia v Central Food SpA [2000] ECR I-7535

Facts
o Technical rules on the labelling of olive oil for sale were adopted by Italy;
o Approval had been sought under Directive 83/189/EC from the Commission, but a
response had not yet been received;
o Unilever and Central Food made a sale contract for olive oil affected by the Italian
measure
o However, The product purchased did not comply with the new Italian rule

Issue
Could the contract be avoided on the basis of its national non-compliance?

Decision
No

Reasoning

1
 o Just as in CIA Security v Signalson [1996], an unapproved national technical
measure will breach EU law, and the directive governing this validity and approval
(Directive 83/189/EC) is directly effective horizontally (exceptionally so) and could
be relied on between two private parties.
o In Werner Mangold v Rudiger Helm, which involved the enactment by the
German government of discriminatory legislation in 2002 regarding fixed contract
workers 52 years and over. The ECJ found in favour of Mangold on the grounds
that the German legislation was contrary to the Equality Directive 2000/78. This
ruling was made despite the fact that the time period of 2006 given for national
governments to implement the directive had not yet lapsed. In giving its ruling, the
Court stated, “It is the responsibility of the national court to guarantee the full
effectiveness of the general principle of non-discrimination in respect of age,
setting aside any provision of national law which may conflict with Community law,
even where the period prescribed for transposition of that directive has not yet
expired."

Activity: what was the facts and what was held in the case of Panagis Pafitis [1996] ECR I-
1829?

 This Principle however applies only in very limited situations, and these seem mostly to
be a ‘on-off’, where private parties are concerned on both sides, but where no particular
obligation was put on the defendant.

Remedies for Union Law Rights

 Individuals do not have extensive rights to enforce Union law directly in the Court of Justice
and they only can do so under a very strict standing, through;
o Judicial Review  Article 263 TFEU;
o Actions for failure to Act  Article 265 TFEU;
o In private actions for damages against the Union Institutions  268 and 340 of the
TFEU.

 The remedies obtainable in respect of union law are those available under national
law, as there are no uniform set of union law remedies as described in the case of
Rewe – Handelgesellschaft Nord mbH v Hauptzollamt kiel [1981] ECR 1805,

“Community law… was not intended to create new remedies in the national courts to
ensure observance of the Community law, other than those already laid down by national
law”

 We also know that, Van Gen en Loos recognized the principle of Direct Effect as a pillar
of Community legal order. Hence, EU law itself (without requiring M/S implementation)
imposes not just obligations, but also confers rights on individuals.

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 o Rationale: The aim is to maintain a legal order which is separate from M/S laws,
however the M/S laws are still needed to ensure the effectiveness of EU laws.
However,
 Direct Effect itself does not ensure full effectiveness of EU law;
o Treaties are largely silent on remedies when M/S are the one’s breaching EU law;
o However, if only left to the M/S to decide on procedure for indiviuals to challenge
a breach by the M/S authorities, the M/S would not have any interest in highlighting
their failures.
 So, ECJ had to develop a body of principles to ensure that individuals relying on the
enforcement of their EU law rights has equivalent remedies.

Remedies for Union Law rights ; Principles and development

 The ECJ established that, the remedies as available in national courts must be applied to
any breaches under the Union law. However, the courts have, from the beginning
stipulated that the remedy obtained must comply with two principles;
Rewe-Zentralfinanz v Landwirtschaftskammer (1976)
“although the Treaty has made It possible.. for private persons to bring direct action, it was
not intended to create new remedies in the national courts to ensure the observance of
Community law…. On the other hand… it must be possible for every kind of action
provided by national law to be available for the purpose of ensuring observance of
Community provisions having direct effect, on the same conditions as it would apply were
it a question of observing national law….”

Significance
 These principles mean that as long as national law provided a remedy similar to that
provided for a breach of a similar national rule and did not make it impossible in practice
to exercise EU rights, that remedy would be lawful under EU law.

 Further inroads into national remedial autonomy were revealed in Rewe where the EU
Court suggested an EU principle of effectiveness requiring that all national authorities
must secure effective remedies to protect EU rights: it must not be ‘excessively difficult or
impossible for an individual to exercise his right to obtain a remedy’ , which is known as
the requirement for practical possibilities.

Comet BV Produktschap [1976] ECR 2043

The court stated that:
“it is for the domestic law of each member state to designate the courts
having jurisdiction and the procedural conditions governing actions at law intended
to ensure the protection of the rights which subjects derive from the direct effects
of Community law, it being understood that such conditions cannot be less
favourable than those relating to similiar actions of domestic nature ….”

3
 Significance:
 Confirms the national remedial autonomy principle that, in the absence of conferral of a
specific EU remedy to accompany an EU right, it is left for the domestic legal system of
each member state to lay down procedural rules governing the actions intended to enforce
the rights which individuals derive from EU law.
 In this case, the ECJ confirms that the EU decentralises the system of enforcement to
national level where EU law is mainly applied by national authorities and adjudicated upon
by national courts according to the rules of national remedial law.
 in order to ensure a minimum degree of uniformity in the enforcement of EU law and to
guarantee the ‘effet utile’ of EU law in the case of Comet the ECJ did assert that this was
not an absolute rule and there would be circumstances when EU intervention into national
remedial rules would be necessary. Here it established the principle of equivalence,
stipulating that ‘claims based on EU law must be subject to the rules which are no less
favourable than those governing similar claims based on national law’

Therefore according to the above,

A national court remedy could be enforced provided that, the said remedy is in line with:
a. Principle of Equivalence: the remedy for union law rights should be no less favourable
than those relating to similar domestic claims;

b. The requirement of practical possibility: that the remedy should not be such as in
practice to make it virtually impossible or excessively difficult to obtain reparation.

 Nevertheless, deciding whether a national remedy (or other procedural rule) is either ‘equivalent’
to a domestic right or effective enough is fraught with difficulties(e.g. must use only existing
national remedies). The content of rights can be ambiguous and it is a National Court that has
the difficult task of defining ambiguous EU rights, which can inevitably lead to a breach of the
principles of effectiveness and equivalence.

 Subsequently, the ECJ also insisted that the remedies provided by national law must be

o Effective;
o Adequate;
o should act as a deterrent; and
o guarantee real and effective protection.

 In von Colson v Land Nordrhein Westfahlen, the ECJ stated that the national court must
interpret the national law ‘in the light of the wording and purpose’ for the relevant community law
in rder to ensure Ms.von Colson an adequate and effective remedy, as required by Article 6 of
the Directive, which said the remedy must also have a ‘detterent effect’. The compensation must,
therefore, ‘be adequate in relation to the damage sustained’. However this statement by the ECJ
applicable in only the von Colson case.

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 Subsequently, it became clear that the requirement that national remedies for breach of
Community law rights should be adequate and effective was a new, universal requirement
to be applied to all such remedies; R v Secretary of State of Transport, exparte Factortame

Significance of Factortame:

 In Factortame the duty was on the UK court to allow the invocation of the EU right of
non-discrimination (so that Spanish fishermen could fish in British waters). The EU
Court stipulated that interim relief must be granted pending the final judgment on the
matter by the House of Lords, otherwise it would undermine the effective judicial
protection of the EU right in question.
 The consequences of this ruling were that the English Courts were required to apply
what was admittedly an existing remedy (interim relief), but in an exceptional situation
(against a government minister) to secure that person’s right. The immediate result of
the application of the ruling was that EU law rights would be treated more favourably
than those based in domestic law, because the interim relief in question (an injunction)
was not available against government ministers for alleged breaches of national law.
 This case could be considered as requiring English law to create a new remedy
(interim relief against the Crown).

 These principles were also extended to other actions for an injunction against the crown, thus
changing the fundamental rule of English law; M v Home Office [1994] 1 AC 377.

 Two examples of the application of the requirement for adequate and effective remedies;

o Marshall (No.2) [1993] 3 CMLR

 This case was a claim for damages arising from Mrs Marshall’s successful
action in Marshall v Southampton and South West Hampshire AHA [1986]
ECR 723.
 Her early retirement had been held to be unfair dismissal. Her compensation
was subject to an upper limit which prevented her from receiving full
compensation as the amount did not include the interest on the award between
the date of the breach and the judgment.
 The Court said the application of the upper limit would therefore not provide for
an adequate remedy. The Directive required that the remedy chosen by the
state must be adequate and effective (Article 6) and since the remedy chosen
here was compensation it must have no ceiling and include interest.

o Johnston v Royal Ulster Constabulary (RUC) [1986] ECR 1651

 the Chief Constable for the Royal Ulster Constabulary (RUC) in Northern
Ireland decided that men in the RUC would carry firearms on a daily basis.
Women would not be equipped with or trained to bear firearms and would not
be asked to perform general duties which might include the use of firearms.
Johnston had been an unarmed member of the RUC for three years and when
her contract came up for renewal it was not renewed. She sought to challenge
this on the grounds of sex discrimination under the Equal Treatment Directive
(ETD) Directive 76/207 (now Directive 2006/54). It was argued that a certificate
relating to national security and public safety signed by the Secretary of State

5
 for Northern Ireland prevented the national court from hearing her sex
discrimination case; the certificate (issued under Article 53 of the Sex
Discrimination (NI) Order 1974) was said to be ‘conclusive evidence’ that the
Chief Constable’s refusal to employ her ‘was for the purpose of safeguarding
national security or of protecting public safety or public order’, and was not
subject to review by a court. The ECJ, in its ruling, referred to the requirement
for ‘effective judicial control’ under Article 6 of the ETD and stated that this was
also a general principle common to all the Member States and required by
Articles 6 and 13 of the ECHR. All persons had the right to obtain an effective
remedy in a competent court against measures which they considered to be
contrary to the principle of equal treatment as laid down in the Directive, and
the certificate, therefore, could not be held to be ‘conclusive’. Mrs Johnston
had the right to have her case adjudicated by a court.

 Subsequently, in UNETEC v Heylens (1987) ECR 4097, a requirement was also placed
on national authorities to give reasons for their decisions in regard to community law rights.

The Application of national procedural rules

 The European Court has also considered the legality of the application of national
procedural rules which affect the exercise of Union law rights.

o Emmott v Minister of Social Welfare [1991] ECR I-4269 is considered to be the

high water mark of the Court’s willingness to intervene and later cases have
manifested a retreat from this position. Directive 79/7 prohibits discrimination on
the grounds of sex in regard to social security measures. It was implemented late
by the Irish government. When Mrs Emmott sought to bring an action relying on
the Directive, she was told her action was time barred. On a reference as to
whether it was contrary to Community law to rely on the time limits, the Court held
that time limits do not start to run until after the proper transposition of the Directive,
so she was not, after all, out of time. Although time limits are reasonable in
principle, a national government cannot rely on its own default in implementing the
Directive late.

o However, in Steenhorst-Neerings [1993] ECR I-5475 the Court held that a

national rule restricting the retroactive effect of a claim for benefits for incapacity
for work was in accordance with Community law. The Court considered this only
with reference to the two principles (equivalence and practical possibility) and held
that the national rule in question satisfied those conditions.

Procedural Protection after the Lisbon Treaty

 Under Article 19(1) TEU, the Court is obliged to ‘ensure that in the interpretation and
application of the Treaties the law is observed’, whilst at the same time Member States

6
 (also under Article 19(1)) are obliged to ‘provide remedies sufficient to ensure effective
legal protection in the fields covered by Union law’.
 In addition, under Article 51 of the Charter of Fundamental rights, the Court, as an EU
institution, is obliged to ‘respect the rights, observe the principles and promote the
application’ of the Charter as part of its interpretive obligation. This includes Article 47,
entitled a ‘Right to an effective remedy and to a fair trial’ which contains an entitlement to
‘an effective remedy before a tribunal’ if Union law right is infringed, and a right to legal
assistance for ‘those who lack sufficient resources’. (See Chapter 12 for a detailed
analysis of the application of the Charter.)

In DEB vs Germany [2010] ECR I-13849

Facts:

o Article 47 was applied by the Court in circumstances where the applicant was
denied legal aid. DEB, a German commercial company, applied forlegal aid in
order to bring an action to establish that the German state had incurred state
liability under Union law. DEB wished to bring an action for damages against the
German state in order to obtain compensation for the damage allegedly caused to
it by Germany’s delay in transposing Directive 98/30/EC concerning common rules
for the internal market in natural gas. DEB was refused legal aid on the ground
that the conditions laid down under the German law for granting such aid to legal
persons were not satisfied. Effectively the national rule prevented a legal person
(i.e. a company) as opposed to a natural from applying for legal aid as they were
forced to make an advanced payment, which natural persons were not obliged to
do. In a reference to the Court, DEB claimed that this rule contravened Article 47
of the Charter.

Held:

o Applying the Charter, in the light of Article 6 ECHR, The Court held that it is not
impossible for legal persons to rely on the provisions of Article 47 of the Charter in
order to dispense themselves from making the advance payment, and that it was
for the national court to ascertain whether this provision in relation to legal aid
constituted a denial of effective access to justice. Thus, in the delicate area of
national procedural rules, the Court, after the coming into force of the Lisbon
Treaty, seems ready to step in when dealing with those national provisions that
could be considered as direct obstacles to access to justice.

Summary

7
c. State Liability

Introduction

 The doctrine of state liability forms part of the package of doctrines (direct effect, indirect
effect and state liability) developed by the European Court with the dual objectives of
o ensuring that Union law prevails and is enforced within the Member States; and
o on the other hand that individuals can obtain their rights under Union law.

 The availability of damages from the state applies to any individual who has suffered loss
as a result of a sufficiently serious breach of Union law. Thus, it overcomes the problems
inherent in the direct effect doctrine where the conditions are not fulfilled and where direct
and indirect effect cannot apply.

Why was the principle of State Liability introduced?

 The ECJ considered a different way of giving maximum possible effect to community law
by introducing a uniform remedy for breach of community law irrespective of whether
legislation has direct effect or not.

 This principle was established in the case of Francovich, Bonifaci v Italy [1991] ECR I-
5357

Facts
o Directive [2008/94/EC] gives protection to employees, allowing them to make
privileged claims against insolvent employers
o Italy failed to implement this directive
o Francovich’s employer became insolvent, owing money (wages) to Francovich and
other employees

Issue
o Could Francovich recover unpaid money?

Decision
o Yes, but from the Italian government, not from his employer

Reasoning
o Directives are not horizontally directly effective, so could not be relied on
o There was no existing law to ‘stretch’ to enable Francovich’s claim, so the doctrine
of indirect effect could not be used.
o As Member States are obliged to implement EU law as required, the wrongdoing
was on the part of the Italian Government, from which Francovich could recover.

Conditions for liability for non – implementation od Directive

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 In Francovich, The ECJ laid down three conditions that must be satisfied to show that
there has been a complete failure to transpose a directive;
 The directive must be intended to confer rights on individuals;
 The content of those rights must be ascertainable from the terms of the
Directive;
 There must be a causal link between the loss suffered and the M/S breach. In
other words, there must be a link between the cause of the loss suffered and
the breach of EU law by the M/S.

Does State Liability also apply to other breaches (of sources) of Union Law?

 Whether a M/S could be liable in damages for breaches of other community law
obligations (such as Treaty Articles) was the issue in Joined cases of Brasserie du
Pecheur SA v Federal Republic of Germany and R v Secretary of State for
Transport, ex p Factortame Ltd (No 2) C-46 and 48/ 93 [1996] ECR I-1029

Facts

In joined references, one involved a German beer purity law challenged on the basis
that it was in breach of [Art 34 TFEU], which prohibits quantitative restrictions on
imports or exports or measures having an equivalent effect. The other involved
quotas under the Merchant Shipping Act 1988, challenged as breaching [Art 49
TFEU], rights of establishment. It also involved a breach of a previous ECJ ruling.
The reference was to clarify the conditions for state liability.

Held

The ECJ held that it was irrelevant that the breaches involved directly effective Treaty
Articles and it was also irrelevant which organ of the Member State was in fact
responsible for the breach.

 The court also redefined the conditions from Francovich to:

 the rule of [EU] law infringed must be intended to confer rights on individuals;
 the breach must be sufficiently serious to justify liability;
 there must be a direct causal link between the breach of the obligation
imposed on the state and the damage actually suffered by the applicant.

 What breach may constitute as ‘suffiently serious’, is considering whether the M/S
has ‘manifestly and gravely ignored the limits on its discretion’.

 It is for the national courts to decide whether this is the case, but the Court listed a
number of factors to be taken into account by the national court. These were:

 the clarity and precision of the rule breached

 the measure of discretion left by that rule to the national or Union authorities

9
  whether the infringement and the damage caused was intentional or
involuntary
 whether any error of law was excusable or inexcusable
 the fact that the position adopted by a Union institution may have contributed
towards the omission
 the adoption or retention of national measures or practices contrary to Union
law.

 It is not necessary for the Commission to have obtained a ruling under Article 263
TFEU from the ECJ that the Member State has breached Union law. If there had been
such a ruling (as had been the case in Francovich) and the Member State persisted
in the breach, that would automatically lead to a finding that the breach was
‘sufficiently serious’:

 Following this ECJ ruling on the preliminary reference, the House of Lords decided in
R v Secretary of State for Transport ex parte Factortame Ltd [1999] 4 All ER 906,
that the breaches of EC law by the UK arising out of provisions in the Merchant
Shipping Act 1998 were sufficiently serious to entitle Factortame Ltd and 96 others to
compensation under the principle of state liability.

Application of State Liability

 In Dillenkofer v Germany [1996] ECR I-4845, the Court held that the non-
implementation of a Directive is always a sufficiently serious breach, so only the
Francovich conditions need to be fulfilled.

 The procedure for bringing an action for damages against the state will be governed by
national rules.

 R v HM Treasury ex parte British Telecommunications plc [1996] ECR I-1631 is an

interesting case concerning the incorrect transposition of a Directive. The breach was held
not to be sufficiently serious because the wording of the EC Directive was unclear, and
several other Member States had also unintentionally misinterpreted it.

 In Haim v Kassenzahnarztliche Vereinigung Nordrhein [2000] ECR I-5123, a public

law body separate from the state was held liable under the principle of state liability.

 In Kobler v Republik Osterreich [2003] ECR I-10239, the ECJ ruled for the first time that
it was possible for the principle of state liability to apply where the alleged infringement
stemmed from a decision of a national court of last instance. The question of liability would
depend on the established criteria for state liability.

 Nevertheless, whether the infringement of Community law was sufficiently serious

depended on consideration of the same factors cited in the Factortame case: whether the
national court had manifestly infringed the applicable law, that is, whether the ‘infringement
was manifest’.
o In deciding what this meant, regard had to be given to the specific nature of the
judicial function and to the legitimate requirements of legal certainty.

10
 o In order to decide whether the infringement was ‘manifest’, the national court
hearing a claim for damages must take account of ‘all the factors which
characterise the situation put before it’. The Court continued that:

… those factors include, in particular, the degree of clarity and precision of the rule
infringed, whether the infringement was intentional, whether the error of law was
excusable or inexcusable, the position taken, where applicable, by a Community institution
and noncompliance by the court in question with its obligation to make a reference for a
preliminary ruling under the third paragraph of Article 234 EC. In any event, an
infringement of Community law will be sufficiently serious where the decision concerned
was made in manifest breach of the case law of the Court in the matter.

o However, rather surprisingly, on the facts presented in the particular case, there
was not a ‘manifest infringement’ of EC law.

Summary

11
 Direct Effect, Indirect Effect and State Liability

Introduction

 Article 288 of the TFEU provides that Regulations are ‘directly applicable in Member
States’. Thus, regulations automatically become a part of national legislation and do not
require any Member State to take any further steps to implement it (Variola SpA v
Amministrazione Italiana delle Fiananze).

 The early view of the Community was that all community legislation should uniformly apply
in all Member States and once made, Member States should not further interfere.

 However, the Treaties are silent on the applicability of treaty article. If the situation was
left at that state, this would have meant that the only way in which individuals could
challenge European law was that, it would have had to be incorporated in to national
legislation or the law came in the form of a regulation.

 The ECJ has played an important role in ensuring that Direct Effect along with supremacy
was developed to ensure that EU law was uniformly applied within the Member States.

Types of ways a citizen can enforce their European Union rights.

 There are 3 types of ways a citizen of a Member State can enforce their European Union
rights.

Indirect Effect Direct Effect State Liability

Activity 1: Distinguish between Direct Effect and Direct Applicability

1. Direct Effect

a. What is Direct Effect (DE)

 DE means that, subject to certain conditions, Union law creates rights and
obligations which individuals may rely on and enforce in their national courts.

1
 This principle was recognized in the case of Case 26/62 van Gend en Loos v
Nederlandse Administratie der Belastingen [1963] ECR.

FACTS:
The claimants, van Gend en Loos, imported chemicals from Western
Germany to the Netherlands where they were asked to pay import taxes at
Dutch customs, the defendants, which they objected to on the grounds that
it ran contrary to the European Economic Community’s prohibition on inter-
State import duties, as per Article 12 of the Treaty of Rome. The defendants
contended that as the claimants were not a natural person but a legal
person, they could not claim such rights.

HELD:
“The Community constitutes a new legal order in international law, for
whose benefit the States have limited their sovereign rights, albeit within
limited fields, and the subjects of which comprise not only the Member
States but also their nationals... according to the spirit the general aspect
and the term of the Treaty, Article 12 should be interpreted in such a sense
as to produce direct effect and to create individual rights which internal
courts should protect”.

Significance:
o Normally the question of the operation of an international treaty in
the domestic legal system is determined by the constitutional law of
the individual country concerned.
o In this case, the ECJ decided that it had jurisdiction to decide the
effect of the Treaty of Rome on a Dutch citizen.
o Nothing is said in the Treaty about the effect of Treaty Articles on
individuals, and it looked as if the only way that individuals could
use EU law to enforce their rights was by leaving it to the
Commission and the Member States to do so. However, in van
Gend en Loos the Court addressed this problem and at one stroke
transformed the legal status of the Treaty from a conventional, if far-
reaching, Treaty governed apparently by the normal rules of
international law, into the foundation of a sui generis ‘new legal
order’ that would operate directly for the benefit of the citizens of
the signatory states.

b. Types of Direct Effect

 Vertical Direct Effect (VDE):

2
  Horizontal Direct Effect (HDE):

c. Development of the criteria laid down by Van Gen den Loos.

 The ECJ, in Van Gen den Loos, held that in order for a EEC treaty article to have
direct effect it if:
 It was clear and precise;
 It was unconditional;
 Its operation did not require a legislative implementing measure on the part
of the state;
 Creates a negative obligation.
“The wording of Article 12 contains a clear and unconditional prohibition which
is not a positive but a negative obligation. This obligation, moreover, is not
qualified by any reservation on the part of states which would make its
implementation conditional upon a positive legislation measure enacted
under national law. They are very nature of this prohibition makes it ideally
adapted to produce direct effects in the legal relationship between Member States
and their subjects.”

 The criteria was subsequently developed by the ECJ in Alfons Luttike GmbH v
Hauptzollamt Saarlouis (1966), which concerned whether a particular treaty
article having a positive obligation could be directly effective:

Held: that the said Article (110) which imposed a positive obligation to abolish taxation
was directly effective and therefore, individuals could rely on this provision before their
national courts from time to time.

