European Union Internal Market

Gareth Davies

• Publisher: Routledge-Cavendish
• Year: 2016
• Print ISBN: 9781138150461
• eBook ISBN: 9781135333140
• Edition: 2
• Topic: Law
• Subtopic: International Law
• Index: Law

This is the first student book to focus on this core topic in EU law. It covers the essential rules of the free movement of people, goods, services and capital, and also explains related issues, such as harmonisation, the development of EU citizenship, human rights in the EU, and the regulation of ecommerce.

CHAPTER 1
INTRODUCTION

This book aims to provide a guide to the law governing the internal market for undergraduates and those on Masters courses. Its primary aim is to give a clear presentation of the essentials, but it is also hoped that it provides a conceptual framework for more in-depth thought and reading. For clarity and simplicity of use there are few footnotes, but at the end there are suggestions for further reading. There a selection of articles from journals, and some books, can be found. They have been chosen to complement each other and this book, providing differing views of the issues raised and discussed in the text.

It is intended that the book alone should provide enough information for introductory courses, or for revision. A student with a good knowledge of this law should be able to pass most internal market law exams. For those on more demanding or higher level courses, or who are more ambitious, the combination of the book and the further reading should provide in-depth knowledge of all the core internal market subjects, and an introduction to some of the related areas.

Of course, all students will also benefit from reading judgments and opinions. They are often quoted here, sometimes extensively, but getting to know the most important judgments in full will still be helpful in understanding the law.

A knowledge of basic Community law concepts is assumed—things like direct effect and supremacy—as well as some idea of what the European Union is. However no detailed knowledge of any other areas of Community law is needed to use this book.

1.1 INTRODUCTION TO THE INTERNAL MARKET

Article 14 EC Treaty states that the European Community shall establish an internal market. This will be ‘an area without internal frontiers, in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty’.

It is hoped that this will achieve two main ends. One is to increase prosperity in the member states of the European Union. The other is to bind those states more closely to each other, and move towards the ‘ever-closer union of the peoples of Europe’ which is mentioned in the preamble to the Treaty.

The process of building the internal market began with its economic side. Goods, workers, self-employed people, services and capital are all things that contribute to the economy (they are sometimes called economic factors). Treaty articles providing for their free movement between member states were the first part of the internal market to come into force, and remain central to it. Indeed, the European Court of Justice has taken to calling the free movement of these things ‘fundamental freedoms’.

These economic articles identify and prohibit the different kinds of national acts and rules which might inhibit free movement. Some of these are obvious, others less so. The articles themselves are short and straightforward, but their interpretation by the Court has been creative and purposive, sometimes radical. They dominate the legal framework of the internal market.

However, the framework of the market is not just economic. Free movement has been extended even to citizens of member states that are not economically active. Just because they are European Union citizens, a term explained in Chapter 4, they now have a right to move freely throughout the EU. This right is in its early stages, and perhaps not quite complete, but it is well on its way.

Moreover, in the future we may expect that frontiers will even be removed for people within the EU who are not EU citizens. Third country tourists, or workers, or refugees, may also acquire the chance to move freely from member state to member state. This may take some time, but the ultimate goal is that frontiers in Europe will be no more than signboards by the road.

The first section of this book, Chapters 2 to 8, deals with the basic law of free movement, introducing the Treaty articles, the major secondary legislation, and the way they have been interpreted by the Court. It also identifies the common themes underlying the different freedoms.

Chapters 9 and 10 then look at harmonisation. It is easy for a student to think that contentious caselaw and judgments are what European law is all about, but the harmonisation process, led by the European Commission, is at least as important. It is the legislative motor of the internal market. Underpinning it—the conceptual motor— is the philosophy of free markets and competition. Therefore Chapter 9 gives a brief explanation of the ideas and role of competition, before the next chapter looks at their application in the legal processes of harmonisation, using some recent examples.

Chapters 11 to 13 then look at some more sophisticated legal issues in free movement law. Chapters 11 and 12 explore its boundaries: does it extend to non-governmental bodies, and to situations within one state? Chapter 13 considers the position of intellectual property. Any discussion of this topic must be incomplete, partly because of the vastness of the subject matter, and partly because so many other areas of law, notably competition law, are involved. However, it is too important to ignore, and a student must have some idea of the particular problems raised.

Finally, Chapter 14 looks at social issues. Does the law of free movement reflect basic ‘European’ values, by protecting the rights of EU citizens and of third country nationals present here? Or does it rather undermine those values, by attacking European welfare states?

1.2 NOTE ON TERMINOLOGY

The articles regulating the free movement of economic factors are often referred to in this book as ‘economic articles’, to distinguish them from those concerned with noneconomic persons, such as EU citizens.

The (economic and non-economic) articles directly governing free movement are often called the ‘free movement articles’ to distinguish them from those concerned with, say, harmonisation, or competition.

The words ‘Community’ and ‘European Union’, or ‘EU’, are used fairly interchangeably. There is still a difference; the EU contains the Community, which contains the institutions; but it matters less and less. In any case, the law made by the Community institutions, pursuant to the European Community Treaty, is the law that applies throughout the EU, so it is EU law, as well as being Community law. In the text I have tended to say ‘Community law’ but talk about the ‘EU’ when the broader thing is being referred to. I just think it sounds nice that way.

In the context of the Treaties, the single market, the common market, and the internal market are the same thing. To my ear a common market emphasises the components of which it is made—the member states. It is clearly a shared thing. A single market only makes sense when contrasted with multiple markets—so it also highlights the division of Europe. An internal market, by contrast, seems to emphasise the wholeness and unity of what is being created, and so perhaps reflects best the purpose of it all.

1.3 NOTE ON TREATY NUMBERING

Revision of the Treaties has resulted in the Treaty articles changing their numbers several times over the years. This can be confusing. For example, an old judgment will mention Art 36, meaning what is now Art 30. If it mentions Art 30, it will be referring to what is now Art 28. In the text, current (post-Amsterdam and Nice) numbering is used. Old numbers have been left in judgments but the new ones have been inserted in square brackets.

CHAPTER 2
THE FREE MOVEMENT OF GOODS: TAXES AND DUTIES

There are three kinds of obstacle to the inter-state movement of goods that are recognised by the EC Treaty