3
 Similarly, the requirement that a measure must not be dependent on further action
is not the obstacle that it, at first, appears. This is because, whenever the Treaty
(or other measure) includes a time limit within which such further action should
take place, the Court has held that, once that time limit has expired, the measure
has direct effect (Defrenne v SABENA [1976] ECR 455)

 The central idea, then, is whether a provision is capable of being applied by a

national court (whether it is ‘justiciable’). Even a lack of clarity will not necessarily
prevent direct effect – because the national court can seek clarification from the
Court of Justice through the Article 267 TFEU preliminary reference procedure if
necessary. As a result, direct effect of Treaty provisions has become the norm,
rather than the exception.

d. When discerning whether Union law is directly effective, we must identify the
source of law and the capability of said law to be directly effective.

I. Primary Legislation

a. Treaty articles:

II. Secondary Legislation

a. Regulations:

4
b. Directives:

5
c. Decisions:

d. International Agreements:

6
 2. Indirect Effect

a) What is Indirect Effect?

 A principle of interpretation whereby the courts of the member states
of the EU must interpret national legislation as far as possible in a
manner that is consistent with provisions of EU law even if they do
not have direct effect.

 Article 4(3) of the TEU (as interpreted by the ECJ): National Courts
are under a duty to interpret national law consistently with EU Law,
so far as it is possible to do so, whether or not the Directive has a
direct effect.

 This principle was established in Von Colson v Land Nordhein –

Westfahlen (1984):

Facts

 Two female applicants for the posts as social workers in German

prison complained about sex discrimination.
 The directive was implemented in a manner that the only
compensation that could be received was a minimal travelling cost.
 The directive did not pass the Van Gend en Loos criteria, and
therefore was not directly effective.

Held:

It was the national courts duty to interpret the national law in accordance
with EU Law. However this obligation was extended in so far as the national
courts are given discretion to do so under national law.

 The doctrine is based on the idea that national courts are part of the state and,
consequently, are bound by what is now Article 4(3) TEU (formerly Article 10 EC). That
Article requires Member States ‘pursuant to the principle of sincere cooperation’ to‘take
any appropriate measure … to ensure the fulfilment of their obligations’ under the Treaties.

 The effect of the ruling is to shift the responsibility for giving effect to Directives on to
national courts in situations where their governments have failed to introduce adequate
national implementing measures. The principle means that national courts are under a
duty to interpret national legislation ‘in the light of the wording and purpose’ of Union law.

 In von Colson, there was some national legislation which purported to implement the
Community Directive but which did so inadequately (the amount of compensation
available was very small). As a result, it was initially thought that the duty of harmonious

7
 interpretation (giving indirect effect to the Directive) only applied to national legislation
which had been intended to implement the Directive in question.

 Whether the rule applied to the interpretation of national law more generally was unclear.
The ECJ has since made clear that the duty applies in relation to all national legislation,
whether passed before or after the relevant Union legislation, and whether intended to
implement it or not.

b) Development of Indirect Effect in the UK:

a. Implementing and non implementing legislation

 Implementing legislation: Legislation passed after the deadline to
implement the Directive has expired.

 Non – Implementing legislation: Legislation passed before the deadline to

implement the Directive has expired.

b. The application of Indirect effect for implementing legislation and non

implementing legislation;

 The House of Lords were reluctant to allow indirect effect for non
implemented legislation;Duke v GEC Reliance.

 The House of Lords were however willing to use the purposive approach
for implementing legislation (Lister v Froth Dry Dock and Engineering &
Pickstone v Freemans Plc)

Lister v Forth Dry Dock and Engineering Ltd

Facts

Following financial difficulties, the defendants, Forth Dry Dock, entered

receivership. Forth Dry Dock was sold to a third party company, however
shortly beforehand the company’s receiver fired all of the company’s twelve
employees as they intended to replace them with a group of employees
who were prepared to work for lower salaries. Moreover, the receivers
lacked the funds to pay the fire employees the money that they ought.
Whilst the EC Tuper Regulation 1981 5(3) found that employees dismissed
‘immediately’ prior to a company’s transfer remained entitled to certain
rights, the question was thus whether the employees could be considered
to have been in employment ‘immediately’ before the transfer when they
had been dismissed one hour prior to the transfer.

Issues

In the event of unfair collective dismissal immediately prior to a company’s

transfer, does the duty to compensate transfer to the receiver.

8
Held

Initially, the Court found for the defendants, however on appeal to the
House of Lords, the Court found for the complainants. Rather than taking
a literal approach to statutory interpretation, the Court decided to take a
purposive approach so as to give application to case law authorities from
the European Court of Justice. Lord Oliver noted that the rights provided
under European Community law meant that ‘in the case of an insolvent
transferor [such rights] are largely illusory unless they can be exerted
against the transferee’. Furthermore, European Community law applied to
persons immediately employed before the company’s transfer and those
who ought have been employed had they not been dismissed inequitable.

Pickstone v Freemans PLC (1989)

Facts

The claimant, Ms Pickstone, was an employee of the defendants,

Freemans, where she worked as a warehouse operative and received a
salary equivalent to that of her male counterparts performing the same job.
However, the warehouse checkers, who were male, benefit from a greater
salary than the warehouse operatives, receiving £1.22 per week more. Ms
Pickstone subsequently alleged that the defendants were in breach of the
Equal Pay Act 1970

Issues

Whether an employer is in breach of equal pay legislation where it has

different pay rates for workers completing work of the same value who are
of different genders.

Held

The Court of Appeal determined that Freemans was not in breach however
this was overturned upon appeal by the House of Lords who found for Ms
Pickstone, and deemed that Freemans was in breach of equal pay
legislation. Whilst a literal reading of British legislation would have meant
that Freemans was not breaching equal pay rights as the warehouse
operatives and warehouse checkers were performing different jobs, this
result would mean that Britain was in result of its obligations arising from
European treaties to give force to a directive to legislate and protect equal
pay. Subsequently, the Lords adopted a purposive approach to statutory
interpretation, permitting Ms Pickstone’s claim on the grounds that she was

9
 being paid less than male workers completing work of equal value, despite
that the work per se was not the same.

 However, the ECJ, developed the principle of indirect effect and further widened Von Colson’s
Scope by the case of Marleasing SA v LA Commercial Internacional de Alimentacion SA
(1990):

Facts:
Marleasing SA (the Applicant) brought an application before the Spanish national
courts for an order that the contract establishing "La Comercial" was void and that
the formation of La Comercial should be nullified on the grounds that establishment
"lacked cause, was a sham transaction and was carried out in order to defraud the
creditors of Barviesa (a co-founder of La Comercial)". La Comercial argued that
the action should be dismissed in its entirety on the grounds that article 11 of the
First Council Directive 68/151/EEC of 9 March 1968 on coordination of safeguards
which, for the protection of the interests of members and others, which had not yet
been implemented by Spain, provided an exhaustive list of the cases under which
the nullity of a company may be ordered and that "lack of cause" was not a ground
listed therein.

Issue:
"Is Article 11 of [the] Council Directive 68/151/EEC of 9 March 1968, which has not
been implemented in national law, directly applicable so as to preclude a
declaration of nullity of a public limited liability company on a ground other than
those set out in the said article?

Held:

The ECJ held that the Spanish Courts were under a duty to interpret national law
in a way that gave effect to European law.

“..it should be observed that, as the Court pointed out in 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, 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."

10
 Marleasing also widened the scope of the doctrine by adding onto von Colson - the obligation
is on the Courts regardless of the fact the national provisions were adopted before or after the
Directive. In Marleasing, no national law had been passed at all to comply with the Directive. It
was held that having national legislation passed specifically in the name of the Directive was
not necessary.

 The approach taken by Marleasing by the ECJ was later confirmed in the English Courts:

Web V EMO Cargo (UK) Ltd (1992) 2 All ER 43

Facts:

Held:

11
 Webb v EMO Air Cargo (UK) Ltd [1994] ECR I-3567

Facts:

Held:

 Grimaldi v Fonds des Maladies Professionalles (1989): Indirect effect is not only applicable
to Directives, but can be used with any typw of EU legislation.

c) Limits to the Doctrine of Indirect Effect:

a. National Courts are only required to carry out this duty “so far as possible”,
so if there is no relevant national legislation, or if the relevant national law
is only capable of one interpretation, then this doctrine cannot be used.
 What may constitute “so as far as possible” may be determined by
the national court [Wagner- Miret (1993)]

12
b. The application of the doctrine is subject to general principles of law, such
as legal certainty and non- retroactivity:

Kolpinghuis (1987)

Held:

It stated that the obligation on the national court to construe domestic

legislation in the light of non-implemented directives was limited by
‘principles of certainty and non-retroactivity’, which in the context of this
case meant that the prosecutor could not use the directive to interpret
national law in such a way as to determine or aggravate the individual’s
criminal liability.

c. The doctrine cannot be applied where it would give rise to, or aggravate,
criminal liability:

Criminal Proceedings against Luciano Acaro (1996)

Held:

“However, 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 when 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…the liability in criminal law of
persons.”

(see also Criminal Proceedings against Berlusconi [2005] ECR I-3565)

HOWEVER:
 such a limitation does not appear to exist in relation to the imposition of
civil liabilities on individuals. In Case 456/98 Centrosteel v Adipol
[2000] ECR I-6007, the ECJ said that the duty to interpret national law
in the light of the wording and purpose of Community law applied even
when this would impose a civil liability on private parties. On this point
see also Case C-185/97 Coote v Granada Hospital [1998] ECR I-
5199, and Cases C-240–244/98 Oceano Grupo Editorial v Rocio
Murciano Quintero [2000].

13
 EU HUMAN RIGHTS
Introduction
 The original three EC Treaties contained no provisions on the protection of human rights.

 However, the situation has since changed significantly, with the Court of Justice declaring that
the “general principles of EU law include protection of fundamental rights, such as human rights
and dignity, freedom, democracy, equality, proportionality and the rule of law, all which are
values common to EU member states”.

 Internal and external European action in the field of fundamental rights generally is
encompassed in the following Articles of the Treaty on the European Union (“TEU”);

 Article 6(1): declares that respect for fundamental rights and freedoms stated in
the Charter on the Fundamental Rights constitutes ones of the basic principles
upon which the Union is found.

 Article 6(2): declares that the EU will accede to the European Convention on
Human rights.

 Article 6(3): states that fundamental rights, as guaranteed by the European

Union Convention and as they result from the constitutional traditions common
to the Member States, shall constitute general principles of the Union’s Law.

 Article 7: provides mechanism for sanctioning EU Member States who violate

the principles in Article 6 in a grave and persistent manner

 The Charter of Fundamental Rights defines further the fundamental rights applicable at
Union level.

 The European Fundamental Rights Agency monitors respect for the Union’s core values. In
particular it provides assistance and expertise to Member States and the Union bodies
implementing EU law on fundamental rights.

Development of Human Rights in the EU before the Charter of Fundamental

Rights.
1. When the European Economic Community was founded in 1957, human rights were not at the
forefront of the concerns of the founding fathers of the Communities. The focus on economic
cooperation was clearly reflected in Article 2 of the EEC Treaty, which stated that the
Community’s objective was to promote throughout the Community a harmonious development
of economic activities, a continuous and balanced expansion, an increase in stability, a high
 degree of convergence of economic performance, a high level of employment, sustainable and
non-inflationary growth, a high degree of competitiveness, and so forth.

2. This exclusive focus on economic matters and the resulting lack of interest in human rights
standards was reflected in the early case law of the Court of Justice (CJEU).

3. In cases like Stork, Geitling and Sgarlata the Luxembourg Court refused to consider the
application of human rights standards, since they were not explicitly based on any article of the
Founding Treaties.

4. This approach changed over time with the growing realisation that ever closer economic
cooperation could equally affect human rights standards. Especially in those Member States with
a strong constitutional tradition, there was debate whether such a powerful organisation should
not be bound by certain legal limits.

5. As a result some national constitutional courts reserved the right to declare Community law
inapplicable if they deemed it incompatible with domestic constitutional provisions (Solange).
Such an approach by domestic constitutional courts would undermine the unity and primacy of
Community law.

6. This risk was quickly identified by the Court of Justice and it decided to change its position. In
the Nold vs Commission [1974] ECR 491 judgment, the Court held: ‘As the Court has already
stated, fundamental rights form an integral part of the general principles of law, the observance
of which it ensures.’

7. In Nold, the Court found out there were two sources for the general principles of EU Law;

 The common national constitutional traditions; and

 International human rights agreements.

8. National Constitutional Traditions;

 The Court of Justice will refer to common national constitutional provisions when
developing general principles of EU law. However, it has done so less frequently than in
the case of international human rights law.

 This seemingly has two principal reasons;

o The inherent difficulty of finding common traditions across 27(now 28) Member
States;
o The fear of compromising supremacy of EU law by deferring to national law.

 The reluctance to base a decision solely upon common national constitutional provision
was apparent in the case of Hauer v Land Rheinland – Pflaz [1979] ECR 3727;

o The Court considered the right to make use of one’s property. Here, the applicant
who wish to plant vines on her land, was prevented from doing so by an EU
 Regulation restricting the planting of vines in order to avoid over production of
wine.

o In its decision, the Court made reference to both the ECHR and the specific
constitutional provision of particular national constitutions, concluding that the
right to make use of one’s own property had to be weighed against community
interest.

 In case AM&S Europe Ltd v Commission [1982] ECR 1575, the attempt by the court to
consider a common national tradition as a source of law was not accepted by all Member
States;
o Here the Court partly based its findings of a general principle of lawyer – client
confidentiality on a comparative survey of the laws of the Member State;

o Some States (such as France) saw the Court’s findings on the basis of it’s survey
on foisting “on the community what was no more than a domestic rule of English
law”.

o Nonetheless, the decision of upholding the principle remained.

 The Court is prepared to recognize a particular right on the basis of common traditions
in several (although not necessarily all) Member States. Thus, there is no guarantee that
the interpretation of a right based on national constitutions will be accepted by all
Member States.

 These difficulties have been partly recognized in case 36/02 Omega [2004], whereby the
Court of Justice stated that it was immaterial whether fundamental rights had its source
in a national legislation or the Union legal order as a general principle of law, since EU
law would protect such right, whatever the Source is.

9. International Human Rights Agreements;

 The Court of Justice constantly treated the ECHR as a special source of inspiration.
 On occasion the Court of Justice also referred to other international or regional
agreements such as;
o The European Social Charter – Defrenne v Sabena (1978);
o The International Covenant on Civil and Political Rights – ACME Industry v
Council (1999);
o International Convention on the Rights of a Child – European Parliament v
Council (2006).

10. The Application of Fundamental rights in the EU

A. Challenges to EU Legislation
 Although numerous challenges have been brought before the Court alleging that EU
legislation violates fundamental principles of EU law, the number of cases where the
Court has annulled legislation is relatively small.

Property rights;
 the Court has followed reasoning given in Nold and Hauer, whereby
such rights could be justified if the restrictions concerned intended
to protect other legitimate interests and are proportionate in
achieving that end.

 Bosphorus v Minister of Transport [1996] ECR I-3953, the Court had

to consider the legality of an EU Regulation which implemented UN
– Mandated sanctions against former Yugoslavia owned aircraft was
impounded. According to Court the fundamental interest of the
international community was sufficient to justify such restrictions of
property or trade rights.

The above reasoning (Bosphorous) was later confirmed in Kadi v Council and
Commission [2005] ECR II-3649 and Yusuf and Al Barakat Int’l Found v
Council and Commision [2005]ECR II-3533 which involved the freezing of
assets by the EU Regulation implementing a U N Security Council resolution.

in Kadi v Council and Commission [2005] ECR II-3649,;

 the Court held that the obligations imposed by an international

agreement cannot prejudice the general principle that EU measures
must respect fundamental rights. Consequently, the Court annulled
the EU regulation on the grounds that it infringed a number of EU
fundamental rights, including the right to defence and the right to
effective judicial protection.

 This case once again resurfaced in 2013 following Kadi’s re-listing on

the UN Security Council’s sanctions list. In this instance, the Court
found that the majority of the reasons provided by the UN (via the
EU) justifying their decision to re-list Kadi were sufficiently detailed
and specific to allow the effective exercise of the rights of defence
and of judicial review. Nonetheless, the restrictive EU measures
were annulled on the basis that the reasons provided had not been
substantiated by evidence

 Competition Law;

 often been the subject of challenges on the grounds of their violation

of fundamental principles. These cases have related to, inter alia:
 a. the rights of the defence (see Case C-397/03 P Archer
Daniels Midland v Commission [2006] ECR I-4429);

b. the right to a fair hearing (see Case C-185/95 P

Baustahlgewebe v Commission [1998] ECR I-8417); and

c. the principle of non-retroactivity (see Case C-189-213/02 P

Dansk Rorindustri v Commission [2005] ECR I-5425).

B. Challenges to Member State Legislation

 According to developed case law, Member States are bond by general principles of
EU law in number of circumstances;

A. When the Member State is applying national provisions of EU legislation

which are based on protection of human rights;

 in Case 36/75 Rutili [1975] ECR 1975 the Court of Justice said that
French measures restricting Mr Rutili’s movement in France had to
be examined as to their compliance with Directive 64/221 which sets
out the limitations on the right of free movement of workers under
Article 45(3) TFEU and also in the light of provisions of the ECHR.

 Johnston [1986] ECR 1659 and C-465/00, 138 and 139/01

Osterreichischer Rundfunk [2003] ECR I-4989 the Court recognized
that the Convention rights to an effective remedy and to privacy
respectively were reflected in EU legislation and had to be
interpreted accordingly by the Member State concerned.)

B. When the Member State is acting as an ‘agent’ of the EU by implementing

or enforcing EU measures;
 when interpreting and implementing EU law, Member States are
under an obligation to act and legislate in a way that respects
Convention rights, even if such rights are not explicitly provided for
under EU law. For example, in Case 5/88 Wachauf [1989] ECR 1263,
national authorities were required to ‘ensure as far as possible’ that
human rights are protected. Here, the Court had to consider the
obligation of a Member State to provide compensation under an EU
Regulation to a farmer who had discontinued milk production. The
Court felt that to deprive the farmer of compensation in return for
the fruits of his labour would be incompatible with his fundamental
rights. Member States should be bound, when implementing EU
law, by all of the same general principles and fundamental rights as
the Union.
 In C-101/01 Lindqvist [2003] ECR I-12971 (paras 84–90) and C-
540/03 European Parliament v Council [2006] ECR I-5769 (paras 15–
23) in which the Court ruled on whether the EU legislation in question
violated fundamental rights and general principles of EU law by
providing Member States discretion in terms of their
implementation measures.

 Lindqvist Judgement;

 It is true that, in many respects, the Member States have a

margin for manœuvre in implementing Directive 95/46.
However, there is nothing to suggest that the regime it
provides for lacks predictability or that its provisions are, as
such, contrary to the general principles of Community law and,
in particular, to the fundamental rights protected by the
Community legal order.

 Thus, it is, rather, at the stage of the application at national

level of the legislation implementing Directive 95/46 in
individual cases that a balance must be found between the
rights and interests involved.

 In that context, fundamental rights have a particular

importance, as demonstrated by the case in the main
proceedings, in which, in essence, Mrs Lindqvist's freedom of
expression in her work preparing people for Communion and
her freedom to carry out activities contributing to religious life
have to be weighed against the protection of the private life of
the individuals about whom Mrs Lindqvist has placed data on
her internet site.

 Consequently, it is for the authorities and courts of the Member

States not only to interpret their national law in a manner
 consistent with Directive 95/46 but also to make sure they do
not rely on an interpretation of it which would be in conflict
with the fundamental rights protected by the Community legal
order or with the other general principles of Community law,
such as inter alia the principle of proportionality
 Whilst it is true that the protection of private life requires the
application of effective sanctions against people processing
personal data in ways inconsistent with Directive 95/46, such
sanctions must always respect the principle of proportionality.
That is so a fortiori since the scope of Directive 95/46 is very
wide and the obligations of those who process personal data
are many and significant.

 It is for the referring court to take account, in accordance with

the principle of proportionality, of all the circumstances of the
case before it, in particular the duration of the breach of the
rules implementing Directive 95/46 and the importance, for the
persons concerned, of the protection of the data disclosed.

 The answer to the sixth question must therefore be that the

provisions of Directive 95/46 do not, in themselves, bring about
a restriction which conflicts with the general principles of
freedom of expression or other freedoms and rights, which are
applicable within the European Union and are enshrined inter
alia in Article 10 of the ECHR. It is for the national authorities
and courts responsible for applying the national legislation
implementing Directive 95/46 to ensure a fair balance between
the rights and interests in question, including the fundamental
rights protected by the Community legal order.

 European Parliament v Council [2006] ECR I-5769

C. When Member States derogate from EU law on the grounds of, for
example public policy;
  Even in these cases, the Court has held that it has a duty to ensure
that the Member State, when derogating, has adequately respected
EU fundamental rights and general principles (see Case C-260/89
Elliniki Radiophonia Tileorassi AS v Dimotiki Etairia Pliroforissis
[1991] ECR I-2925, paras 42–45).

 This encroachment of EU law into the law of the Member States

extends even to those cases where the Member State has derogated
on grounds of public interest – the justification developed by EU case
law for non-discriminatory measures (see Case C-368/95
Familiapress [1997] ECR I-3689).

 On one hand, such scrutiny by the Court has meant that there has
been a stream of cases in which a Member State attempts to rely on
a public policy or public interest derogation to expel, or refuse a
benefit to, a migrant covered by EU law.

 In such cases the Member State has been required by the

Court to take adequate account of the impact of the
proposed action on the right to family life, as protected
under Article 8 of the Convention ;

o Case C-60/00 Carpenter v Home Secretary [2002]

ECR I-7091, para.72, the Court concluded that Union
Law must be interpreted in light of the general
principles. The court further concluded that Union
law therefore must be interpreted by reference to
EU law.

o In this case Article 8 of the ECHR was used to

reformulate Union law on services.

 On the other hand, this scrutiny has also allowed the Court to uphold
derogations made on grounds of the protection of human rights. For
example in Omega (above), whereby the Court found that the
restriction of the marketing of laser games in Germany could be
justified on the grounds of the protection of human rights.

D. When acting outside the scope of EU law, Member States are not bound
by EU fundamental principles;
 Lastly, the Court has confirmed that, when acting outside the scope
of EU law, Member States are not bound by EU fundamental rights
and principles.

 In Cases 60 and 61/84 Cinetheque [1985] ECR 2605, the Court of

Justice held that it had no power to examine the compatibility of the
ECHR with national law which concerns an area which falls within the
jurisdiction of the national legislator (see also Case 12/86 Demirel
[1987] ECR 3719).

 Case C-168/91 Konstantinidis v Stadt Altensteig [1993] ECR I-1191

concerned a claim by a Greek national that the way in which his
name had been transcribed from Greek into German constituted
discrimination. Advocate General Jacobs concluded that there was
discrimination which could not be objectively justified. He reasoned
that there was a fundamental right for any citizen of the Union to
move freely anywhere in the Union and to be treated ‘in accordance
with a common code of fundamental values’ which included the right
to have the correct transcription of the spelling of his name.
However, the Court of Justice did not follow the AG’s opinion and
instead held that the transcription rules were only to be regarded as
incompatible with Article 49 TFEU on establishment in so far as its
application would cause a Greek national such a degree of
inconvenience as to interfere with his freedom of establishment.
This would only occur if the transcription would expose him to a risk
of confusion with other persons.

 Case C-299/95 Kremzow v Austria [1997] ECR I-2629 where the

Court found that a purely hypothetical prospect of exercising the
right to the free movement of persons does not establish a sufficient
connection with EU law to justify the application of Union general
principles.

 Despite this, as was evident in the case of Carpenter (above), what

falls inside and what falls outside of EU law is not certain. See also
Cases C-144/95 Maurin [1996] ECR I-2909 and C-276/01 Steffensen
[2003] ECR I-3735 which demonstrate the difference in treatment
depending on whether the measure concerned falls inside or outside
the scope of EU law.
The Charter of Fundamental Rights
A. The emergence of the Charter

 The original Community Treaties contained no catalogue of basic rights which could constitute
a check on the exercise of power by the EU institutions. Recognising this, the Union set up a study
group in 1999 with the intention of cataloguing the various fundamental rights spread around
the EU Treaties, the case law of the Court of Justice, the ECHR and the Declaration on
Fundamental Rights of the European Parliament 1989. As such, the aim was not only to collect
together existing rights, but also to codify new rights.

 The result was the Charter, which sets out all the rights which must be upheld within the Union,
categorising them under the subheadings of Dignity, Freedoms, Equality, Solidarity, Citizens’
Rights, Justice and General Provisions of Interpretation and Application.

 The Charter was solemnly proclaimed at the Nice European Council on 7 December 2000. At that
time, it did not have any binding legal effect. However, the Treaty of Lisbon saw the
incorporation of the Charter into primary European law and, since then, it has been binding on
EU institutions and national governments.

 Article 6 TEU states that ‘the Union recognises the rights, freedoms and principles set out in the
Charter of Fundamental Rights of the European Union of 7th December 2000 ... which shall have
the same legal value as the Treaties’. The United Kingdom and Poland both considered it
necessary to adopt Protocol No.30 which provides an ‘opt-out’ from the Charter for both
countries. Article 1 of the Protocol declares that;

“the Charter does not extend the ability of the Court of Justice of the European Union, or any
Court or tribunal of Poland or of the United Kingdom, to find that the laws, regulations or
administrative provisions, practices or action of Poland or of the United Kingdom are
inconsistent with the fundamental rights, freedoms and principles that it reaffirms.”

 This Protocol carries more political than legal weight, as the national courts of Member States
were already bound by rights identified by the Court of Justice, national traditions and the
European Court of Human Rights. In November 2009 the Czech Republic was added to the
Protocol.
 Following the Lisbon Treaty, the Charter now has primary legal status within the Union.
However, for the rights to be actionable a Union element must still be invoked. Thus, purely
internal situations do not fall within the ambit of the Charter, nor do fundamental rights issues
which arise in areas over which the EU has no competence (see, for example, Case C-27/11 Vinkov
[2012] 3 CMLR 22).

 The Court of Justice has now ruled on the exact scope of the Charter. Article 51 states that
the Charter is applicable to the institutions of the EU and the Member States when
implementing EU Law.

 The expression ‘Member states when implementing EU law’ was the object of much
disagreement among the drafters of the Charter. Its wording reflects the attempts made by
 Member States to limit the scope of the Charter mainly to the mere implementation of
Directives.

 In Case C-617/10 Fransson [2013] 2 CMLR 46 the Court clarified instead that;

“the fundamental rights guaranteed in the legal order of the European Union are
applicable in all situations governed by European Union law, but not outside such
situations… Since the fundamental rights guaranteed by the Charter must therefore be
complied with where national legislation falls within the scope of European Union law,
situations cannot exist which are covered in that way by European Union law without
those fundamental rights being applicable. The applicability of European Union la entails
applicability of the fundamental rights guaranteed by the Charter.”

 In conclusion it could be argued that the Charter is now a benchmark for the legality of both
EU law and national law when this falls within the (very wide) scope of EU law.

 The Court has, however, recently provided some guidance on the scope of application of Article
51 of the Charter. In Case C-206/13 Cruciano Siragusa v Regione Sicilia - Soprintendenza Beni
Culturali e Ambientali di Palermo EU:C:2014:126

o the Court held that a national measure will be considered as implementing EU law when
‘a certain degree of connection’ is established and where that link with EU law ‘is above
and beyond the matters covered being closely related or one of those matters having an
indirect impact on the other’.
o Moreover, the Court reminded that a number of elements must be taken into account
to establish whether national legislation ‘involves the implementation of Article 51 of the
Charter’, namely
 ‘the legislation is intended to implement a provision of EU law;
 the nature of that legislation and whether it pursues objectives other than those
covered by EU law, even if it is capable of indirectly affecting EU law; and
 also whether there are specific rules of EU law on the matter or capable of
affecting it.’

 As for the relationship between the Charter and other sources of human rights protection,
Article 53 of the Charter makes it clear that nothing in the Charter can be interpreted so as to
lower existing protection of rights under EU law, the Member States’ constitutions or
international law including the ECHR.
o Case C-399/11 Melloni [2013] 2 CMLR 43 deals with a possible conflict between the
fundamental rights guaranteed by the Spanish Constitution and the European Arrest
Warrant rules.
o The European Arrest Warrant is a uniform system of extradition between Member States
of convicted persons or suspects for the purpose of enforcing judgments or of conducting
prosecutions.
o In the Melloni judgment the question was whether a Member State can make the
surrender of a person convicted in absentia conditional upon the conviction being open
 to review in the issuing Member State, in order to avoid an adverse effect on the right to
a fair trial and the rights of the defence guaranteed by its Constitution.
o The Court of Justice in interpreting Article 53 of the Charter ruled that although national
authorities and courts remain free to apply national standards of protection of
fundamental rights, the level of protection provided for by the Charter and the primacy,
unity and effectiveness of EU law cannot be compromised.
o The Court robustly added that casting doubt on the uniformity of the standard of
protection of fundamental rights as defined in the European Arrest Warrant decision
would undermine the principles of mutual trust and recognition which that decision
purports to uphold and would, therefore, compromise its efficacy.

B. The application of Charter rights by the Court of Justice

 Since the coming into force of the Lisbon Treaty, the number of judgments in which the Court
has cited or made reference to the Charter has increased from under 10 rulings in 2009 to almost
90 in 2012.

 One example can be seen in the Court’s judgment in C-555/07 Kucukdeveci [2010] ECR I-365 with
regard to age discrimination.
o Here, the Court referred specifically to Article 21(1) of the Charter which prohibits
discrimination on grounds of (inter alia) age.

 Later, in Joined Cases C-411/10 and C-493/10 NS, the Court was asked whether Member States
can transfer asylum seekers to other Member States where there is a risk of a serious
infringement of their rights.
o For that purpose, the Court ruled on the interpretation to be given to Articles 1, 4, 18 and
47 of the Charter. Specifically, it stated that Article 4 should be interpreted as meaning
that the Member States may not transfer an asylum seeker to the Member State where
they first entered the EU when they are aware of systemic deficiencies in the asylum
procedure and in the reception conditions. This was because to return an asylum seeker
to such an environment would result in them facing a real risk of being subjected to
inhuman and degrading treatment, as prohibited by Article 4 of the Charter.

 The Court has also upheld the fundamental right of data protection by invalidating part of an EU
measure which required the publication of the names of recipients of funds from the European
Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development.

o see Joined Cases C-92/09 and C-93/09 Volker und Markus Schecke [2010] ECR I-11063).
 Furthermore, in Case C-70/10 Scarlet v SABAM [2010] ECR I-11959, the Court declared that
obliging an internet service provider to install a filtering system in order to prevent the
infringement of intellectual property rights would violate the right of the provider’s customers to
the protection of their personal data. This was because such a filtering system would involve a
systematic analysis of all content and the collection and identification of users’ IP addresses.

 In Case C-578/08 Chakroun [2010] ECR I-1839, the Court interpreted the provisions of the EU
Family Reunification Directive in the light of fundamental rights, in particular the right to respect
for family life. In view of this interpretation, the Court found that national legislation which
imposes certain requirements on the amount of financial resources available to third-country
nationals who wish to obtain a residence permit for their spouse was prohibited under the
Directive.

 The right to an effective remedy is one of the most quoted rights in the case law of the Court
of Justice

o . In Case C-279/09 DEB Deutsche Energiehandels- und Beratungsgesellschaft [2010]

ECR I-13849, the Court had to consider whether national legislation refusing legal aid to
persons in the absence of a ‘public interest’ violated the right to an effective remedy.

o The Court held that the principle in Article 47 of the Charter must be interpreted as
meaning that it is not impossible for legal persons to rely on that principle and that aid
granted pursuant to that principle may cover, inter alia, the costs of legal advice or
representation.

 The Court has not only considered Member State measures when applying the rights
protected in the Charter. In fact, the Court has also ruled on how the EU institutions must
take into account fundamental rights in the Charter when acting.

o For instance, the Court found that when the legislator decides to delegate powers to the
Council or the Commission, the Charter must be taken into account. For this reason, the
Court annulled a Council decision on surveillance of the external EU sea borders since the
measure was likely to affect personal freedoms and fundamental rights to such an extent
that the involvement of the EU legislature was required.
o Case C-355/10 European Parliament v Council [2013] 1 CMLR 1
o Similarly, the Court has annulled the notices of several open competitions to become a
civil servant of the EU on the basis that they have only been published in the three official
languages, thereby violating the non-discrimination prohibition in Article 21 of the
Charter (C-566/10 P Italian Republic v Commission [2013] 2 CMLR 5).
o However, one of the most important recent judgments is C-362/14 Maximillian Schrems
v Data Protection Commissioner.

Facts
 Mr Schrems, an Austrian national, lodged a complaint with the Irish Supervisory
Authority (the Data Protection Commissioner) stating that the laws and
practices of the United States do not offer adequate protection from surveillance
by public authorities of the data transferred to it. The complaint was rejected on
the basis that under the ‘Safe Harbour Scheme’ the United States ensured a
sufficient level of protection of all personal data transferred to it. The applicant
subsequently brought the case before the High Court of Ireland.

 In response to a preliminary ruling asking whether the decision of the

Commission (the Safe Harbour Decision) had the effect of preventing a national
supervisory authority of investigating such a complaint, the ECJ held that the
decision of the Commission ‘cannot eliminate or even reduce the powers
available to the national supervisory authorities’ under the Charter or the
directive. The Court stressed the role of national supervisory bodies of protecting
personal data as guaranteed under the Charter.

 The Court also stressed that it had the sole competence to determine whether
or not a Commission decision is valid. The Court then went on to decide whether
the Safe Harbour Decision was valid.

It held that:

1. the US Safe Harbour Scheme allowed for interference, by US public authorities, with
the fundamental rights of EU nationals, particularly in the absence of any rules limiting
such interference, and in the absence of any effective legal protection against such
interference.
 2. United States authorities were able to access and process personal data received from
EU Member States in a way which went beyond what was proportionate and necessary
for the purposes of protecting national security.

3. . such legislation which permits unlimited access to electronic communications must be

regarded as ‘compromising the essence of the fundamental right to respect for family
life’.

4.such legislation which does not provide for any access to effective legal remedies, or
access to the information directly relating to the individual, or a means of obtaining
rectification or erasure of such data ‘compromises the essence of the fundamental right
to judicial protection’ which is an inherent aspect of the rule of law.

 The consequence of this judgment is that the Commission’s Safe Harbour Decision is invalid, and
that the Irish Supervisory Authority was under an obligation to examine Mr Schrems’ complaint
with due diligence and to decide whether, pursuant to the directive, the transfer of data to the
United States should be suspended on the basis that the United States does not afford a sufficient
level of protection of personal data.

 C-203/15 Tele2 Sverige ECLI:EU:C:2016:970

 The Court considered the fundamental rights to private life and data protection in the
joined Cases C-203/15 Tele2 Sverige AB v Post-och telestyrelsen and C-698/15 Secretary
of State for the Home Department v Tom Watson and others.

 Upholding its decision in C-293/12 and C-594/12 Digital Rights Ireland and Seitlinger and
others, it held that Members States may not impose a general obligation to retain data
on providers of electronic communications services.

 The Court confirmed that the national measures in question fall within scope of EU law.

 It further stated that EU law precludes national legislation that imposes a general and
indiscriminate retention of traffic data and location data, as the retention of such data
constitutes a serious interference and therefore only the objective of fighting serious
crime is capable of justifying such measures.

 The Court noted that a Member State may only adopt legislation as a preventive
measure, and strictly for the targeted retention of that data and solely for the purpose
of fighting serious crime. Additionally, access to retained data must be subject to
safeguards provided for in the relevant legislation, including prior independent review.

 The Court has also recognised the following fundamental rights in the Charter.

 Article 1: The right to human dignity (see Cases C-34/10 Brustle v Greenpeace [2011]
ECR I-9821 which relate to the patenting of human embryos through patented
 cloning; and C-179/11 Comite inter mouvements aupres des evacues (CIMADE) v
Ministre de l’Interieur [2013] 1 WLR 333 which concerned the obligation on Member
States to guarantee minimum conditions for the reception of asylum seekers).

 Articles 15 and 16: the freedom to choose an occupation and the freedom to
conduct a business (see Case C-544/10 Deutsches Weintor v Land Rheinland-Pfalz
which discussed the compatibility of an EU regulation on health claims made on
foods with these articles of the Charter).

 Article 18: The right to asylum (see Case C-175/08 Hasan [2010] ECR I-1493).

 Article 24: The rights of the child (see Case C-403/09 PPU Jasna Deticek v Maurizio
Sgueglia [2009] ECR I-12193 and Case C-491/10 Aguire Zarraga [2010] ECR I-14247).

 Article 28: The right to strike (see Case C-341/05 Laval [2007] ECR I-11767).

 Article 34: The right to social and housing assistance (see Case C-571/10 Kamberaj
[2012] 2 CMLR 43 which concerned a national measure denying long-term resident
third country nationals the right to housing benefits).

 Article 42: The right to access to documents (see Cases C-506/08 P Kingdom of
Sweden v Commission and My Travel Group [2011] ECR I-6237; C-28/08 P Commission
v The Bavarian Lager Co Ltd [2010] ECR I-6055; C-139/07 P Commission v Technische
Glaswerke Ilmenau GmbH [2010] ECR I-5885; and Joined Cases C-514/07 P, C-528/07
P and C-532/07 P Commission/Association de la Presse international [2010] ECR I-
8533).

The Relationship between EU fundamental Rights and the ECHR

 Through amendments, the Treaties, included greater reference to human rights

standards. The first time that human rights were explicitly referred to was in the
Maastricht TEU, with the introduction to Article 6.

 Before Article 6 was included, the Union and its institutions were not directly bound by
the ECHR as such, still less by the case-law of the European Court of Human Rights.
However, Article 6 § 3 of the Treaty on European Union referred to the ECHR as part of
the general principles of Community law.

 This was reflected in the case-law of the Community’s Courts, the European Court of
Justice (ECJ) and the Court of First Instance (CFI). They regularly referred to the ECHR
and the Strasbourg case-law in their judgments but applied them indirectly, as part of
the general principles of the Union’s law.
  The situation at that time was that the rights enshrined in the ECHR are not legally
binding on the EU and its institutions (Commission, Council, European Parliament, Court
of Justice etc.). However, these rights do apply to the EU Member States, even when the
latter are applying or implementing EU law.

 This created an imbalance which can lead to uncertainty and confusion about who,
ultimately, is responsible for any breaches of ECHR rights.

 Until the Lisbon Treaty, the European Union did not have the necessary competence to
become a Party (accede) to the ECHR. It has since changed with the entry into force of
the Lisbon Treaty, on 1 December 2009. The Lisbon Treaty provides such competence
and also commits the Union to accede to the ECHR.

The application of the ECHR by the Court of Justice

o As an international human rights measure, the EU uses the ECHR as a source of

inspiration when interpreting fundamental principles in EU law. This was first
recognised in Case C-4/73 Nold v Commission [1974] ECR 491.

o In Case C 36/75 Rutili v Minister for the Interior [1975] ECR 1219, the Court held
that various rights invoked by the applicant and contained in express provisions
of Union secondary legislation were specific manifestations of more general
principles enshrined in the ECHR.

o . Further references to specific provisions of the ECHR were made by the Court
in Case 222/84 Johnston v Chief Constable of the RUC [1986] ECR 1651, where
the Court said that the requirement of judicial control reflected a general
principle of law common to the Member States as laid down in Articles 6 and 13
of the ECHR. As such, Article 6 of the Equal Treatment Directive 76/207 had to
be interpreted ‘in the light of the general principle’.

o The same goes for sex discrimination (see Cases C-13/94 P v S and Cornwall
County Council [1996] ECR I-2143 and C-185/97 Coote v Granada Hospitality
[1998] ECR I-5199) and for data-protection and privacy (see Cases C-465/00,
138 and 139/01 Rechnungshof v Osterreichischer Rundfunk [2003] ECR I-
12489). The Court has also, on several occasions, referred to the ‘special
significance’ of the Convention to EU law (for examples of this see Cases C-
260/89 Elliniki Radiophonia Tileorassi AE v Dimotiki Etairia Pliroforissis [1991]
ECR I-2925 and C-299/95 Kremzow v Austria [1997] ECR I-2629).

o The EU has, on some occasions, gone further than the Convention when
recognizing rights in EU law. For example, in Case 155/79 AM&S Europe Ltd v
 Commission [1982] ECR 1575, the Court found that the right to legal privilege
(i.e. lawyer-client confidentiality) is protected under EU law, despite not being so
protected under the ECHR.

o In the field of competition law, the Commission’s powers are broad and include
the right to authorise searches of premises and to impose severe financial
penalties.

o Affected parties have therefore called upon the Court to limit the exercise of the
Commission’s powers by reference to fundamental legal principles. In the Joined
Cases 46/87 and 227/88 Hoechst AG v Commission [1989] ECR 2859, the
applicant invoked various human rights principles, such as that protected under
Article 8 of the ECHR, but argued their application to their business premises.
The Court found that there had been no such breach by the Commission. This
ruling was criticised for being incompatible with rulings of the ECtHR such as that
in Case A 1251-B Niemietz v Germany (1993) 16 EHRR 97, where it was
explicitly stated that Article 8 of the ECHR extends to encompass business
premises. This ruling was later reflected in the Court of Justice’s ruling in Case C-
94/00 Roquette Freres [2002] ECR I-9011.

o A similar approach was taken by the Court in relation to Article 6(1) of the ECHR
(see Cases 374/87 Orkem [1989] ECR 3283, Funke v France (1993) 16 EHRR 297
and C-199/92 P Huls v Commission [1999] ECR I-4287).

The EU’s accession to the ECHR

 Discussed since the late 1970s, the accession of the EU to the ECHR became a legal obligation
under Article 6(2) of the Treaty of Lisbon. The legal basis for the accession of the EU is provided
by Article 59(2) ECHR, as amended by Protocol 14.

 Whereas all EU Member States are also parties to the ECHR, the EU itself is currently not. Even
though the EU is founded on the respect for fundamental rights, the ECHR and its judicial
mechanism do not formally apply to EU acts.

 Despite this, all EU Member States, as parties to the Convention, have an obligation to respect
the ECHR even when they are applying or implementing EU law. This divergence may be rectified
by the EU becoming a party to the Convention.

 Accession will make the ECtHR the court of last instance regarding matters of human rights in
the EU, a fundamental shift from the current constitutional setup.

 However, following Case C-84/95 Bosphorus v Minister for Transport [1996] ECR I-3953, this
accession may be the only way to close a legal loophole that exempts EU Member States from
liability under the ECHR when implementing EU law.

o Bosphorus concerned an Irish action to impound a Yugoslav plane under EU Regulation

990/93.
 o The interpretation and application of the Regulation was contested in the light of Article
1 of the First Protocol of the ECHR which sets out a right to ‘peaceful enjoyment of [one’s]
possessions’.
o In response to a preliminary reference, the Court of Justice did not consider that the Irish
actions had been disproportionate. Subsequently, the Turkish lessees of the plane
brought an action before the ECtHR, in which the Court held that Member States of the
EU are absolved from responsibility under the ECHR when they act in compliance with
EU law.

o The ECtHR justified this approach by finding that ‘[the EU] is considered to protect
fundamental rights ... in a manner which can be considered at least equivalent to that for
which the Convention provides’.

o The EU’s accession will therefore strengthen the protection of human rights in Europe,
by submitting the Union’s legal system to independent external control. It will also close
gaps in legal protection by giving European citizens the same protection vis-à-vis acts of
the EU as they presently enjoy from the Member States.

 Official talks on the accession started on 7 July 2010 and, on 5 April 2013, a draft accession
agreement was published. In December 2014, Opinion 2/13 assessed the question: ‘Is the
draft agreement providing for the Protection of Human Rights and Fundamental Freedoms
compatible with the Treaties?’

o After ruling that the case was admissible and making some preliminary points, such as
the sui generis nature of the EU (as opposed to its being a state), and affirming the
primacy of direct effect and EU law, the Court went on to rule that the draft agreement
was incompatible with EU law;

 It gave five reasons for its decision, among which are the following:
1. The draft agreement did not take account of the specific characteristics and the
autonomy of EU law in three respects.
2. It violated Article 344 TFEU which gives the Court of Justice a monopoly on settling
inter-state disputes concerning EU law between Member States.
3. The co-respondent system envisaged in the draft agreement proved incompatible
with EU law.
4. According to this system both the EU and a Member State could be parties to an
ECHR case. This was considered problematic because it would give the ECtHR too
much scope to interpret EU law and because it would give the ECtHR the power to
allocate responsibility for breach of the Convention between the EU and its Member
States, which goes against the idea that only the CJEU can rule on EU law.

 The consequence of this decision is that EU accession to the ECHR cannot be carried through on
the basis of the current draft treaty. The agreement on the accession of the EU to the ECHR is
incompatible with Article 6(2) or Protocol No.8 of the TEU.

 The Court passed this judgment despite the submissions given by the Commission, the Council,
the European Parliament and the majority of its Member States. In its opinion, however, the
Court did provide some amendments that would have to be carried out before the EU could
 accede to the ECHR while still being in compliance with EU law. Until these amendments are
adhered to, it is unlikely the court will find any agreement regarding the accession being
compatible with EU law.

RECENT DEVELOPMENT

There is an additional development regarding the application of the Charter to private parties. Whilst
Directives can have vertical but generally not horizontal direct effect, a question as to whether the
Charter could apply horizontally remained until the recent decision in joined cases C-569/16 and C-570/16
Bauer and Brossonn ECLI:EU:C:2018:871 Judgment of 6 November 2018. The Court of Justice held that
the Charter is horizontally applicable in principle and Article 51 (regarding its scope of application) does
not preclude such a finding. Therefore, all provisions of the Charter are applicable in all situations
governed by EU law and Member State laws must, as far as possible, be interpreted in conformity with
those rights. Where an interpretation of national law through consistent interpretation is impossible, and
the right has a mandatory nature that determines the obligations imposed in a sufficiently clear manner,
the right can be invoked in both public and private disputes, and the Member State must ensure that a
remedy is offered within that dispute. Otherwise, if it cannot, state liability in damages may be claimed.
 Exit from the European Union

1. When did the British public vote to leave the European Union?
 In June 2016

2. What was the immediate consequence UK Government had to face?

 The UK government has to navigate an unprecedented withdrawal from a union
that has formed a part of British legal machinery for the past 43 years.
 They also consider the economic, political and legal landscape when Article 50 of
the Treaty on the European Union (TEU) is triggered.

3. What is Article 50 of the TEU?

 Article 50 sets out the procedure by which a Member State (MS) can withdraw
from the European Union.
 It sets out procedural rules that the particular MS must follow, however it does
not provide for the substantive conditions of the withdrawal.
 The three essential procedural steps are as follow

Step One : the Notification of withdrawal (Notice)

Step Two : the negotiation of witdrawal agreement

Step Three: either; (a) conclusion of such agreement; or

(b) automatic exit of the withdrawing MS.

 Article 50 of the TEU states that “Any Member State may decide to withdraw
from the Union in accordance with its own constitutional requirements” and it
should serve a notice of that intention, and treaties which govern the EU, “shall
cease to apply”.
 Article 50 further sets down a maximum two year process for exit after
notification.
 Until the BREXIT, no MS has ever withdrawn from the EU.

4. What was the principal issue that the UK Government faced in relation to Article 50 of
the TEU?
  The principal issue was whether such notice can, under UK’s constitutional
arrangements, lawfully be given by Government ministers without the prior
authorization by an act of Parliament.
 Other additional issues raised was, whether the terms on which powers have
been statutorily devolved require consultation with or the agreement of the
devolved legislatures before Notice is served, or otherwise operate to restrict
the Government’s power to do so (“Devolution Issues”).

 This question was answered in the case of Miller V Secretary of State for Exiting
the European Union [2016].

Miller V Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin)
Facts;

 The UK entered the European Economic Community – which later became the European
Union (‘EU’) – in 1973.
 European law took effect through the European Communities Act 1972 (‘1972 Act).
 In 2015, a referendum under the auspices of the European Union Referendum Act
2015 produced a majority in favour of leaving the EU.
 The issue for the court was what legal steps needed to be taken to initiate the process of
leaving. The core question was whether Government ministers could give formal notice
without a new Act of Parliament.
 The court expressly stated that the case had nothing to do with any of the political issues
surrounding withdrawal from the EU.
 Also raised in the case was the impact on the devolved administrations of Wales, Scotland
and Northern Ireland. The ‘devolution issues’ raise the question of whether consultation
or agreement of the devolved institutions would be necessary before notice to leave the
EU could lawfully be given.
 The main issue in determining the case was whether the Secretary of State (Sos) could
bring about changes in domestic law by exercising his powers at international level and
this raises two potentially conflicting principles.
o The first is that the SoS generally can enter or exit treaties without the need for a
fresh Act of Parliament.
o The second is that the Secretary of State cannot normally exercise any powers he
has if it would result in a change in UK domestic law unless he has authorisation
from an Act of Parliament.
  The question is whether the second principle prevents the SoS from giving notice to the
EU until a new Act authorises that to happen.

Held:
On the main issue: The Supreme Court by majority of 8 to 3 dismisses the Secretary of
States’ appeal. In a joint Judgement, the SC holds that an Act of Parliament is required
to authorize ministers to give Notice of the decision of the UK to withdraw from the
European Union.

On the issues of Devolution: the Court unanimously concludes the neither section 1 or
section 75 of the Nothern Ireland Act is of assistance in this case, and that the sewel
convention does not give rise to legally enforceable obligations.

Reasons for the Judgement.

The Supreme Court considers that the terms of the European Communities Act
1972(ECA) , which gave effect to the UK’s membership of the EU, are inconsistent with
the exercise by ministers of any power to withdraw from the EU Treaties without
authorisation by a prior Act of Parliament;

 Section 2 of the ECA authorises a dynamic process by which EU law becomes a source of
UK law and takes precedence over all domestic sources of UK law, including statutes. So
long as the ECA remains in force its effect is to constitute EU law as an independent and
overriding source of domestic law. It operates as a partial transfer of law-making powers,
an assignment of legislative competences, by Parliament to EU institutions, unless and
until Parliament decides otherwise.
 It is common ground that UK domestic law will change as a result of the UK ceasing to be
party to the EU treaties and the rights enjoyed by UK residents granted through EU law
will be affected.

 The Government argues that the 1972 Act does not exclude the power for ministers to
withdraw from the EU Treaties, and that section 2 of the Act actually caters for the
exercise of such a power as it gives effect to EU law only so long as the power of
withdrawal is not exercise. However, there is a vital difference between variations in UK
law resulting from changes in EU law, and variations in UK law resulting from withdrawal
from the EU Treaties. Withdrawal makes a fundamental change to the UK’s constitutional
arrangements, by cutting off the source of EU law. Such a fundamental change will be the
 inevitable effect of a Notice being served. The UK constitution requires such changes to
be effected by Parliamentary legislation.

 The fact that withdrawal from the EU would remove some existing domestic rights of UK
residents also renders it impermissible for the Government to withdraw from the EU
Treaties without prior Parliamentary authority.

 It would have been open to Parliament when enacting the ECA to authorise ministers to
withdraw from the EU Treaties, but clear words would have been required; not only are
there no such clear words, but the provisions of the ECA indicate that ministers do not
have such power. Withdrawal is not authorised by section 2, which envisages ministers
taking part in the EU law-making processes: withdrawing from the EU is doing the
opposite.

 The fact that ministers are accountable to Parliament for their actions is no answer
constitutionally, if the power to act does not exist in the first place and where (as the
court has been asked to assume) the exercise of the power would be irrevocable and pre-
empt any Parliamentary action.

 Subsequent EU-related legislation and events after 1972, including the introduction of
Parliamentary controls in relation to decisions made by UK ministers at EU level relating
to the competences of the EU or its decision-making processes, but not to the giving of
notice under Article 50(2), are entirely consistent with an assumption by Parliament that
no power existed to withdraw from the treaties without a statute authorising that course.

 The 2016 referendum is of great political significance. However, its legal significance is
determined by what Parliament included in the statute authorising it, and that statute
simply provided for the referendum to be held without specifying the consequences. The
change in the law required to implement the referendum’s outcome must be made in the
only way permitted by the UK constitution, namely by legislation. The Government
accepts that the resolution of the House of Commons on 7 December 2016 calling on
ministers to give notice under Article 50 by 31 March 2017 is a political act which does
not affect the issues arising in the appeals.

The devolution issues

 The devolution Acts were passed by Parliament on the assumption that the UK would be
a member of the EU, but they do not require the UK to remain a member. Relations with
the EU and other foreign affairs matters are reserved to UK Government and parliament,
not to the devolved institutions. Withdrawal from the EU will alter the competence of the
devolved institutions, and remove the responsibilities to comply with EU law.

 In view of the decision of the majority of the Justices that primary legislation is required
for the UK to withdraw from the EU, it is not necessary for the court to decide if the NIA
imposes a discrete requirement for such legislation.

 The decision to withdraw from the EU is not a function carried out by the Secretary of
State for Northern Ireland in relation to Northern Ireland within the meaning of section
75 NIA. Moreover, section 1 NIA, which gave the people of Northern Ireland the right to
determine whether to remain part of the UK or to become part of a united Ireland, does
not regulate any other change in the constitutional status of Northern Ireland.

 As to the application of the Sewel Convention to the decision to withdraw from the EU
given the effect on the devolved competences, the Convention operates as a political
constraint on the activity of the UK Parliament. It therefore plays an important role in the
operation of the UK constitution. But the policing of its scope and operation is not within
the constitutional remit of the courts. The devolved legislatures do not have a veto on the
UK’s decision to withdraw from the EU.

5. What was the consequent result of the Miller Case?

 UK Government sought approval by the Parliament and consequently on 29th
March, 2017, after obtaining the vote in Parliament, the UK notified the Council
of the European Union of it’s intention to leave the EU.
 Thus, the exit day for the UK is scheduled to be at 11 pm (UK time) on the 29 th of
March 2019.

6. What was the position of the UK?

 The official position adopted by the UK government in relation to the process of
withdrawing from the EU was first expressed in two White Papers;
o White Paper (2nd February 2017)  “ the United Kingdom’s exit from and
the new partnership with the European Union”; and
o White Paper ( 30th March 2017)  “Legislating for the United Kingdom’s
withdrawal from the European Union”.
  One of the priorities which was listed in the White Paper dated 2 nd February 2017,
is to provide “business, the public sector ad the public with much certainty as
possible.
 The great repeal bill was to be introduced to remove the European Communities
Act 1972 from the statute book and convert the already existing body of EU law in
to domestic law. This would ensure smooth and secure transition as opposed to a
sudden change which would have impacted business’ and Citizens negatively.

7. The EU Withdrawal Bill

 The above idea has now been embodied in the EU Withdrawal Bill.
 The main function of the Bill is to repeal the European Communities Act of 1972,
which took Britain in to the EU and tha sanctioned the Supremacy of EU law over
domestic law.
 The Bill aims at ‘domesticating’ existing EU law provisions in to UK law to ensure
smooth transition the day after the Brexit.
 It aims to ;
o Convert existing direct EU law (EU regulations and directly effective
decisions), as it applies in the UK at the date of exit, in to domestic law;
o Preserve the laws that UK passed to implement their EU obligations (such
as laws to implement EU directives).
o The Bill grants power to the government to ‘correct retained EU law’ ,
meaning the power to amend and repeal specific areas and provisions.

8. What are the problems faced with the EU Withdrawal Bill?

 According to the Government White Paper there is believed to be approx.
12,000 EU Regulations in force, while Parliament has passed 7900 statutory
instruments implementing EU legislation and 186 Acts, which incorporate a
degree of EU influence.
 Impracticalities in replication of all EU Laws - It is impossible to ‘absorb’ the
entirety of EU rights and the EU Courts aquis since, for many crucial areas,
continued common activity depends on the EU rights that cannot simply be
incorporated into UK domestic law.

9. The Negotiations.
 UK has two distinct phases of negotiations;
(i) UK – EU withdrawal Agreement, which was aimed at concluding an
agreement dealing with specific aspects only to guarantee an orderly
withdrawal.
(ii) Second negotiations were aimed ay providing a new framework for the
relationship between EU and UK. So far, only the Council of the EU has
published its proposed agreement.
 Free Movement of Goods [FMG]

Introduction
A central policy of the European Union (EU) has been the establishment of an internal single
market in which the free movement of goods, persons, services and capital is ensured. The Treaty
on the Functioning of the European Union (TFEU) provides clear guidance on how the single
market should operate and in particular how the free movement of goods should be ensured. The
Court of Justice (CoJ – formerly known as the European Court of Justice) has supported the
implementation of the single market and the free movement of goods through its decisions.
However, the complexities of harmonising member states with divergent cultures, regulations,
and mind sets are numerous and challenging. The free movement of goods within the EU has
created a patchwork of EU legislation and case law.

Internal Market / Single Market

 The term ‘Internal Market’ is defined in Article 26 of the TFEU:

“ The Union shall adopt measures with the aim of establishing or ensuring the
functioning of the internal market, in accordance with the relevant provisions of the
Treaties...The internal market shall comprise an area without internal frontiers in which
the free movement of goods, persons, services and capital is ensured in accordance with
the provisions of these Treaties”.

 The Single Market refers to the EU as one territory without any internal borders or other regulatory
obstacles to the free movement of goods and services. A functioning Single Market stimulates
competition and trade, improves efficiency, raises quality, and helps cut prices. The European
Single Market is one of the EU’s greatest achievements. It has fuelled economic growth and made
the everyday life of European businesses and consumers easier. Simply, the single market is an
economic policy pursued through legal measures.

 The authors of the original Treaty recognized that there were two main means to establishing as
integrated system. They are;

o Negative Integration : removal of existing barriers, be they in the form of customs

duties, import quotas or other trade barriers;
o Positive Intergration: through harmonization of national rules, including (for
example) measures regulating technical standards and safety requirements.

 The EU Single Market accounts for 500 million consumers and 21 million small and medium-sized
enterprises (SMEs). The Commission’s main goal is to ensure the free movement of goods within
 the market, and to set high safety standards for consumers and the protection of the environment.
Learn more about conformity assessment, market surveillance, legal metrology, the New
Approach legislation, harmonised and non-harmonised sectors, and the international dimension in
the Single Market for Goodssection.

What are the provisions that govern Free Movement of Goods?

 The law relating to FMG is provided for in the Treaty on the Functioning of the European Union
(‘TFEU’);
o Articles 28 – 30 : any barriers which involve some financial charge;
o Article 110 : any financial charge that is Discriminatory;
o Articles 34 – 36 : all other barriers that do not involve a financial charge.

 The TFEU lists the following as the main obstacles against FMG:
o customs duties on imports and exports (Articles 28 and 30 TFEU)
o charges having equivalent effect to customs duties (Articles 28 and 30 TFEU)
o discriminatory internal taxation on imported goods (Article 110 TFEU)
o quantitative restrictions on imports and exports (Articles 34 and 35 TFEU)

What is Customs Union?

 The creation of Customs Union is provided for in Article 28(1) of the TFEU:

“The Union shall comprise a customs union which shall cover all trade in goods and
which shall involve the prohibition between Member States of customs duties on imports
and exports and of all charges having equivalent effect, and the adoption of a common
customs tariff in their relations with third countries”

 In other words, it is an agreement between countries to abide by two principles

a. A free trade where goods pass between the countries without the imposition of
restrictions such as customs duties (internal aspect);and
b. A system, for the charging of common tariff on goods coming to the free trade
area from other countries(external aspect).

 While other articles of the TFEU supplements Article 28(1) by including specific provisions,
which regulate the customs union;
o Article 30 : prohibits customs duties and Chargers of Equivalent Effect
o Article 110; prohibits discriminatory taxation
o Article 34 and 35: prohibits quantitative restrictions and Measures Equivalent
Effect
o Article 36: outlines permissible derogations from article 34 & 35.
 What is the difference between the term “Internal Market” and “Customs Union”?

What is a Common Customs Tarrif

common duty for all non-EU countries for trade with EU countries. Once paid - are in "free
circulation" into EU ART 29 TFEU. MS cannot impose any additional customs duties at all.

The definition of the term ‘Goods’ for the purpose of FMG

 The TFEU does not provide a definition for the terms ‘Goods’. The ECJ defined what may be
considered as a ‘Good’ in the case of Commission v Italy (Art Treasures) [1968] ECR 423;

Facts:

the Italian Government prohibited the exportation of art treasures (articles of artistic,
historic, archaeological or ethnographic nature) and claimed that the art treasures did not
constitute "goods".

Held:

The ECJ defined goods as "products which can be valued in money and which are
capable, as such, of forming the subject of commercial transactions."

 Therefore, according to the above definition any product that is capable of:
o being valued in money; and
o If its subject to a commercial transaction (i.e can it be transacted between two or
more parties)
Then it is considered to be a ‘Good’.

 Case law on the types of products that the ECJ considered to be ‘Goods’;

o Works of art is considered to be a good : Thompson [1978] ECR 2247

o Coins which are no longer in circulation is considered to be a good (as would bank
notes and bearer cheques): Bordessa and Others [1995] ECR I – 361
o Donations done as an act of kindness is NOT considered to be a good : Perche
[2009] ECR I – 361
o Electricity is a good: Almelo v Energiebedrijf Ijsselmij [1994] ECR I-1477
o Natural Gas is a good : Commission v France [1997] ECR I-5815
o Television signal is NOT a Good: Sacchi [1974] ECR 409
Customs duties and common market tariff

 The original EEC treaty, Article 12, which became the first Article to be directly effective (Van Gend
en Loos), prohibited the raising of customs duties or introduction of new ones. It was known as the
“standstill’ provision. Article 30 of the TFEU has now replaced Article 12 of the EEC Treaty, and
states that:

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

BREAKDOWN OF ARTICLE 30 (Financial Charges)

 Definition of “Custom duties”:

Customs duties are those charges that are imposed at the point that goods cross a
national boundary. Because of this they are an obstacle to goods moving from one EU
country to another and are prohibited.

o Why are customs duties prohibited?

Customs duties are prohibited because they are protectionist; they make the imported
goods more expensive than the rival domestic product.

 Charges having Equivalent Effect (“CEE”)

o There are numerous charges and other compulsory payments that can have the same
effect as customs duties, i.e rendering imported goods more expensive in comparison to
domestic products.

o the prohibition introduced to prevent Member States from circumventing the prohibition by
dressing them up or being creative with the in such way that they manifest themselves as
something else.

o Definition of “Equivalent effect”

 Defined in the case of Commission v Italy (Statistical Levy) 1969

“any pecuniary charge, however small and whatever its designation and
mode of application, which is imposed unilaterally on domestic or foreign
goods by, reason of the fact that they cross a frontier”
Facts:

involved an Italian levy on imports and exports across its borders. The levy was a
very small sum and it was used to pay for the gathering and publication of
statistics on trade patterns

Significance:

 The ECJ emphasised that it is the effect, not the purpose, of the levy
that matters and, since extra fees and charges are likely to put imported
goods at a disadvantage compared with domestically produced goods,
the effect was equivalent to a customs duty.

Diamondabieders v Brackfield JC 2 and 3/69

Facts:

Held:

 ECJ established a threefold test to ascertain whether a particular charges

comes under the definition of CEE;
o The charge must be imposed at the time of importation or
subsequently;
o Must be imposed specifically upon a product from another
member state to the exclusion of a similar product; and
o Must result in a variation in the price of the product.

 The ECJ has held that the prohibition on CEEs also applies to goods
imported directly from third countries (Diamondabieders v Indiamex
[1973] ECR 1609).
 Exceptions for Article 30 of TFEU

1. Payment for a service

 What would be considered as payment for service?

o If there is a specific benefit individually conferred on the importer or
exporter, then it is considered a payment for a serve and does not
attract Article 30 of the TFEU.

o A charge for a service will be lawful where the benefit paid is a service
actually rendered to the importer and the cost charged on the service is
based on the actual cost of providing it

Commission v Belgium [1983] ECR 1649 (public warehouses –

storage charges)

Held:

charge is lawful where the benefit paid for is a service actually rendered
to the importer, probably at his request AND the cost charged is based
on the actual cost of providing it.

o The benefit should be specific, if the benefit is in the “general interest of

all exporters” or to the public at large, this exception will NOT apply and
the MS will be in breach of Article 30 of the TFEU.

 Therefore, the exception excludes inspections for public health

reasons or to ensure equality (W Cadsky SpA v Instituto
nazionale per il Commercio Estero [1975] And Bresciani
[1976])

2. Charges for inspections mandatory under EU Law.

 if the charge is for an inspection where the inspection is required under EU

Directive and the Directive does not specify who should pay for it.

Bauhuis v Netherlands [1977] ECR 5

 Facts:

Phytosanitary inspections by the Dutch authorities of plants being exported to

member and non-member States, for which charges are made, do not infringe
charges equivalent to customs duties on exports where (a) the inspections are
voluntary, albeit in practice almost invariably requested, (b) they are instituted in
furtherance of an international convention to which all the EEC member-States are
party and which is aimed at furthering international trade by easing the health
formalities, and (c) the charges do not exceed the actual costs of inspection.

Held

The Court held that charges made by the Dutch authorities for phytosanitary
inspections of plants being exported, the inspections being voluntary although in
practice indispensable and intended, in application of the International Plant
Convention 1951, to replace inspections on import by inspections in the country of
export, were permissible and not in violation of Article 30 of the TFEU.

Case 18/87 Commission of the European Communities v Federal Republic of

Germany [1988] ECR 5427)

Facts

Germany charged a fee for inspection costs of live animals upon their import.

Issue

Was this fee contrary to the EU’s common customs policy (now Art 28 TFEU)?

Decision

No

Held:

fees for inspections carried out under the requirements of Council Directive
81/389 were held to be acceptable. According to the Court of Justice they
 satisfied the criteria that:
(i) the fees constituted a payment for a service, not exceeding the cost of the
actual inspections in respect of which they are charged;
(ii) the inspections in question were mandatory and uniform for all the products
in question in the Community (EU);
(iii) the inspections were provided for by Community (EU) law in the interests of
the Community; and;
(iv) the inspections promoted the free movement of goods in particular, by
neutralizing the obstacles which may result from unilateral inspection measures
adopted under Article 30 of the EC Treaty (now 36 TFEU).

3. Domestic taxes apply to imported goods

 If a charge applies equally to both domestic and imported goods, it may be legal
as an ‘internal tax’. Member States are largely free to decide their own level of
taxes for products such as tobacco, cars, petrol, alcohol etc., provided these
‘internal taxes’ are ‘origin-neutral’.

 In other words, as long as there is strict equivalence in the treatment of domestic

and imported products, it is lawful to impose domestic taxes on imported goods.

 Such taxes, however, fall under Article 110 TFEU and not under Article 30 TFEU.
It should be noted that the two Articles are mutually exclusive and if a product is
taxed when it crosses a border, such tax will be subject to Article 30 TFEU.

 In some cases, taxes may apply where there is no equivalent domestic product.

Cooperativa Cofrutta Srl [1987] ECR 2085: hardly any bananas were grown
in Italy, but the ECJ still held that the Italian ‘consumption tax’ on imported
bananas was part of the internal tax system. This, the Court found, was provided
that the internal tax related to a general system of internal dues applied
systematically to categories of products in accordance with objective criteria
irrespective of the origin of the products.

Article 110 and Discriminatory Taxation

 Article 110 TFEU (ex Article 90 EC) supplements the provisions on the abolition of
customs duties and charges having equivalent effect. Its aim is to ensure the free
movement of goods between the Member States in normal conditions of competition by
eliminating all forms of protection which may result from the application of internal
taxation that discriminates against products from other Member States (Joined Cases
C-290/05 and C-333/05 Nádasdi and Németh [2006] ECR I-10115).

 In relation to Article 34 TFEU, Article 110 is considered as lex specialis, which means
that cases covered by Article 110 exclude the application of Article 34 TFEU. This was
the case in the judgment Kawala [2007] ECR I-10703, where the Court decided that a
 registration fee for imported second-hand vehicles, being of a fiscal nature, falls under
Article 110 and that therefore Article 34 TFEU is not applicable.

Application of Article 110 of the TFEU

 What is the difference between Article 110 and Article 30?

 Definition of Internal Tax

Cooperativa Cofrutta Srl [1987] ECR 2085

“a charge described as a consumer tax which is imposed on both imported products and
domestic products but in practice applies almost exclusively to imported products
because domestic production is extremely small does not constitute a charge having an
effect equivalent to a customs duty on imports within the meaning of articles 9 and 12 of
the eec treaty if it is part of a general system of internal dues applied systematically to
categories of products in accordance with objective criteria irrespective of the origin of
the products . it therefore constitutes internal taxation within the meaning of article 95“

 Directly Effective

Article 110 of the TFEU is directly effective to all M/S since the case of Van Gen
en Loos.
See also – Lutticke [1966] ECR 206

 Articles 110 (1) and 110(2) –

“No Member State shall impose, directly or indirectly, on the products of other
Member States any internal taxation of any kind in excess of that imposed directly
or indirectly on similar domestic products.
 Furthermore, no Member State shall impose on the products of other Member
States any internal taxation of such a nature as to afford indirect protection to other
products”.

o Article 110 (1) is infringed where the tax charged on an imported product
and that charged on a similar domestic product are calculated differently
on the basis of different criteria, which lead, to a higher taxation than
imposed on the imported product.

o Article 110 (2) is designed to catch national tax provisions that seek directly
or indirectly to protect domestic products by applying unequal tax ratings
to foreign goods, which may not exactly be similar to domestic goods, but
which may nonetheless be in competition with them.

The Relationship between Article 110(1) and 110 (2)

“Directly or Indirectly”

 If different tax rates apply depending on the country of origin of the goods, or on
whether they are home-produced or imported, that is direct discrimination on the
basis of origin and clearly breaches Article 110 TFEU.

For example, in case C-90/94 Haahr Petroleum [1997] ECR l-4085, national rules
required Danish ports to impose a 40 per cent surcharge on the basic charge paid
for goods unloaded from ships. The tax was imposed only on goods loaded on
ships arriving from outside Denmark and thus constituted direct discrimination on
the basis of origin.

 Article 110 TFEU also covers indirect discrimination. This is where the tax
appears to be neutral and makes no reference to the origin of the goods, but the
basis on which the tax is levied depends on a feature which, in practice, only
occurs in imported products.

 This results in indirect tax protection for domestic products.

 In cases of indirect discrimination, it is necessary to prove that there is a

protective effect.

Humblot [1987] ECR 1367

Humblot paid higher tax on bigger engine. French cars did not have large
engines so the tax was indirectly discriminatory against imported cars. Tax
increase was disproportionate to engine size increase. An incremental tax would
not have been discriminatory.
 contrast with Case C-132/88 Commission v Greece [1990] ECR I-1567

Taxes on cylinder capacity of car, social policy allowed tax increases discouraging
purchase of cars with larger cylinders and so was not discriminatory even though
only smaller cylinder cars were produced in Greece.

 In Danske Bilimportorer v Skatteministeriet [2003] ECR I-6065 which

concerned a very high registration tax on new cars sold in Denmark which were
all imported. In this case there was no breach of Article 110 TFEU because there
were no Danish products to be protected. Direct discrimination can never be
justified (see Haahr Petroleum, above).

 HOWEVER, SOME CASES WHERE, INDIRECT DISCRIMINATION HAS BEEN

JUSTIFIED.

Chemial Farmaceutici v DAF [1981] ECR 1 (industrial policy justification)

Facts:

Held:
Commission v France [1987] ECR 1597 (regional policy justification to support poor
regions of France).

Facts:

Held:

Definition of “Similar Products”

 The Court defined similar products as those which have similar characteristics and
meet the same needs from the point of view of consumers.

 In Commission v France, according to the Court’s reasoning, spirits based on

grain, such as whisky, rum, gin and vodka, are similar to spirits based on wine and
fruit, such as cognac, calvados and armagnac.

 If the conditions for direct discrimination are not met, taxation might be indirectly
discriminatory as a result of its effects.

 In Commission v United Kingdom , the UK levied an excise tax on certain wines

which was roughly five times the tax levied on beer. The UK produces considerable
amounts of beer, but very little wine. After establishing that light wines were
genuinely in competition with beer, the Court of Justice found that by levying excise
duty on light wines from fresh grapes at a higher rate, in relative terms, than on
beer, the UK had failed to fulfil its obligations under the second paragraph of Article
110 TFEU.

Why were they found liable under Article 110(2)?

 The test the ECJ uses to decide whether products are competing is whether
customers regard those products as ‘fulfilling the same consumer need’. At the
time of the wine and beer case, the British were not great wine drinkers and tax
on wine was higher than on beer. Despite this, the Court felt that consumer
attitudes are not frozen in time. Due to the greater availability of imported
products resulting from the FMG in the EU, customers could try new things – and
should not be deterred from doing so by high taxes. So, light wines at the
cheaper end of the market were held to be ‘competing’ with beer.
  SIMILARLY, In Case C-302/00 Commission v France (Tobacco) [2002] ECR I-
2055, France imposed a higher rate of tax on light tobacco cigarettes than on
dark ones. The ECJ decided that light and dark tobacco products were similar
(despite the fact that they tended to be consumed by different age groups)
because they were made from the same basic raw material (although different
types); had similar properties; and fulfilled the same consumer need.

 Thus, the test ECJ uses to decide whether products are competing is
whether customers regard those products as ‘fulfilling the same consumer
need’.

Consequences of Breaching Article 110

 This depends on whether the breach is of Article 110(1) TFEU or 110(2) TFEU. In the
case of similar products under Article 110(1) TFEU, Member States are required to
ensure strict equivalence in the tax applied or, if there is a sliding scale, that the imports
are placed at the lowest point on the scale (Bobie Getrankevertrieb v Hauptzollamt
Aachen-Nord [1976] ECR 1079).

 If the products are not similar but are competing, it is not necessary that the rates of tax
be identical. Rather, the Member State must ensure that the rates are such that there is
no ‘protective effect’ for the competing domestic product (Commission v Belgium
[1987] ECR 3299).

Article 110 and Third country goods

 Article 110 TFEU also applies to goods in free circulation (see Case 193/85
Cooperativa Cofrutta [1987] ECR 2085).
 However, generally, Article 110 TFEU does not apply to third country goods directly
imported into a Member State. Even where provisions on nondiscriminatory taxation
have been included in the relevant Free Trade or Association Agreement, the Court has
given a more limited interpretation to them.

Kupferberg [1982] ECR 3641

Facts:

Held:
  Where goods are imported from a third country with which the EU has no such
agreement, Article 110 TFEU does not apply (see Cases C-114/95 and C-115/95
Texaco v Danish Ports [1997] ECR I-4263).

Article 110 and Exports

 Although Article 110 TFEU does not mention exports, the ECJ has held that it could
apply if goods to be sold on the domestic market had to pay less tax than those for
export, as this might deter exports;
Nygard [2002] ECR I-3657 which concerned a levy on pigs slaughtered for the domestic
market and for export. The levy was more advantageous for those for sale on the
domestic market than for those intended for export. This, in turn, breached Article 110
TFEU
 Free Movement of Goods
Non Financial or Non Tariff Barriers

Introduction
 Real Free Movement of Goods (FMG) cannot be achieved by just removing financial
barriers as for in practice, trade in goods is obstructed at least as much by so called Non
– Tariff Barriers (NTB).

Example: consider a producer if child safety seats in a situation where each Member State
has different safety standards for child safety seats. Even if there was no financial barrier
he will still find it difficult to sell his child-safety seats in other Member States. Not only will
he have to meet different standards in all Member States, he will also have to compete
with the domestic producers of each of the Member States who will have a competitive
advantage. These types of situations are considered to be major obstacles to trade,
especially intra community trade between M/S.

 The EU laws have recognized and prohibits NTBs under Article 34 and Article 35 of the
TFEU. The CJEU has played a major in developing principles capable of capturing almost
any national rule that deals with NTB.

 While Article 30 relating to financial charges is absolute (I.e that there are no derogations
or exceptions), Article 36 provides for derogations against Article 34 and Article 35.

Article 34
“Quantitative restrictions on imports and all measures having equivalent effect shall be
prohibited between member states”

Article 35
“Quantitative restrictions on exports and all measures having equivalent effect shall be
prohibited between member states”

Article 34 – Quantitative restrictions and measures having equivalent effect on

Imports

 Quantitative Restrictions (QR) : ‘measures which amount to a total or a partial

restraint of, according to the circumstances, imports, exports and goods in transit’
[Geddo (1973)].
  Why are quotas prohibited?

o Such quotas are prohibited between MS’ by article 34 on the grounds that,
since it is aimed specifically at imports, it is discriminatory.
 A complete ban on imports can be regarded as a quota of zero,
while partial bans also come within this definition.

 Restrictions need not be legislation, they can also be

administrative act: Franking Machine case (case 21/84)

 There are two types of bans that are provided for in Article 34;
o Quantitative Restriction:
 Any measures that directly concern the quantity or the number of
products that may be imported.

Etablissements Delhaize Frers er Compagnie Le Lion SA v

Promalvin SA and AGE Bodegas Unidas SA [1992]

o Any ‘measures having equivalent effect to quantitative restrictions’

(MEQR)

 What are considered as ‘Measures’:

o Direct Effect and Article 34

 For Article 34 to apply, there must be a state measure (Vertical Direct

Effect).

Commission v Ireland (Buy Irish) [1982]

the Irish Goods Council was found to have state funding and direct state
involvement in the appointment of its Management Committee. As
such, the Council was a public authority capable of issuing relevant
state measures. The Court of Justice held that its activities were,
therefore, subject to Article 34 TFEU.

Apple and Pear Development Council v KJ Lewis [1983]

a domestic campaign to increase the market share of English apples

and pears at the expense of domestic imports was at issue. Because
the Development Council was part-funded by the state the advertising
campaign was deemed incompatible with EU law. It was ruled
unacceptable for a state funded body to encourage consumers to buy
domestic products solely by reason of their national origin.
  An inaction by the State in the face of organized and persistent
disruption attracts Article 34

Commission v France [1997]

Over a 10 year period of the French had not done enough to prevent
activists from obstruction of imports in to France of cheaper fruit and
vegetables in Spain and Portugal.

o The term ‘measures’ is not necessarily concerned with binding measures:

Commission v Ireland [1982]  same case as above

the ECJ ruled that a government sponsored “Buy Irish” campaign

constituted a measure having equivalent effect to a quantitative restriction
on imports contrary to Article 30 (now Article 28). The three year campaign
was coordinated by the Irish Goods Council (IGC) and in addition to the
advertising a “Guaranteed Irish” product symbol was established.

Irish Government raised three arguments in defence. First it was argued

that the campaign lacked the necessary binding force to qualify as a
measure. This was rejected by the Court, which made the point that state-
sponsored campaigns would invariably qualify as measures.

Second, it was argued that private commercial contributions to the

campaign and the membership and governance of the IGC - the body
behind it - meant that the Article 30 (now 28) would not be triggered. Again,
this was dismissed on evidence of the state’s involvement with the IGC.
Third the fact that the campaign was a failure was held to be irrelevant: its
manifestly discriminatory object was sufficient to trigger prohibition.

Measures having Equivalent Effect to a Quantitative Restrictions (MEQR)

Development of the Definition of MEQRs by the CJEU

 The main prohibition in Article 34, is regarded to be MEQRs.

Directive 70/50

 At first, to offer MS some guidance as to the meaning and scope of prohibited

measures, the Commission issued Directive 70/50. The Directive was issued under
Article 33(7) EEC (which is now repealed) and it served to provide non – binding
guidelines to the interpretation of Article 34.
  The Directive provides a non-exhaustive list of measures capable of having an
equivalent effect to QRs. This list of measures fall in to two parts;
o Article 2 of the Directive : covers “measures, other than those applicable
equally to domestic and imported products” (distinctly applicable); and

o Article 3 of the Directive : measures which cover equally domestic and imported
products of particular types (indistinctly applicable).

 The Directive, however, did not provide a definition for an MEQR.

 As MEQR is rather a vague concept, it was once again up to the CJEU to provide
for a definition.

PHASE I: Procureur du Roi v Dassonville (1974) a.k.a Dassonville

Facts:
The Belgian law required Scotch whisky to have a certificate of origin in order to
be sold. Dassonville purchased Scotch whisky in France, to sell in Belgium. He
forged certificates of origin in order to satisfy Belgian Law.
Issue:
Was the Belgian law incompatible with EU law and more specifically, Article 34?
Decision: Yes

 the ECJ held that Member States had an obligation to prevent unfair practices provided
they are reasonable and do not hinder inter-Member trade placing "firmer emphasis
on the vigour of Article 28 as a means to dismantling restrictive national rules" .

 As it was more difficult for a trader importing goods in circulation in another Member
State to obtain the certificate than for an importer to do so when importing of the goods
directly from the state of production, it was held that the requirement to obtain the
certificate of authenticity was illegal under Article 28.

 The ECJ provided a wide definition for what may constitute an MEQR:

“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”
 Under this definition. Even measures that are capable of potentially hindering trade in
an indirect fashion qualify as MEQRs, and hence are in principle prohibited under
article 34.

 Crucially, the CJEU also did not require any form of discrimination to be present, but
only looked at the actual or possible effect of a measure on trade.

 The range restrictions that this seminal definition incorporates is wide and as such that
much time and effort must be expended in trying to work out the parameters in this
definition.

 Dassonville Limitations

o A measure which is not capable of hindering trade between Member States,

but only affects the flow of trade within a Member State will not breach Article
34 TFEU.

Quietlynn Ltd. v. Southend Borough Council (case C-23/89) where a

licensing requirement for the sale of sex appliances was held not to breach
Article 34 TFEU.)

o A measure which imposes a maximum price which goods can be sold for can
be considered in breach of Article 34, if the sale of the imported products
becomes if not impossible, more difficult.

Tasca case (65/75) where the price of sugar in Italy had a maximum price so
low that it made selling imported sugar difficult.

o A measure which imposes a minimum price which goods can be sold for
does NOT breach Article 34 though. The court said that a prohibition on
selling below cost price, would be acceptable since it would have no adverse
effect on trade between Member States [van Tiggele case (case 82/77)]

Distinctly applicable measures

 In Dassonville the ECJ did not distinguish between distinctly applicable and indistinctly
applicable measures. However, the two situations are different and must be
distinguished.

 Distinctly applicable measures are roughly similar to directly discriminatory measures.

The key feature is that imported goods are treated less favorably than domestic goods
and article 34 requires them to be treated equally.
 Case Facts

Commission v Ireland
(Buy Irish)

Evans Medical &

Macfarlene Smith (1995)

International Fruit Co. v

Produktschap voor
Groenten en Fruit (1971)

Commission v UK (UHT
Milk case)

 NOTE: Distinctly Applicable rules can only be saved or justified by recourse to

specific exceptions set out in Article 36.

Indistinctly Applicable Measures

 Discrimination is not always so obvious (as seen in distinctly applicable measures) and
can be hidden or disguised.
 Indistinctly applicable measures are those rules and practices which in law apply to
both national products and domestic products alike, but place heavier burden on the
imported good.

E.g domestic producer must only satisfy the national rules however, an importer must
satisfy it’s own rules and those rules of the importing state.
  Four Categories that of indistinctly applicable measures;

Case Facts

1. Origin Marking Requirements

 Imposes extra burden on the importer
 Encourages seemingly later nationalistic prejudice in shoppers/

Commission v United
Kingdom (Origin Marking
case) [1985]

Commission v Ireland (Irish

souvenirs) [1981]

2. Packaging Restrictions
 Those who wish to import must comply with rules of packaging of a MS, thus having
to adopt manufacturing processes of the particular MS

Walter Rau v De Smedt

PvbA (1982)

See other cases [Mars

[1995]& Estee Lauder
Cosmetics v Lancaster
[2000])

Name Restrictions
 Court has ruled that MS cannot reserve a generic name for products that are
manufactured out of specific raw ingredient or contain only a given proportion of raw
ingredients
Deserbais (1988)

Commission v Itay (2000)

and Commission v Spain
(2003)

Clinique Laboratories (1994)

Contents, ingredients and process restrictions

Cassis de Dijon (1979)

Gili and Andres (1980)

Drei Glocken (1988)

Bellamy (2001)
 Commission v Italy (Red bull
case) (2003)

PHASE II : Cassis de Dijon : the approach to indistinctly applicable approach

 In the Cassis de Dijon case the court developed the approach towards ‘indistinctly’
applicable measures. Although such measures apply to both domestic and imported
goods equally in law, in fact they impose an extra burden on imported goods.

 The rule at issue was the German requirement that fruit liqueurs have an alcohol
strength of 25 per cent. The French blackcurrant liqueur, Cassis, had a strength of 15–
20 per cent and therefore could not be sold in Germany. The German rule, although
apparently non-discriminatory, in fact made it impossible for French manufacturers to
export Cassis to Germany, thus making it indistinctly applicable and in breach of Article
34 TFEU.

 The Court reasoned that while domestic goods have been manufactured to comply with
the rules applicable in their home state, imported goods must meet the standards set
both in their home state and the importing state. Because of this double regulatory
burden that imported goods must satisfy, indistinctly applicable rules create a ‘dual
burden’ – in breach of Article 34 TFEU.

 Accordingly, the ECJ established the principle of Mutual Recognition : the

presumption that if a good is lawfully manufactured in one member state should
be marketable in another. If the law prevents this, responsibility is on the member
state to rebut the presumption.

 The Court also ruled that, where there are no harmonised EU rules (i.e. a Directive or
Regulation) on the matter in question, Member States can still have their own rules for
domestic producers. They can only require imported goods to comply with their national
rules if the following conditions are fulfilled:

o the rule in question applies equally to domestic products

 o the rule is necessary to protect an essential public interest: rule of
reason (what the Court calls a (‘mandatory requirement’)
o it is ‘proportionate’ (i.e. is not more restrictive/burdensome than
necessary to protect that interest).
Measures which fulfil this test fall outside the scope of Article 34 TFEU and are legal.

 The principle of mutual recognition can be rebutted with the rule of

reason.

The Rule of Reason/ Mandatory Requirement

 In Cassis de Dijon the ECJ stated that certain restrictive measures could be
justified if they were designed to satisfy 'mandatory requirements' including
public health considerations and protection of the consumer.

 the “mandatory requirement doctrine” provides an additional list of grounds

on which MS can justify imposing national rules on imported goods. But,
unlike Article 36 (derogations), mandatory requirements can only be used to
justify indistinctly applicable rules.

 The list of mandatory requirements are not exhaustive. The original four
categories under mandatory requirements are listed down below;

o Effectiveness of Fiscal Policy:

o Consumer protection :
 Oosthoek [1982]: the use of free gifts to sell encyclopedias

Held: As regards the restrictions on imports referred to in Article

30 [now, after amendment Article 28] of the EEC Treaty, it must
be remembered that the Court has repeatedly held, since its
Judgment of 20 February 1979 in Case 120/78 Rewe [1979]
ECR 649, that in the absence of Common rules relating to
Marketing, obstacles to movement within the Community
resulting from disparities between national rules must be
accepted in so far as those rules, being applicable to domestic
products and imported products without distinction, are
justifiable as being necessary in order to satisfy mandatory
requirements relating, inter alia, to Consumer Protection and
Fair Trading.
  Buet [1989]: door step selling of educational materials
Must be contrasted with Keck.

o Protection of public health

 APESA v DSSC (Aragonesa) [1991]

o Protection of the environment

 Commission v Austria [2005]

Facts:
Austria had put in place a ban on lorries of over 7.5 tonnes
transporting certain goods (such as waste, stone, timber) using
the A12 highway for a distance of 46 kilometres. The road is the
main transit route between the south of Germany and Italy.

Held:

The Court of Justice accepted that this was justified under the
mandatory requirement of ‘protection of the environment’ but
held that it was not proportionate. The Austrian authorities had
declared that they wanted a shift from road to rail transport for
such heavy goods but had not ensured that there was adequate
and sufficient rail transport available or alternative means of
transporting the goods by road. They had not considered
whether there were other ways of reducing the air pollution
caused by the traffic that were less restrictive of the free
movement of goods. However, the transitional period of two
months between the adoption of the ban and its implementation
was clearly insufficient time to allow the operators concerned to
adapt to the new circumstances. The Austrian measures
therefore fell within the scope of Articles 34 and 35 TFEU and,
although justified, were not proportionate. See also the more
recent and factually very similar Case C-28/09 Commission v
Austria [2011] ECR.
o Protection of culture
 Cinetheque SA v Federation Natinale de cinemas Francias
[1985]

Facts:
that French law banned for sale of rental of videos of films
during the first year in which the film was shown. This law
applied equally to domestic and imported videos. The video-
cassette distributors challenged the law as a violation of Article
30(now 28).
Held:
article 30 of the EEC treaty does not apply to national
legislation which regulates the distribution of
cinetamographic works by imposing an interval between
one mode of distributing such works and another by
prohibiting their simultaneous exploitation in cinemas and
in video-cassette form for a limited period , provided that
the prohibition applies to all video-cassettes , whether
manufactured in the national territory or imported , and any
barriers to intra-community trade to which its
implementation may give rise do not exceed what is
necessary for ensuring that the exploitation in cinemas of
cinematographic works of all origins retains priority over
other means of distribution .
although it is the duty of the court to ensure observance of
fundamental rights in the field of community law , it has no
power to examine the compatibility with the european
convention for the protection of human rights and
fundamental freedoms of national legislation which
concerns an area within the remit of the national legislator.
o Protection of national or regional socio – cultural characteristics
 Torfaen BC v B&Q plc [1989]

o Plurality of press
 Familiapress v Heinrich Bauer Verlag [1997]
 o The protection of fundamental rights
 Schimdberger v Austria [2003]

The Limitations of Dassonville and Cassis Dijon Principles

 It is difficult to exaggerate just how broad the definition of an MEQR under Dassonville
and Cassis de Dijon is. The definition only requires that a national rule in some way makes
it more difficult for a product to enter the market, not that the rule is harder on foreign
products or imposes a dual burden.
 In practice, however, almost any rule that is worth having will require something, and
therefore make it more difficult to enter the market than if the rule did not exist. For
example, any product standard such as requiring real cocoa in chocolate or prohibiting
certain additives in baby milk will make it more difficult for foreign producers to enter the
market than if these standards did not apply. All such national standards, therefore, qualify
as MEQRs under Article 34 TFEU.
 In addition, the CJEU has also held that Member States have a positive obligation to
prevent or stop any behaviour by private individuals that might interfere with the free
movement of goods.

In Commission v France (Spanish Strawberries) [1997], the French government was

found to have violated Article 34 TFEU by not stopping French farmers from attacking and
destroying trucks with Spanish fruit that was outcompeting French fruit.
Such a general positive obligation to actively remove any restrictions to free movement
caused by private individuals could also be a far reaching instrument.

 Now as we will see, EU law does not just set aside such eminently desirable rules as
health standards for baby milk, as these may often be justified. The only point here is that
the very broad definition developed by the Court does qualify all such rules as MEQRs (or
NTBs) and therefore brings them under the scope of the prohibition in Article 34 TFEU,
and under the scrutiny of EU and national courts.
PHASE III : Keck & Selling Arrangements

 The very wide definition of a MEQR in Dassonville, combined with its extension in Cassis
de Dijon to cover indistinctly applicable measures, generated a huge number of
challenges to national rules based on Article 34 TFEU. As was argued by Advocate
General Slynn in Cinetheque, some of these rules were not intended to restrict imports
and did not in any way make things more difficult for the importer. Nonetheless, they fell
within the scope of Article 34 TFEU and required justification under either Article 36 TFEU
or the Cassis de Dijon mandatory requirements.

 This issue came to a head in the ‘Sunday trading’ cases (see Case 145/88 Torfaen
Borough Council v B&Q plc [1989] ECR 3851 and Case C-169/91 Stoke-on-Trent City
Council and Norwich City Council v B&Q plc [1992] ECR I-6635). In these cases a
national law restricted what kinds of goods could be sold on Sunday. This rule restricted
the sale of imported goods to exactly the same extent as for the sale of domestically
produced goods (i.e. it imposed an ‘equal burden’).

 Yet the ECJ still required the rule to be justified. However, in Joined Cases C-267 and C-
268/91 Criminal Proceedings against Keck and Mithouard [1993] ECR I-6097 the
Court accepted that a clear limit should be placed on the types of measure encompassed
by Article 34 TFEU.

Facts:
Keck and Mithouard were prosecuted in France under anti-dumping
retail laws for selling Picon liqueur at below cost price. The
Court distinguished the case from its earlier jurisprudence on
the content or characteristics or the products concerned. Thus
the legislation in question fell outside the scope of the then
article 30 of the Treaty of the European Community (now codified
as article 34 of the Treaty on the Functioning of the European
Union)

 The Court declared that ‘contrary to what has previously been decided’, Article 34 TFEU
would not apply to: The judgment therefore creates two categories of trading rules: those
which lay down ‘product requirements’, and those which lay down ‘selling arrangements’.

“Contrary to what has been previously decided, the application to products from other
Member States of national provisions restricting or prohibiting certain selling
arrangements is not such as to hinder directly or indirectly, actually or potentially, trade
between Member States within the meaning of the Dassonville judgment… so long as
those provisions apply to all relevant traders operating within the national territory and so
long as they affect in the same manner, in law and in fact, the marketing of domestic
products and of those from other Member States”(2) As one commentator has recently
 written, “…unfortunately, it did not say which of the previous decisions was being
overturned.”

 ‘Product requirements’ affect the goods themselves and are still governed by the existing
rules on discriminatory and dual burden measures. ‘

 ‘Selling arrangements’ do not require any change to the product itself but only restrict the
way it is marketed. As such the latter fall outside the scope of Article 34 TFEU and are
legal. They also do not have to be justified or proportionate under EU law.

 A rule of thumb for distinguishing between a ‘product requirement’ and a ‘selling

arrangement’ is to ask yourself whether, in order to comply with this rule, the importer has
to make any physical alteration to the product, for example by changing the ingredients,
packaging or labelling. If so, it is a ‘product requirement’. If not, it is a ‘selling arrangement’.
In other words, ‘selling arrangements’ relate to where, when and how goods are to be
sold.

Examples of selling arrangements

 Case C-292/92 Hunermund [1993] ECR I-6787 (rules on advertising of

products in pharmacies);

the ECJ held that a rule prohibiting the advertisement of certain medical
products, was outside the scope of Article 28 as defined in the Keck judgment.
In this instance the Court repeated its reasoning for holding this stance. It
stated that as the rule was not technically aimed at intra-Community trade and
as it applied equally to all traders in the particular Member State, despite the
fact that it could have the effect of affecting the volume of sales in this area,
this did not warrant it being prohibited under Article 28. This case is particularly
significant, as it demonstrates the court’s view that advertising restrictions fall
under the ‘selling arrangement.” The effect of this cannot be easily overlooked,
considering the importance of advertising in gaining a foothold in new markets.

 Leclerc-Siplec [1995] ECR I-179 (restriction on TV advertising of retail

products).

Facts:
This case was the result of a suit brought by Leclerc-Siplec (a French
distributor of fuel at service stations belonging to the Leclerc supermarket
group) against the French television advertising companies TF1 Publicité and
M6 Publicité. TF1 and M6 had refused to broadcast an advertisement for
Leclerc-Siplec’s petrol stations on the ground that Article 8 of Decree No
92/280 of March 27, 1992 excluded the distribution sector from televised
advertising. The parties to the proceedings before the Tribunal de Commerce
of Paris agreed that the advertisement in question was caught by Article 8,
 which also prohibits the advertisement of certain other specific goods and
economic sectors.1 By forcing the distribution sector to advertise in regional
daily newspapers, the prohibition aims to protect the regional daily press and
to encourage pluralism in the media, at least as far as the distribution sector
is concerned. As Leclerc-Siplec was of the view that the prohibition was
contrary to Community law, it asked the French court to refer to the Court of
Justice pursuant to Article 177 of the EC Treaty.

 The Court in Lucien Ortscheit GmBH [1994] E.C.R I-5243, considered a

situation where a piece of legislation prohibited certain advertisements, which
contained an offer to obtain medicines by importing them from abroad. In this
instance it was held that the legislation did indeed breach Article 28, as it was
only applicable to medicines sold from other Member States.

 Some cases have concerned marketing rules which nonetheless have an

effect on the product itself.

o In Case 315/92 Clinique [1994] ECR I-317, a German law prohibited

the use of the name ‘Clinique’ for cosmetics because the consumer
might be confused and think that the product had medicinal properties.
It was held by the Court of Justice to be disproportionate to the objective
of consumer protection and the health of humans. See also Case C-
470/93 Verein gegen Unwesen im Handel v Mars [1995] ECR I-1923
where a promotion printed on the wrapper of the Mars bar was part of
the product itself.

o ECJ in Vereinigte Familiapress Zeitungsverlags und Vertreibs v

Heinrich Bauer Verlag [1997] 3 CMLR 1329 did consider that certain
“selling arrangements” could have a bearing on the product itself. In this
case, an Austrian law prevented publishers from including prize
competitions within their publications. A German newspaper contained
such a completion and was prohibited from selling newspapers in
Austria. The court held that this law was in breach of Article 28, but its
reasoning was that it concerned the nature of the product itself and not
merely a “selling arrangement”. It does however point towards a more
restrictive interpretation of the Keck Formula.

 More recently, there has been indication form the ECJ of a more narrow
interpretation of its own formula, this can be clearly seen in its ruling in TK-
Heimdienst Sass [2000] E. C. R. I-151. In this case, “Austrian legislation
restricted the possibility to do sales on rounds of given groceries to those
traders who had an establishment in the administrative district where the sale
on the rounds took place or in a district bordering it”. The ECJ in this instance,
found that the law in question was not compatible with Article 28 as it was not
 a “selling arrangement” within the Keck Formula. Its main argument to support
this assertion was based on the logical grounds that the residence requirement
would always be indirectly discriminatory, due to the fact that foreign traders
were much less likely to have an establishment within the specified area.

 Case C-69/93 Punto Casa [1994] ECR I-2355(opening hours);

 Case C-391/92 Commission v Greece [1995] ECR I-1612 (restriction on

where baby milk powder could be sold);

Refinement of Keck: the market access test

 The Keck decision states essentially that if provisions regarding selling arrangements
"affect in the same manner, in law or in fact, the marketing of domestic products and those
of other Member States"21, then these should not be caught by Article 34. What has
created a lot of issues here, is the addition of the phrase "in fact": it signifies a wider test
of indirect discrimination with regards to selling arrangements.

 An interesting example of where the Court held that a ‘selling arrangement’

discriminated against foreign traders in fact is:

Case 254/98 Schutzverband gegen unlauteren Wettbewerb v TK-Heimdienst GmbH

[2000] ECR I-151. Under the Austrian Code of Business and Industry 1994, traders such
as bakers, butchers and grocers were only permitted to sell on rounds from locality to
locality or from door-to-door those goods which they also sold from a permanent
establishment in the area or in an adjacent municipality.
The Schutzverband, an association for the protection of the economic interests of
undertakings, brought an action against TK-Heimdienst to restrain it from offering for sale
on rounds groceries which it did not sell in permanent establishments in that municipality
or any adjacent one.
The Court held that the legislation in question related to ‘selling arrangements for certain
goods’ but that it did not affect in the same manner the marketing of domestic products
and that of products imported from other Member States. As such, the rule did not apply
equally in law and in fact but rather impeded access to the market of the Member State
of importation for products from other Member States more than it impedes access for
domestic products. Therefore the Austrian law did fall within the scope of Article 34 TFEU
despite being described by the Court of Justice as a selling arrangement.
Another key case concerning selling arrangements which do not apply equally in fact is
Case C-405/98 Konsumentombudsmannen v Gourmet International Products [2001]
ECR I-1795.
 This case concerned an application for an injunction by the Swedish Ombudsman
responsible for consumer protection, which prevented Gourmet International Products
(GIP) from placing advertisements for alcoholic beverages in magazines. The Swedish
law was effectively a total ban on advertising alcoholic beverages, prohibiting their
advertisment on the radio, television or in magazines and periodicals other than those sold
at the point of sale. GIP published a magazine called Gourmet which contained
advertisements for red wine and whisky.
In a reference the ECJ was asked whether Article 34 TFEU or Article 56 TFEU precluded
legislation entailing a general prohibition on alcohol advertising and whether such a
prohibition could be justified on the grounds of public health.
The Consumer Ombudsman and the French, Danish, German and Austrian governments
argued that such a law on advertising fell within the scope of a Keck selling arrangement,
and was therefore not prohibited by Article 34 TFEU. The ECJ rejected this argument.
It pointed out that para.17 of Keck states that national provisions prohibiting certain selling
arrangements must not impede access to the market for products from another Member
State or must not impede access more than they impede the access for domestic goods.
The Court concluded that a rule such as the one at issue was liable to impede access to
the market for products from other Member States more than for domestic products with
which consumers are already familiar. Therefore the rule affected the marketing of
products from other Member States more than that of domestic products and was
prohibited by Article 34 TFEU. With regards to the justification of the rule on the grounds
of public health, the Court stated that it was for the national court to determine:
o whether it was proportionate
o whether ‘the protection of public health against the harmful effects of alcohol can
be ensured by measures having less effect on intra-Community trade’.

 Moreover, one must note that, Advocate General Jacobs expressed grave concern about
the breadth of the Formula in the case of Leclerc-Siplec (C-412/93). He described the
relaxation on the restriction on advertising in Member States was, “the most serious
difficulty to emerge from the Keck judgment.”(6) The flaw in the reasoning behind Keck, is
that arrangements relating to the sale of a product are valued more highly than market
access. Jacobs argued stringently that this was the wrong course of action for the court to
take.

The end of Keck?

 The application of the Keck test continues to trouble the CJEU. Two rather peculiar cases
were recently brought to the attention of the CJEU:

Case C-110/05 Commission v Italy [2009] ECR I-519

the Commission claimed that Italy had failed to fulfil its obligations under Article 34 TFEU by
maintaining rules (Article 56 of the Highway Code) which prohibit mopeds, motorcycles,
tricycles and quadricycles from towing a trailer. The European Court – after requesting a
second Attorney General Opinion– examined whether Italian law had to be considered as in
 breach of the Treaty with regard to trailers which were specifically designed to be towed by
motorcycles and which were legally produced and marketed in Member States other than the
Italian Republic.

The Court found ‘that the national measure limited the possibilities of use of the
aforementioned trailers, preventing a demand for such products and, therefore, hindering their
importation’. Therefore, it constituted a measure having equivalent effect to quantitative
restrictions on imports within the meaning of Article 34 TFEU.

The interest of the decision lies in the Court’s dismissal of a possible application of the Keck
threshold. The Court implicitly rejected a possible extension of Keck to ‘use arrangements’
and embraced what could be concisely termed as an ‘access to market’ test.

 Such an approach was suggested by Attorney General Kokott in Case C-142/05 Mickelsson
[2009] ECR I-4273. The question there was whether restrictions imposed by Swedish law
(whose breach was strictly sanctioned) on the use of jet skis on inland waters could be
considered as an obstacle to free movement of goods. The Court ignored the Attorney
General suggestion and, relying on Cassis de Dijon case law, held that even if the national
regulations at issue do not have the aim or effect of treating goods coming from other Member
States less favourably, the restriction which they impose on the use of a product in the territory
of a Member State may, depending on its scope, have a considerable influence on the
behaviour of consumers, which may, in turn, affect the access of that product to the market of
that Member State.

 It is, therefore, to be concluded that restrictions on product uses will not be ‘saved’ under the Keck
test. It should, however, be noted that in both cases, Italian Mopeds and Mickelsson, the Court
found that the measures in question could be justifiable on the grounds of public aims such as
road safety or protection of the environment.
 Services and Establishment
Introduction
 When the internal market was established, the European economy primarily revolved around the free
movement of Goods.

 The free movement of Services was therefore considered to be a residual category. This means that it
covers those areas not covered by the provisions relating to the free movement of goods, capital and
persons.

 Since then, Services now constitute over 70% of the European economy and thus, the importance of free
movement of Services has increased.

Prohibition of Discrimination based on Nationality

Article 18 of the TFEU:

“Within the scope of application of the Treaties, and without prejudice to any special provisions contained
therein, any discrimination on the grounds of nationality shall be prohibited….”

 The general principle as provided in Article 18 of the TFEU applies to self-employed people, companies
and service providers, entitling them all to equal treatment with nationals.

 Thus, both the right of establishment and the freedom to provide services rest on the prohibition of
discrimination.

Right of Establishment vs. Freedom to provide Services

 The key treaty provisions that govern the right of Establishment and the freedom to provide services are:

Article 49 of the TFEU:

“ 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 54, 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 56 of the TFEU:

“Within the framework of the provisions set out below, restrictions on freedom to provide services within
the Union shall be prohibited in respect of nationals of Member States who are established in a Member
State other than that of the person for whom the services are intended.

The European Parliament and the Council, acting in accordance with the ordinary legislative procedure,
may extend the provisions of the Chapter to nationals of a third country who provide services and who are
established within the Union”.

Treaty provisions that apply to right of establishment and freedom to provide services

Right to Establish: Article 49 – 54

Freedom to provide Services: Article 56 – 62

Difference between the right to Establish and the freedom to provide services

 The differences between the right to Establish and the freedome to provide Services was clearly outlined
in the case of Gebhard v Consiglio Dell’Ordine Degli Avvocati e Procuratori di Milano [1995] ECR I-4165

Facts:

A German lawyer called Mr Reinhard Gebhard from Stuttgart, lived in Milan, Italy. He called himself an
"avvocato" and set up chambers to practice as a lawyer. He was suspended by the Milan Bar Council,
because he had not been registered. Italian lawyers complained he used the title of 'avvocato' in his
practice with mainly German customers in Milan.

Held:

The Court of Justice held that it should be evaluated whether the Italian rules erected an obstacle to
freedom of establishment.

“
20 The situation of a Community national who moves to another Member State of the
Community in order there to pursue an economic activity is governed by the chapter of the
Treaty on the free movement of workers, or the chapter on the right of establishment or the
chapter on services, these being mutually exclusive.
[...]
”
25 The concept of establishment within the meaning of the Treaty is therefore a very broad
one, allowing a Community national to participate, on a stable and continuous basis, in the
economic life of a Member State other than his State of origin and to profit therefrom, so
contributing to economic and social interpenetration within the Community in the sphere
of activities as self-employed persons.
26 in contrast, where the provider of services moves to another Member State, the
provisions of the chapter on services, in particular the third paragraph of Article 60,
envisage that he is to pursue his activity there on a temporary basis.
27 As the Advocate General has pointed out, the temporary nature of the activities in
question 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. The fact that the provision of
services is temporary does not mean that the provider of services within the meaning of the
Treaty may not equip himself with some form of infrastructure in the host Member State
(including an office, chambers or consulting rooms) in so far as such infrastructure is
necessary for the purposes of performing the services in question.
[...]
37 It follows, however, from the Court' s case-law that national measures liable to hinder or
make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must
fulfil four conditions: they must be applied in a non-discriminatory manner; they must be
justified by imperative requirements in the general interest; they must be suitable for
securing the attainment of the objective which they pursue; and they must not go beyond
what is necessary in order to attain it (see Case C-19/92 Kraus v Land Baden-
Wuerttemberg [1993] ECR I-1663, paragraph 32).
38 Likewise, in applying their national provisions, Member States may not ignore the
knowledge and qualifications already acquired by the person concerned in another Member
State (see Case C-340/89 Vlassopoulou v Ministerium fuer Justiz, Bundes- und
Europaangelegenheiten Baden-Wuerttemberg [1991] ECR I-2357, paragraph 15).
Consequently, they must take account of the equivalence of diplomas (see the judgment
in Thieffry, paragraphs 19 and 27) and, if necessary, proceed to a comparison of the
knowledge and qualifications required by their national rules and those of the person
concerned (see the judgment in Vlassopoulou, paragraph 16).
39 Accordingly, it should be stated in reply to the questions from the Consiglio Nazionale
Forense that:
° the temporary nature of the provision of services, envisaged in the third paragraph of
Article 60 of the EC Treaty, is to be determined in the light of its duration, regularity,
periodicity and continuity;
° the provider of services, within the meaning of the Treaty, may equip himself in the host
Member State with the infrastructure necessary for the purposes of performing the services
in question;
° a national of a Member State who pursues a professional activity on a stable and
continuous basis in another Member State where he holds himself out from an established
professional base to, amongst others, nationals of that State comes under the provisions of
 the chapter relating to the right of establishment and not those of the chapter relating to
services;
° the possibility for a national of a Member State to exercise his right of establishment, and
the conditions for his exercise of that right, must be determined in the light of the activities
which he intends to pursue on the territory of the host Member State;
° where the taking-up of a specific activity is not subject to any rules in the host State, a
national of any other Member State will be entitled to establish himself on the territory of
the first State and pursue that activity there. On the other hand, where the taking-up or the
pursuit of a specific activity is subject to certain conditions in the host Member State, a
national of another Member State intending to pursue that activity must in principle comply
with them;
° however, national measures liable to hinder or make less attractive the exercise of
fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be
applied in a non-discriminatory manner; they must be justified by imperative requirements
in the general interest; they must be suitable for securing the attainment of the objective
which they pursue; and they must not go beyond what is necessary in order to attain it;
° likewise, Member States must take account of the equivalence of diplomas and, if
necessary, proceed to a comparison of the knowledge and qualifications required by their
national rules and those of the person concerned.

Significance:

 A national of a Member State who pursues a professional activity on a stable and continuous
basis in another Member State where he holds himself out from an established professional base
to, amongst others, nationals of that State comes under the chapter relating to the right of
establishment and not the chapter relating to services.

 As appears from the third paragraph of Article 60 of the Treaty, the rules on freedom to provide
services cover – at least where the provider moves in order to provide his services – the situation
in which a person moves from one Member State to another, not for the purposes of
establishment there, but in order to pursue his activity there on a temporary basis.

 The temporary nature of the activities in question has to be determined in the light of its duration,
regularity, periodicity and continuity. This does not mean that the provider of services within the
meaning of the Treaty may not equip himself with some form of infrastructure in the host
Member State (including an office, chambers or consulting rooms) in so far as such infrastructure
is necessary for the purposes of performing the services in question.

 The possibility for a national of a Member State to exercise his right of establishment, and the
conditions for his exercise of that right, must be determined in the light of the activities which he
intends to pursue on the territory of the host Member State.
  Where the taking-up of a specific activity is not subject to any rules in the host State, a national
of any other Member State will be entitled to establish himself and pursue that activity there.

 On the other hand, where the taking-up or the pursuit of a specific activity is subject to certain
conditions in the host Member State, a national of another Member State intending to pursue
that activity must in principle comply with them.

 Such conditions, which may consist in particular of an obligation to hold particular diplomas, to
belong to a professional body or to comply with certain rules of professional conduct or with rules
relating to the use of professional titles, must fulfil certain requirements where they are liable to
hinder or make less attractive the exercise of a fundamental freedom guaranteed by the Treaty,
such as freedom of establishment. There are four such requirements:

o they must be applied in a non-discriminatory manner;

o they must be justified by imperative requirements in the general interest;
o they must be suitable for securing the attainment of the objective which they pursue; and
o they must not go beyond what is necessary in order to attain it.

As far as conditions relating to the possession of a qualification are concerned, Member States
must take account of the equivalence of diplomas and, if necessary, proceed to a comparison of
the knowledge and qualifications required by their national rules and those of the person
concerned. The court accepted that it does not have jurisdiction under the preliminary reference
procedure to rule on the compatibility of a national measure with EU law.

The freedom to provide Services

a)Direct Effect, Direct Discrimination and Indirect Discrimination

Van Binsbergen [1974] ECR 1299

Facts:
Netherlands had a rule that required a person to be a “habitually resident” in the
host state in order to provide legal representation services.

Held:
 The court established that Article 56 of the TFEU has Direct Effect;
 The Court rules that Article 56 of the TFEU specifically applied to
situations where a service provider was prevented from providing a
service because of their residence in another Member State (Direct
Discrimination);
 As the requirement to be established in the Netherlands was easier for
Dutch nationals to comply with, the rule amounted to indirect
discrimination on grounds of nationality.
b) The Extension of Article 56 of the TFEU to non-directly discriminatory (or indistinctly
applicable) rules.

 In some cases a residence requirement may be necessary to ensure the application of

professional rules of conduct, this is only if supervision could not be achieved by less
restrictive means (I.e. the said restriction must be proportionate). This was further
developed in the following cases;

o Webb [1981] ECR 3305

o Sager v Dennemeyer [1991] ECR I-4221

Meaning of Services (Article 57)
Article 57 of th TFEU

“Services shall be considered to be ‘services’ within the meaning of the Treaties 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 Member
State where the service is provided, under the same conditions as are imposed by that State on its
own nationals”.

 Article 57 of the TFEU recognizes two characteristics that need to be fulfilled in order for a
particularly activity is regarded to be a “Service”:
o They are temporary in nature; and
o Normally provided for remuneration.

a) The activities are temporary in nature:

1. This characteristic was further developed in the case of Gebhard (1995);

o the temporary nature of the activities in question 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.

o The fact that the provision of services is temporary does not mean that the
provider of services within the meaning of the Treaty may not equip himself with
some form of infrastructure in the host Member State (including an office,
chambers or consulting rooms) in so far as such infrastructure is necessary for the
purposes of performing the services in question.

2. Activities at the margin of the scope of the definition (Article 57) must be considered in
terms of their objectives;

 Interference of rules of sporting bodies with the provisions of Service:

Meca – Medina v Commission (2006)

Held:
  Sporting activities are protected by Article 56 of the TFEU in so far as it
constitutes an economic activity. As such, the activities of semi –
professional or professional sportsmen were either “work” or the
provision of services for remuneration.

 Further, the court decided that Articles 45 and 56 of the TFEU on services
do not only apply to actions of public authorities but also extend tto rules
of any other nature aimed at regulating gainful employment and the
provision of services in a collective manner. Thus, rules of sporting bodies
are capable of been reviewed by reference to Article 56.

 However, in this case, it was in relation to anti-doping rules, which

concerned a purely sporting interest which has nothing to do with
economic activity, thus the sportsmen could not rely on article 56.

i.

b) Normally provided for a remuneration

1. The essential characteristic of remuneration lies in the fact that it constitutes

considerations for the service in question, and is normally agreed upon between the
provider and the recipient.

Belgium v Humbel [1988] ECR 5365

Held: a state school operating within the national educational system was not held to be
providing services. However, a school in the private sector, which is financed by private
means for profit (I.e. the fees are paid by the pupils and their parents), is a provider of
services under Article 56 TFEU.

Rationale: the state was not engaged in a “gainful” activity, and as such, state education
should not be considered as a service for the purpose of Article 57.

2. Even though remuneration does not pose a problem, it is unclear whether payment for
an activity is crucial to that activity falling within the definition of what constitutes a
service. In a series of cases the CoJ held that it is not essential that the person who
receives the service be the person who provides the remuneration.

Deliege (2000)

An athlete’s participation in a judo competition was regarded as the provision of services

for remuneration even though she was unpaid for her time in the competition itself.
 Successful sports stars gained income from the publicity associated with the sport and
the celebrity status.

The Court stated:

“ sporting activities and, in particular, a high ranking athlete’s participation in an
international competition are capable of involving the provision of a number of separate,
but closely related, services even if some of the services are not paid for by those whom
they are performed”.

 However, the absence of remuneration can result in an activity not being considered a
service and thereby not being protected by Article 56 of the TFEU.

SPUC v Grogan (1991)

Facts: a dispute arose when an Irish student’s union sought to provide information on
services that were classed as illegal in Ireland but legal elsewhere in the Union.

Abortion was legalized in the UK in the late 1960’s, however abortions were illegal in
Ireland by virtue of constitutional right to life and protection of the unborn child. The
student’s union sought to provide information in Ireland to women on clinics that carried
out abortions in the UK.

When Irish authorities sought to enforce the constitutional prohibition on abortions by

banning information distribution activity, the students sought to rely on Article 56 and
the right to provide a service to continue.

Held: that since remuneration was not provided by the recipients of that information on
clinics, the activity of the students could not amount to a service within the meaning of
Article 57 of the TFEU.

c) Services and Cross Border Activities

 Article 56 of the TFEU as illustrated above is very broad. At its cores is the prohibition of
national laws that discriminate against service provider from other member states;
 Three broad categories of cross border activities are covered under Article 56 of the TFEU.
They are;
o Cross border activity with the service provider moving temporarily from state A
to state B;
o Cross border activity with the recipient of the service moving temporarily from
State A to state B;
o Cross border activity with no person moving: the service itselfs moves (e.g.
telecommunications, television).

a. Freedom to provide a Service;

  The scope of freedom to provide a service was clearly demonstrated in
the case of Van Binsbergen (1974).

Ciola [1999] ECR I-2517

Facts: concerned a restriction imposed by the Austrian Authorities on the

number of moorings on lake Constance which could be held by boat
owners resident in other Member States.

Held: the Austrian rule breached Article 56 since it interfered with the
company’s attempts to provide a service.

b. Freedom to receive a service

 the CoJ has extended the scope of Article 56 to include the freedom to receive
services;

Luisi and Carbone [1984]

two Italians travelling to another Member State as tourists and for

medical treatment were protected by Article 56 TFEU.

Cowan [1989] ECR 95

a French law provided compensation for injuries to French nationals and

residents who were victims of crime. The Court found that this rule could
not be dependent on a residence qualification and, as such, Mr Cowan
who on a visit to Paris was robbed and injured could claim compensation
as a recipient of services under Article 56.

 This extension has been especially important in the field of

education:

Case 293/83 Gravier v City of Liege [1985] ECR 593

Facts:
Françoise Gravier, a French national, applied in 1982 to
study cartoon drawing at the Académie Royale des Beaux-Arts in
the Belgian city of Liège. Gravier was requested to pay a fee of
24,622 Belgian francs (approximately 610 euros) as
a Minerval (enrolment fee) which was only demanded from
foreign students. After refusing to meet the fee, Gravier was
rejected by the Académie and her Belgian study visa was
revoked.
 Held:

“ The imposition on students who are nationals of other members states

of a charge, a registration fee or the so-called Minerval, where the fee
is not imposed on students who are nationals of the host member
state, constitutes discrimination on grounds of nationality contrary to
Article 7 of the Treaty [of Rome]. ”

 It also ruled that learning cartoon art counted as "vocational

training" and thus qualify for the same legal status.
Significance:
 Gravier v. City of Liège is acknowledged as a precedent in
European case law. The ECJ further ruled that, although higher
education was outside European laws and regulations, the
access to it was not. As a result, non-discriminatory access had to
be applied by member states for access to professional
education.
 With the later case in 1988, Blaizot v. University of Liège, the
ECJ decreed that any education at universities can be counted as
professional education.

i. Healthcare
 A growing number of cases have concerned the receipt of services that fall
under social security schemes.
 Specifically, in relation to health care, a common question arises relating to
eligibility for service provision in different Member States where the service
recipient travels to other countries to receive healthcare and then bills their
own health service provider for the treatment received.
 Healthcare has traditionally been provided by each Member State for its
citizens, funded by either premiums of direct taxation.

 Kohll v Union des Caisses de Maladie [1998] ECR I-1931

Facts:
Mr Kohll, from Luxembourg, obtained orthodontic treatment for his
daughter in Germany and then sought reimbursement from the
Luxembourg social security system. The Luxembourg authorities
refused on the grounds that prior authorisation had to be obtained
for treatment to be carried out in another Member State.

Held:
o That, such treatment amounts to economic services and as
such should create an entitlement protected by Community
law.
 o The Court of Justice held that the requirement for prior
authorisation as a prerequisite for reimbursement was
contrary to Articles 56 and 57 TFEU. Such restrictions could
only be justified if there was a risk of seriously undermining
the financial balance of the social security system.

 Prior authorization to travel to another Member State may be

required and can be justified if proportionate.

Joined Cases C-157/99 Smits and Peerbooms [2001] ECR I-5473

Facts:

persons registered with social security sickness insurance in the

Netherlands were subject to a requirement of prior authorisation to
receive medical treatment in another Member State.

Held:

o That, prior authorization to travel to another Member State may

be required to receive healthcare, and can be justified if
proportionate.

o The Court held that such a requirement could be subject to the

following conditions:
o that the treatment is ‘normal in the professional circles
concerned’, and
o that the medical treatment is necessary.

o The Court went further to clarify that the phrase ‘normal in the
professional circles concerned’ meant that the treatment must be
‘sufficiently tried and tested by international medical science’. This
ensures that it is assessed according to international, and not just
national, criteria.

o It also stated that authorisation can be refused on the grounds of

lack of medical necessity only if the same or equally effective
treatment can be obtained without undue delay in a hospital having
a contractual arrangement with the insured person’s sickness fund.

 Inizan v Caisse Primaire d’Assurance Maladie des Hauts de Seine

[2003] ECR I-12403,

Held:
o prior authorisation could be required for treatment outside
France, but could only be refused if the ‘same or equally
 effective treatment for the patient’ could be obtained in
France without undue delay.

o The Court stressed that because prior authorisation

requirements hinder the exercise of a fundamental freedom,
they must be based on objective, non-discriminatory criteria
which are known in advance, so that national authorities do
not use their discretion arbitrarily. Also, there must be:

“a procedural system which is easily accessible and capable

of ensuring that a request for authorization will be dealt with
objectively and impartially within a reasonable time and
refusals to grant autorisation must also be capable of being
challenged in judicial or quasi-judicial proceedings”.

 In Case C-372/04 R on the application of Yvonne Watts v Bedford

Primary Care Trust [2006] ECR I-4325,

Held :
o the Court of Justice ruled that the UK National Health Service
(NHS) was obliged to refund the costs of hospital treatment
obtained in another Member State if the patient concerned
was faced with an ‘undue delay’ in the UK.

o It held that although the prior authorisation system

governing NHS reimbursement of the cost of hospital
treatment elsewhere in the EU was a deterrent to patients
from seeking such treatment, it was justified and
proportionate.

o However, where the delay in offering treatment in the home

state exceeds a medically acceptable time period, the
competent authorities may not refuse authorisation because
of any of the following:

 the existence of waiting lists;

 the alleged distortion of the normal priorities;
 the fact that hospital treatment is offered free of
charge;
 and/or a comparison between the cost of the
treatment provided in the host;
 Member State and the cost of that treatment in the
Member State of residence.
  In Case C-512/08 Commission v France ECR [2010] ECR I-8833

Held:
o the Court upheld a national requirement for prior
authorisation in order for the competent institution to be
responsible for payment for treatment planned in another
Member State and involving the use of major medical
equipment outside a hospital setting.

o According to the Court, due to the dangers to the

organisation of public health policy and the financial balance
of the social security system, such a requirement was a
justified restriction.

o Contrast this with the judgments in Kohll where ‘refusal to

reimburse at a flat rate the cost of spectacles purchased in
another Member State could not be justified, since it had no
real effect on the financing or balance of the Luxembourg
social security system’.

 Contrast also with Case C-173/09 Elchinov [2010] ECR I-8889 in which
the Court held that legislation of a Member State which is interpreted
as excluding, in all cases, reimbursement in respect of hospital
treatment given in another Member State without prior
authorisation is not consistent with Article 56 TFEU.

d) Services that move, where the provider and recipient do not;

 Businesses providing services such as telephone, email, internet or cable services could
be established in a Member State, service customers in another Member State, and
neither party could ever move across borders since the service itself is capable of
movement. Such activities are also protected by Article 56.

Alpine Investments BV v Minister van Financien [1995] ECR I-1141:

Facts:

Netherlands had introduced rules which prohibited ‘cold calling’ (uninvited telephone
sales) for the sale of commodities on the futures market to non-professional investors.
These were risky investment products and there had been complaints that customers
were given inadequate warning of the risks involved. Alpine, a company established in
the Netherlands, used this sales method to contact potential customers in the UK, where
cold calling was allowed. The restriction was imposed by the home state of establishment,
but restricted the freedom to offer services in another Member State.
 Held:
o Court held that Alpine could plead Article 56 TFEU against its own home state in this
situation, stating that:

“ the right freely to provide services may be relied on by an undertaking as against the
state in which it is established if the services are provided for persons established in
another Mmeber state”

o Seeking to draw an analogy with the Keck ruling in relation to goods, the Dutch and UK
governments argued that the Dutch rule merely affected the way in which the services
could be offered. This was rejected by the Court of Justice because the rule ‘directly
affects access to the market in services in the other Member State and is thus capable of
hindering intra-Community trade in services’. Despite this, the Dutch rule was held to be
justified and proportionate on the grounds of protecting the reputation of the Dutch
financial sector.
 Sources of Union Law, Legislative Acts and Procedures

 The European Union (EU) legal system is based on several sources of law.
 Union law is not universal, nor can the Union enact legislation it pleases; its competence is limited
to the powers attributed to the Union by the legal texts adopted by the Member States.

Principle of Conferral

 Under this fundamental principle of EU law, laid down in Article 5 of the Treaty on European
Union, the EU acts only within the limits of the competences that EU countries have conferred
upon it in the Treaties.
 These competences are defined in Articles 2–6 of the Treaty on the Functioning of the EU.
Competences not conferred on the EU by the Treaties thus remain with EU countries.
 While the principle of conferral governs the limits to EU competences, the use of those
competences is governed by the principles of subsidiarity and proportionality. These principles
are corollary principles of the principle of conferral.
 They determine to what extent the EU can exercise the competences conferred upon the Treaties.

The Principle of Subsidiarity

 The principle of subsidiarity seeks to safeguard the ability of the Member States to take decisions
and action and authorises intervention by the Union when the objectives of an action cannot be
sufficiently achieved by the Member States, but can be better achieved at Union level, ‘by reason
of the scale and effects of the proposed action’. The purpose of including a reference to the
principle in the EU Treaties is also to ensure that powers are exercised as close to the citizen as
possible, in accordance with the proximity principle referred to in Article 10(3) of the TEU.

 A good example of where the principle of subsidiarity is tested is the European policy on road
traffic safety.

o There is a directive that requires children under the age of 12 and less than 135 cm in
height to sit on booster seats when travelling in the back of a car. (There are some
exceptions for unexpected and urgent journeys, and a few other reasons like that.) The
reason behind the law is that seatbelts fitted in cars – itself a mandatory requirement –
are designed for adults and not children. Children, being smaller and still growing, need a
different kind of protection, which the new booster seats are intended to provide.
 o It was reported that “In some countries there is a lack of political will to accord road safety
a high priority” and that the EU should create “Pressure on national governments to put
road safety on the political agenda”. Thus the Principle of Subsidiarity came in to play.

Principle of Proportionality

 The principle of proportionality regulates the exercise of powers by the European Union.
 It seeks to set actions taken by the institutions of the EU within specified boundaries.
 Under the rule the involvement of the institutions must be limited to what is necessary to achieve
objectives of the Treaties.
 In other words, the content and form of the action must be keeping in with the aim pursued. The
Treaties cannot go beyond what is necessary.
 The Principle of proportionality is laid down In Article 5 of the TEU.

What do these Principles all mean?

 The Union can therefore only act if;

o The actions form part of the competences conferred upon the EU by the Treaties;
o In the context of competences shared with the Member States, the European level is most
relevant in order to meet the objectives set by the treaties;
o The content and form of the action does not exceed what is necessary tp achieve the
objectives of set by the treaties.

Sources of EU Law

1. Primary Legislation
a. Treaties
b. Subsidiary conventions
c. Acts by the representatives of the Member States
2. Secondary Legislation
a. Legally Binding
i. Regulations
ii. Directives
iii. Decisions
b. Non – legally Biding
i. Recommendations
ii. Opinions
3. Supplementary Legislation
i. Case Law of the ECJ
ii. General Principles of law recognized by the ECJ
iii. International Agreement with third party countries
Z

Sources of EU Law

Secondary Supplementary
Primary Legislation
Legislation Legislation
(Article 288, TFEU)

Subsidiary Conventions and Legally Binding Not legally Case Law of the ECJ General Pronciples of
Treaties acts by the representatives the ECJ International
Binding
of the member states Agreements with third
party countries

Reccomendations Opinions

Regulations Directives Decision other acts

 (1) Primary Legislation

a. Treaties
 The European Union is based on the rule of law.
 This means that every action taken by the EU is founded on treaties that have
been approved voluntarily and democratically by all EU member countries. For
example, if a policy area is not cited in a treaty, the Commission cannot propose
a law in that area.
 A treaty is a binding agreement between EU member countries. It sets out EU
objectives, rules for EU institutions, how decisions are made and the relationship
between the EU and its member countries.
 Treaties are amended to make the EU more efficient and transparent, to prepare
for new member countries and to introduce new areas of cooperation – such as
the single currency.
 Under the treaties, EU institutions can adopt legislation, which the member
countries then implement

Activity 1:

1. List out the main treaties which form a part of primary legislation.
2. Explain the what “Subsidiary Legislation” and “act by the Representative of the
Member States” mean and include examples for each.

(2) Secondary Legislation as set out in Article 288 of the TFEU

 The TFEU at Art 288 provides that: ‘In order to carry out their tasks and in accordance
with the provisions of this Treaty, the European Parliament acting jointly with the
Council [added by TEU], and the Commission shall make regulations and issue directives,
take decisions, make recommendations or deliver opinions.’
 The various forms of secondary legislation are described in Art 288 and it is their scope
and effect that distinguishes them from each other.

Turner, Chris. EU Law (Key Facts Key Cases) (p. 25). Taylor and Francis. Kindle Edition.

a. Legally Binding Acts;

i. Regulations
 By Art 288: ‘A regulation shall have general application. It shall be
binding in its entirety and directly applicable in all Member States.’
 This is a binding legislative act, that must be applied in it’s entirety
across the EU.
(e.g. when EU wanted to ensre that there were common safeguards on
goods imported from outside the EU, the Council adopted a regulation).
 ‘Directly applicable’ means the regulation automatically becomes law in
each Member State with no requirement for the state to do anything to
implement it, and it may create rights and obligations directly
enforceable in the national courts (Bussone v Ministry of Agriculture
(1978)).
 This makes them the most powerful form of secondary legislation and
they are used when there is a requirement for exact uniformity.
 Under the terms of the Article 288 TFEU, only Regulation are directly
applicable. Treaty Articles are not directly applicable.
 Regulations may also be Directly Effective if it fulfills the criteria as set in
the case of Van Gend en Loos ( will be studied in the future chapters).
 The Court of Justice held that Regulations should be incorporated
without change in national legislation by MS;

o Commission v Italy (Re Slaughtered Cows) [1973] ECR 101;

Facts: The Commission brought enforcement proceedings
against Italy for failing to enforce Regulations on dairy on time.
The EU wanted to stop under-production of dairy products by
introducing a premium for slaughter of cows. The Italian
government decreed the regulations were ‘deemed to be
included’ in the decree, and reproduced them with extra
procedural provisions. However, Italy failed to operate the
scheme on time.

Held: the Court of Justice held that Italy was in breach both for
delay, and also ‘the manner of giving effect’ to the Regulation. In
one respect it departed from the Regulation, as it did not account
for extension of time allowed for slaughter.
“ … According to the terms of the article 189 and 191 0f the
Treaty, Regulations are, as such, directly applicable in all Member
States and come into force solely by virtue of their publication in
the Office Journal of the Communities, as from the date specified
in them, or in absence thereof, as the date provided in the
Treaty….”
 o Variola v Italian Finance Administration [1973] ECR 981;

Held:

 The prohibition of all customs duties and charges having

equivalent effect covers any charge levied at the time or by
reason of importation and which, specifically affecting the
imported product and not the home-produced product, has the
same restrictive effect on the free movement of goods as a
customs duty.
Accordingly, a charge imposed exclusively on imported goods
because they have been unloaded in home ports constitutes a
"charge having equivalent effect" and is prohibited.
 Owing to its very nature and its place in the system of sources
of community law, a regulation has immediate effect and,
consequently, operates to confer rights on private parties which
the national courts have a duty to protect.
 The direct application of a regulation means that its entry into
force and its application in favour of or against those subject to
it are independent of any measure of reception into national
law.
A legislative provision of national law reproducing the content
of a directly applicable rule of community law can in no way
affect direct applicability, or the court' s jurisdiction under the
treaty.
 In the absence of valid provision to the contrary, repeal of a
regulation does not mean abolition of the private rights it
created.
 A legislative provision of internal law cannot be set up against
the direct application, in the legal order of member states, of
regulations of the community and other provisions of
community law without compromising the essential character
of community rules and the fundamental principle that the
community legal system is supreme.
 This is particularly true as regards the date from which the
community rule becomes operative and creates rights in favour
of private parties.

Research

 Held:[1979] ECR 777

Case of Simmenthal SpA v Commision
ii. Directives
 By Art 288: ‘A directive shall be 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.’
 Directives are unlike regulations (which are uniform and directly applicable
rules):
o they are used to ensure that Member States adapt their own laws for
the application of common standards;
o they require Member States to choose the method of
implementation within a set deadline;
o they are mainly used in areas where the diversity of national laws
could have a harmful effect on the establishment or functioning of
the Single Market.
 So, whereas a regulation is applicable to Member States and individual
citizens alike, a directive:
o is primarily intended to create legal obligations on the Member State;
o so is not intended to create directly enforceable rights for
individuals, but the ECJ ensures that it does.

 However, there are now important exceptions to this last point:

o vertical direct effect, which may be relied upon by the individual in

the case of unimplemented directives if the claim is against the state
or an ‘emanation of the state’.

Van Duyn V Home [1974] ECR 137

Facts: Yvonne Van Duyn, a Dutch national, claimed the British
Government, through the Home Secretary, infringed TFEU article
45(3) (then TEEC art 48(3)) by denying her an entry permit to work at
the Church of Scientology. The Free Movement of Workers Directive
64/221/EC article 3(1) also set out that a public policy provision had
to be 'based exclusively on the personal conduct of the individual
concerned'. The UK had not done anything to expressly implement
this element of the Directive. The government had
believed Scientology to be harmful to mental health, and
discouraged it but did not make it illegal. She sued, citing the Treaty
of Rome and Community law, arguing that the Directive should apply
to bind the UK. She was not being refused because of 'personal
conduct'.The Home Office argued the provision was not directly
effective, because it left the Government the discretion to apply
exceptions to free movement.
 Held: that entry could not be refused on the basis of her association.
The freedom of movement for workers between Member States can
only be restricted due to public policy, public security, public health,
or overriding reasons of public interest as created by the Court of
Justice. Despite this qualification, the principle of free movement is
to be considered unconditional for the purpose of being relied upon
by an EU citizen. Van Duyn could be validly refused entry to the UK if
her personal conduct justified the refusal on the basis of one or more
of the above restrictions. A directive may become vertically directly
effective if unimplemented or implemented incorrectly to prevent
negative implementation effects on individuals.

o However, for the said unimplemented or wrongly implemented

directive to have such direct effect, the said directive must be’
 Clear and precise;
 Unconditional; and
 Has passed their date of implementation.

Pubblico Minitero v Tullio Ratti [1979] ECR 1629

Facts: Mr Tullio Ratti claimed that he should not have to comply with
a stricter Italian law that required him to label his solvents, on the
ground that it conflicted with two Directives. Mr Ratti sold solvents
and varnishes, some of which were imported from Germany that
complied with two Directives. Directive 73/173 (adopted 4 June
1973, to be implemented 8 December 1974) and Directive
77/728 (adopted 7 November 1977, to be implemented 9 November
1979) required solvents and varnishes to be packaged and labelled
specially. Mr Ratti complied with the Directives, but an Italian law of
1963 was stricter in some respects. Mr Ratti was prosecuted for
failure to comply with the Italian law. Directive 73/173 was already
meant to have been implemented, but Directive 77/728 was not yet
required to be implemented: Italy had not changed the law at all. Mr
Ratti argued that compliance with the Directives, rather than Italian
law, was enough. The court in Milan referred to the ECJ whether Mr
Ratti had to comply.

Held: The ECJ held that Mr Ratti was not bound by Italian law that
was meant to be changed by Directive 73/173, but he was still bound
by Italian law, which would later have to be changed under Directive
77/728 because its deadline for being implemented had not yet
passed.
“ 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 it’s own failure to
perform the obligations which the Directive entails”.
 It must be noted that, the direct effect of an unimplemented Directive is
limited to use against a state or an “emanation of state”.

Marshall v Southampton and South West Hampshire Area Health Authority

[1986] ECR 723;

The case was in relation to the issue of whether different retirement ages for
men and women in the UK amounted to discrimination under Directive
76/207, the ‘Equal Access Directive'; the ECJ confirmed that it was. It also
identified that the applicant was able to use the directive against her
employer but only because her employer was in fact the Health Service, an
organ of the state. The ECJ later indentified that the national courts should
decide what bodies a Directive could be enforced using vertical direct effect.
It was later explained that vertical direct effect may also affect bodies that
could be described as an ‘emanation of the state'.

Foster v British Gas [1990] ECR I- 3313;

There was a claim against British Gas in respect of the different retirement
ages for men and women based on the Equal Treatment Directive 76/207.
The English Court of Appeal held that British Gas was not a public body against
which the directive could be enforced. On appeal, the House of Lords sought
clarification from the ECJ, who replied with “A Directive may be invoked
against “a body, whatever its legal form, which has been made
responsible…for providing a public service under the state and has for that
purpose special powers beyond those which result in from the normal rules
applicable in relations between individuals.” On this interpretation a
nationalised undertaking such as British Gas would be a public body against
which a directive may be enforced, as the House of Lords decided. A number
of cases have considered and applied the Foster (1990) criteria.

iii. Decisions
 By Art 288: ‘A decision shall be binding in its entirety upon those to whom
it is addressed.
 The first feature of a decision is that it is the least easy to define of the
legislative acts – it could be a legally binding measure in a specific legal
form, but it could also be a non-binding, informal act laying down
guidelines.
 Its most striking effect is that it is immediately and totally binding on the
addressee, and as a result may create rights for third parties.
  It should also be noted that the Courts have held that a title of an Act
does not necessarily determine its legal classification. The Court will look
to the substance rather than form;
o In a joined cases International Fruit V Commission [1971] ECR
411, a piece od legislation that had been enacted as a
‘Regulation’ was held by the Court to be in fact, a ‘bundle of
decisions’.

General Applicability Direct Direct effect

Applicability
Treaty Yes – They will apply Once Treaty is Yes – if they
Articles throughout the EU incorporated there conform to Van
is no need for Gen den Loos
further enactment Criteria.
of Articles

Regulations Yes – They will apply Yes – they require Yes – if they
throughout the EU no further conform to Van
implementation Gen den Loos
Criteria.

Directives Yes – They will be No- they are an Only vertically if

addressed to all Member order, so they unimplemented or
States. require incorrectly
implementation. implemented.

Decisions No – they are addressed They are an order They may confer
to a particular individual that must be rights on other
complied with by individuals
the addressee. affected by them.

iv. Other acts;

  Article 288 TFEU is not exhaustive.
 The ECJ has recognized other types of legally binding Acts, such as Notices
and Resolutions, which are usually persuasive rather than legally binding.
 These are sometimes referred to as Acts sui generis, of their own kind,
which can be binding under certain conditions.
 The Court has held, for example, that certain Acts of European
Parliament, though not mentioned in Article 288, bind third parties, and
because they have legal effects vis-à-vis third parties are, therefore,
judicially reviewable [Les Verts v EP (1986) ECR 1339].
 As a result of this case the first paragraph of the Article 263 TFEU to
include an amendment “and of acts of the European Parliament intended
to produce legal effects vis-à-vis third parties (e.e. in the case of
Commission v Council (ERTA) [1971] ECR 263, a Council resolution was
held by the Court to have legal effect).

b. Non legally Binding Acts;

i. Recommendations
 A "recommendation" is not binding. When the Commission issued a
recommendation that EU countries' law authorities improve their use
of videoconferencing to help judicial services work better across borders, this
did not have any legal consequences. A recommendation allows the institutions
to make their views known and to suggest a line of action without imposing any
legal obligation on those to whom it is addressed.

ii. Opinions
 An "opinion" is an instrument that allows the institutions to make a statement
in a non-binding fashion, in other words without imposing any legal obligation
on those to whom it is addressed. An opinion is not binding. It can be issued by
the main EU institutions (Commission, Council, Parliament), the Committee of
the Regions and the European Economic and Social Committee. While laws are
being made, the committees give opinions from their specific regional or
economic and social viewpoint. For example, the Committee of the Regions
issued an opinion on the clean air policy package for Europe.

(3) Supplementary Legislation

a. Case Law of the ECJ
 The case law of the European Courts is an important source of law. There is no
doctrine of precedent in the European Courts as there is in the English courts.
 However, preliminary rulings of the European Courts must be followed by the
national courts under the doctrine of supremacy and the ECJ generally follows
its own case law, referring to its own ‘consistent case law’.
  If it intends to reverse a previous ruling, it will usually announce very clearly
that it is doing so.
 The Treaty of Rome was a ‘traité cadre’ – a framework treaty – and it was always
envisaged that it would be completed not only by secondary legislation but also
by case law.

b. General Principles of EU Law

 Will be studied in the future.

c. International Agreements with non member states (third Countries)

 Agreements with third countries are applied by the European Court as an integral
part of Union law. They include the following;
o Agreements between the Union and one or more third countries. An
example is the WTO agreement.
o So-called ‘mixed agreements’ between the Union and its Member States
acting jointly, on the one hand, and between the Union and third
countries, on the other hand. An example is the Lomé conventions
between the Union and the African, Caribbean and Pacific (ACP)
countries.
 EU law from other Member State Perspectives

1. Germany

 Germany has 5 separate court systems. Each of this court systems are
headed by a Federal Supreme Court.
 However, on constitutional issues, all courts are subject to the rulings of the
Federal Constitutional Court (FCC).
 Germany has a mitigated dualist system, and recognized the special
position of Union Law as distinct from traditional international law. This was
seen in the case of International Handelsgesellschaft (1974), also known
as “Solange I”, which followed the Court of Justice ruling in the case of
International Handelsgesellschaft (1970) The FCC held:

“ This Court – in this respect in agreement with law developed by the

European Court of Justice – adhered to its settled view that community law
is neither a component part of he national legal system nor international
law, but forms an independent system of law flowing from an
autonomous legal source”.

 In principle the two legal sphere stand side by side in their validity. In
particular;
o the union organs, including the Court of Justice, have to rule on the
binding force, construction and observance of Union Law, and;
o the national organs must rule on the binding force, construction and
observance of the constitutional law of the Federal Republic of
Germany.

 In the case of Lutticke (1971) made clear that in Germany, Union law is
applied directly and cannot be set aside by subsequent national laws ad
that each court is entitled to not apply national laws which are contrary to
Union Laws.

 Can Union Law be set aside of it violates the Basic Law of Germany, and in
particular fundamental rights that are protected by Basic Law?

o Solange I (1974)

 The FCC noted that the protection of fundamental rights was

an essential element of Basic Law, and that this power could
 not automatically be restricted by transferring sovereignty to a
supranational organization.
 In the opinion of the FCC , the fundamental rights guaranteed
under Basic Law was insufficiently protected under Union
Law, as the Union lacked democratically legitimated and
directly elected parliament as well as a codified catalogue of
human rights.
 The FCC could not rule on the validity or invalidity of Union
Law, but it held that the German authorities or courts should
not apply rules of community law which infringed the rule of
the Basic Law relating to the basic rights as long as the
Community did not itself provide adequate protection of
fundamental rights.
 In cases of doubt the FCC would rule on the existence of such
an infringement.

o Solange II (1987)

 The FCC held that the protection of the fundamental rights in

the Community has reached a degree where it was
comparable to the standard set by the Basic Law.
 On this basis the FCC ruled that it would no longer exercise
jurisdiction “only as long” as the Union, and in particular the
case law of the ECJ, generally ensures an effective protection
of fundamental rights as against the sovereign powers of the
Union.

o Brunner v The European Union Treaty (1993)

 when considering whether the Maastricht Treaty on European

Union unduly extended the competences of the European
Community and made too many inroads on German
sovereignty, the Federal Constitutional Court again re-
affirmed German constitutional sovereignty and its right to
review the scope of Community competence.

 The FCC has therefore found an accommodation with the supremacy of

Union Law whereby it acknowledges that supremacy but at the same time
retains a scrutiny role with regard to the fundamental doctrines of the
German Constitutional law.

o the extent of scrutiny was observed in the case of Honeywell (2010):

 “if the supranational integration principles is not to be endangered,
ultra vires review must be exercised reservedly by the Federal
Constitutional Court”.

2. France

 France’s legal order has two court systems: the judicial and the administrative
courts. The Cour de Cassation (highest civil court) accepted the primacy of directly
effective EC law, on the basis of Article 55 of the French constitution:

Article 55: ‘treaties or agreements which have been duly ratified or approved shall,
on publication, have a higher authority than the statuies, provided that the
agreement or treaty in question is applied by the other party’

o Vabre and Weigel (Cour de Cassation) [1975] 2 CMLR

 Vabre, a coffee importer, claimed violation of Article 95 (Now article

110) of the TFEU. The French Court held stated that:

“the EEC Treaty prevails over subsequent national statutes; it

establishes a new special legal order for which forms a constitutive
part of the national legal orders and is directly valid for the subjects
of the member states and binding for their judicial institutions”.

 The Conseil d’Etat, the supreme administrative court, has shown reluctance to
accept the primacy of Union law, and in particular has refused to accept that
Directives can have direct effect:

o Minister of the Interior v Cohn-Bendit [1980] 1 CMLR 543

 Facts: Daniel Cohen – Bandit, a german citizen born in france, was

one of the leaders of a student revolt. He had been deported after
that, but when he tried to enter France, later, to take up an offer on
employment, his request was refused. He challenged the decision
based on rights of free movement.

 Held: the French Courts held that directives could not be invoked by
individuals in national courts in order to challenge individual
administrative decision.

 The French Court has ignored the principle of Direct Effect of directives established
before this case. However, the French Court does recognize that, legislation
adopted by the French executive, as opposed to statutes passed by the legislature,
could be annulled where there is a conflict with the result to be achieved under the
directive [Compagnie Alitalia (1990)].
 The French Court adopted a more positive attitude doctrine of supremacy of Union
law over national legislation in the case of Nicolo (1990):

o Facts: this case concerned a challenge by two French citizens of legislation

giving the right to vote and stand for European Parliament elections to non
European French citizens of the overseas departments and territories.

o Held: the French Court, impliedly recognsed that EC treaty would prevail
over a French statute in case of conflict.

 The French Courts took a further step in Boisdet [1991] 1 CMLR 3, it held that an
EC Regulation took precedence over subsequent French statutes which conflicted
with it, on the basis of the Court’s case law.

 In Rothmans, Phillip and Morris and Arizona Tobacco [1993] 1 CMLR 253, it
awarded damages under the Factortame principle, for loss caused by a Ministerial
order which conflicted with an EC Directive (i.e. that directive would prevail over
a subsequently adopted statute).

 While, in practice, therefore, the French courts accept the primacy of directly
effective Union law, their reasoning is frequently based on the French constitution,
rather than on the European Court’s doctrine of supremacy. This is a similar view
to that expressed in UK and German courts that it is the national constitution which
is at the head of the legal order and that Union law supremacy exists only in so far
as it is provided for under national law.

3. Italy

 The Italian Constitutional Court has accepted the supremacy of Union law, based
on Article 11 of the Italian constitution:
o Frontini v Ministero delle Finanze [1974] 2 CMLR 372.
 However, it reserved the right to ensure that the fundamental principles of the
Italian constitution were not infringed by Union law. It reaffirmed this position in
the case of:

o SpA Fragd (1989).

 General Principles: Supremacy of EU Law

Supremacy of EU Law

 The European Court of Justice (ECJ), in a series of rulings, has developed the doctrine of supremacy
of EU law over national law.
 According to the European community law, where there is a conflict between European law and the
law of the Member States (MS), European law prevails.
o This has been evident since the case of Van Gen den Loos (1963);

“the Community constitutes a new legal order in international law, for whose benefit the States have
limited their sovereign rights, albeit within limited field”

 The doctrine of Supremacy of Community law had no formal basis in the European Community
Treaty, but was developed by the ECJ on the basis of its conception of new legal order.
 Even though the main emphasis of the judgement (of Van Gend) links to the terminology of direct
applicability and direct effect, it is also significant because, by referring to the new legal order, the
ECJ asserted that the Community had more independent status as well as greater impact on the
national legal systems of the Member States.
 The ECJ established the doctrine of supremacy of European Community law over national law in the
case of Costa V ENEL [1964] ECR 585.

1. Supremacy of provisions of EU legislation over provisions of national legislation.

Costa V ENEL [1964]

FACTS:

In 1962 the Italian Republic introduced a law which nationalised the production and distribution of
electricity and created an organization, ENEL, to which was transferred the property of the electricity
undertakings.

The applicant was a shareholder of a firm which had been affected by the nationalization, and
claimed that he was not liable for a bill sent to him for electricity supplied to him by ENEL. In
proceedings before the Justice of the Peace of Milan, Claimant claimed that the Nationalization Law
of 6 December 1962 was contrary both to the Italian Constitution and to a number of provisions of
the E.E.C. Treaty.

Issue

The European Court of Justice was required to adjudicate upon the doctrine of supremacy as it
pertained to the relationship between domestic and Community law, namely whether Community law
and the provisions of the various treaties limited the ability of Member States to enact legislation
which ran contrary to those provisions.

1
 Held

An Italian law, enacted to bring into effect an international treaty, is no different from any other law,
and is subject to the normal rules with respect to implied repeal when it conflicts with other laws. The
violation of a treaty provision does not invalidate a domestic law. However, as the Treaty of Rome
involved the partial transfer of sovereignty from Member States to the Community itself, a
subsequent unilateral law which is incompatible with the aims of the Community could not prevail.

2. Union Law is absolute over provisions of national constitutions.

International Handelsgesellschaft mbH v. Einfuhr- und Vorratsstelle für Getreide und

Futtermittel [1970] ECR 1125

 A constitution is the set of rules that govern political bodies. These rules are often protected by
special courts and cannot be changed as easily as ordinary law.
 In Costa the matter at hand regarded a clash between a provision of ordinary national law and a
provision in the Treaty.
 An interesting question is: what happens if that national provision is a constitutional provision?
 The case of Internationale Handelsgesellschaft concerned the question of whether EC law should
have supremacy over the Constitutions of the Member States and especially if Community law takes
primacy over the fundamental rights provisions in national Constitutions.
 The case is said to mark the classic claim of full supremacy of Community law.
 The Court held that Community law should take precedence over all provisions in national law
whatever its legal status even the Member States’ Constitutions.

FACTS:

 In order to control the market in certain agricultural products, a system had been introduced by the
Community, under which exports were permitted only if the exporter first obtained an export license
and gave an economic deposit. However, if the firm failed to import the goods then the firm would
lose its deposit. The matter at hand regarded a firm that had lost its deposit. The applicants claimed
that the whole system was invalid as it was contrary to fundamental human rights. According to
German constitutional law public authorities may impose on the citizen only those obligations which
are necessary for attaining the public objective in question.
 In the German administrative court it was argued that the Community measure was invalid for it
violated the German Constitution and the question of its validity was referred to the ECJ for
preliminary ruling.
 The question concerned whether the ECJ considered the European regulation to be in violation of
fundamental rights of individuals.

HELD:

 The ECJ held that the law stemming from the Treaties is an independent source of law and that it
cannot be overridden by rules of national law “however framed”. Otherwise, it would be deprived of
its character of Community law which would lead to the Community itself be called into question.
Consequently, the “validity of a Community measure or its effect within a Member State cannot be

2
 affected by allegations that it runs counter to either fundamental rights as formulated by the
constitution of that State or the principles of a national constitutional structure”.

Significance:

 This means that no matter what the nature and status of the legal provision of the Member State, the
directly applicable Community provision shall take precedence.
 Therefore, fundamental rights that are part of a Constitution or the constitutional structure of a
Member State cannot affect the validity of Community law.
 Furthermore, the ruling made it clear that Community law has precedence even over national
legislation that was adopted after the relevant Community provision. The Court justified its ruling be
referring to the fact that the unity and efficacy of EC legislation would be seriously harmed if a national
court would be permitted to review its validity on the basis of specific provisions in the Member
States’ legal system.

3. It affects both prior and future legislation

Simmenthal

HELD:

where the Court held that national courts, even a lowly court of first instance, have a duty to set aside
provisions of national law which are incompatible with EC law. There was no need to wait for the
national law to be amended in line with national constitutional procedures: the national rule had to
be set aside immediately if it conflicted with a directly applicable or directly effective Community
provision.

4. Factual Application of the Doctrine.

Commission v France (Re French Merchant Seamen) [case 163/73]

FACTS:

In an action based on the French Code Maritime, the code provided a discriminatory ration on
number of Frencg to nonFrench workers on merchant ships. The French Government argued that
the code was not enforced in practice.

HELD;

Non Enforcement by administrative practices are not enough. The maintenance of national law
contrary to union law gives rights to an ambiguous state of affairs, and leaves citizens of a member
state in a state of uncertainty.

3
5. Supremacy of EU law does not only cover the Courts, but also Administrative bodies, Nor
does the obligation to set aside conflicting national rules only apply to national courts:

Even an administrative agency dealing with a national social insurance scheme was held to be
required to do so in Case C-118/00 Larsy v INASTI [2001] ECR I-5063.

6. Member States are allowed to ignore national legislation that conflict Community Law.

Factortame (No.2) [1991]

The Factortame judgment is seen as the most far-reaching case made by the ECJ, with regards to
the relationship between Community law and the law in the Member States.
It makes clear that any Act of Parliament must be read as subject to directly enforceable rights under
the union law.

FACTS:

The origin of the case was a decision by the Community to adopt fish conservation measures. To
achieve this, limits were laid down on the total number of fish of various species that could be caught
in a given period. Quotas were allotted to each Member State. Certain Spanish fishermen, however,
thought that they could obtain a share of the British quota by the expedient of registering companies
in the United Kingdom and transferring the ownership of their boats to those companies.They
claimed that, since their boats were owned by British companies, they were entitled to sail the British
flag and therefore take fish from the British quota, rather than the Spanish quota. British fishermen
objected to this “quota hopping”, and the British Government passed legislation to prevent it.

The Spaniards immediately challenged the legislation in the British courts, claiming that the
registration procedure in the UK was discriminatory, and a reference was made to the ECJ to
determine whether it was contrary to Community law.
Since the ECJ normally takes about one to two years to decide such cases, this would have meant
that the fishing boats in question would have been idle for some time suffering irreparable damage.
The Spaniards therefore applied for an interim injunction to preclude the Government from enforcing
the British statute until the ECJ had given its ruling.

HELD:

House of Lords

 The House of Lords ruled that, under United Kingdom law, there was no power to grant an injunction
against the Crown to suspend the application of an Act of Parliament.
 The House of Lords then made a reference to the ECJ asking a question of remedies: did
Community law require that interim injunctions against the Crown should be available to litigants
claiming rights under Community law? In other words, could a national court suspend application of
a national rule that prohibits the national court from granting interim relief.

4
 ECJ

 The ECJ found in favor of the Spanish fishermen. It ruled that the effectiveness of EC law would be
impaired if a rule of national law could hinder a national court from granting interim relief in a matter
regarding Community law. The Court stated that national courts must set aside its national law if it
has a case before it concerning Community law and the only reason for not granting interim relief is
a rule of national law.
 The ECJ stated that where, in a case involving Community law, a national court considers that the
sole obstacle to the granting of an interim relief is a rule of national law, Community law requires to
set aside that rule.
 The ECJ reaffirmed its position in Simmenthal and stated that directly applicable provisions of
Community law make any conflicting provision of national law inapplicable. The British court must
disapply the Act of Parliament since it was inconsistent with the EC Treaty.
 Factortame had a considerable impact in the United Kingdom where parliamentary sovereignty is a
fundamental constitutional principle.

Significance:

 In essence what the decisions of the case appear to show is the defiant breach of parliamentary
sovereignty, which is the principle of parliament being a supreme law making body and no one can
override its legislation. The Factortame case is a great example of how courts would not act by the
law created by Parliament, where there is conflict with Community Law.
 After this case, the House of Lords have been give the authority to ignore Acts of Parliament which
may conflict with EU law.

Summary of the Cases;

 The cases of Costa and Internationale Handelsgesellschaft both clarified many questions relating to
the relationship between national law of the Member States and Community law.
 Costa laid the foundations of the supremacy doctrine by stating that Community law shall take
precedence over national law.
 In Internationale Handelsgesellschaft the Court stated that Community law has primacy over all
national law whatever the legal status of the national law.
 Thus, fundamental constitutional provisions in a national constitution cannot override EC law. The
national court of the Member States must therefore enforce Community law even if there is a clash
with their own national provisions.
 The Simmenthal II ruling laid clear the practical implications of the supremacy doctrine.
 Factortame enabled Member States to ignore any legislation that conflict with community laws.

5
 SUPREMACY OF EU LAW AND UK PERSPECTIVE

 The way in which Union law enters in to the legal systems of the Member States depends, from a
constitutional point of view, on whether the MS is a monist or a dualist in its approach of international
law;

Monist: the constitution provides for international law to enter into domestic law without a need for
further national measures of incorporation or transposition.

Eg. France

Dualist: international law does not become part of domestic law until it is incorporated by a domestic
statute.

 In the UK, the incorporation of the Community Law had presented two specific problems;
 Dualism is followed strictly; and
 There is the doctrine of Parliamentary Supremacy. Parliamentary
Supremacy is a principle of the UK constitution, making parliament the
supreme legal authority in the UK, which can create or end any law. The
courts do not have the authority to overrule its legislation and no Parliament
can pass laws that future Parliaments cannot change. Parliamentary
sovereignty is the most important part of the UK constitution.

 International treaties in the UK are ratified by the government under the power known as prerogative.
Generally, the government does not need to seek prior parliamentary approval before ratifying a
treaty. Treaties entered in to by the UK government do not affect the law applied by the domestic
court and are only binding in international law.

 A treaty will only have effect in the domestic legal system if an Act of Parliament incorporates it –
The European Communities Act of 1972.

As a dualist state without a written constitution the status of Community law in the UK derives
from the European Communities Act 1972. To what extent does that Act enable the British
courts to give effect to the principle of supremacy of EC law?

 The most significant provisions here are Sections 2 and 3. ‘Section 2(1) of the European
Communities Act 1972 makes the concept of direct effect a part of the UK legal system.

 It reckons that law which is under the EC Treaties is given immediate legal effect to be directly
enforceable in the UK. The English courts are directed by section 2(1) to enforce any directly effective
European Community measures.

6
 Thus, there is no need for a fresh act of incorporation to enable UK courts to bring into effect each
European Community Treaty provision, regulation, or directive which according to the European
Community law has direct effect.’

 Subsequently, section 2(2) provides for the implementation of Community obligations, even when
they are intended to replace national legislation and Acts of Parliament, by means of Order in Council
or statutory instrument rather than by primary legislation only. This is subject to Schedule 2 which
lists the ‘forbidden’ areas, such as the power to increase taxation, to introduce retrospective
measures or to create new criminal offences.

 Section 2(4) is the section relevant to the question of primacy. It does not expressly say EC law is
supreme. Under this section, any enactment passed or to be passed, other than one contained in
this part of this Act, such as an enactment of a non-Community nature, shall be construed and have
effect subject to the foregoing provisions of this section, such as obligations of a Community
nature. The Schedule to which the provision refers sets out a number of powers, such as increasing
taxation or legislating retroactively, which cannot be exercised by Order in Council or by delegated
legislation, even if they are necessary to comply with a Community obligation. It seems an Act of
Parliament will be needed for these powers.

 Under Section 3(1) any question as to the meaning or effect of any of the Treaties, or as to the
validity, meaning or effect of any Community instrument, shall be treated as a question of law and,
if not referred to the ECJ, be determined in accordance with the principles laid down by the ECJ.

 The provision makes the decision of the ECJ on the meaning and effect of European Community law
authoritative in UK courts, giving them, to use domestic legal language, the force of precedent.

 With regard to the effect of the European Communities Act 1972, s. 2(1) and (4), the first question
to arise is whether the combination of these two provisions is sufficient to enable the British courts
to give priority to European Community law, on Simmenthal principles, as the ECJ would require.
The very traditional constitutional view is that the doctrine of parliamentary sovereignty, and
particularly the principle of implied repeal, makes entrenchment of European Community law
impossible. Parliament is not free to bind its successors. Hence, priority for European community
law cannot be guaranteed, and s. 2(4) can only provide a rule of construction.

 The leading decision on the relationship between Community law and the UK law is Factortame,
which has been discussed early. Prior to that decision the judicial approach varied. The predominant
approach, despite early judicial comments to the contrary, was to use principles of construction to

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 assume that when Parliament enacted the 1972 European Communities Act it intended any
ambiguity or inconsistency with European Community law to be resolved by giving primacy to
European Community law, provided that there was no indication that Parliament expressly intended
to depart from a provision of Community law, the assumption being that if the latter were to exist
then the courts would follow the will of Parliament. Therefore, where an apparently conflicting
provision of English law was capable of being read in conformity with Community law, this was the
proper approach to take.

 The application of the indirect effect of Community law in the UK courts based on the above concept:

Pickstone v Freeman plc [1989] AC 66 HL

FACTS:

Miss Pickstone brought a claim against her employer under the Equal Pay Act 1970. She was
employed as a warehouse operative and was paid the same as male warehouse operatives.
However, Miss Pickstone claimed that the work of the warehouse operatives was of equal value to
that done by male warehouse checkers who were paid £1.22 per week more than she was.

HELD:

The House of Lords decided that the literal approach would have left the United Kingdom in breach
of its Treaty obligations to give effect to an EU directive. It therefore used the purposive approach
and stated that Miss Pickstone was entitled to claim on the basis of work of equal value even though
there was a male employee doing the same work as her.

Duke v GEC Reliance Ltd [1988] AC 618 HL

FACTS:

The court was asked about the differential in retirement ages between men and women in private
sector employment, and whether it constituted sex discrimination.

HELD:

Section 2(4) of the 1972 Act did not allow a British Court to distort the meaning of a British Statute
in order to enforce a Community Directive which does not have direct effect. Schemes which
concerned differential retirement ages for men and women were covered by the exemption.

 The House of Lords, later, accepted the ECJ’s ruling in the landmark case of Factortame.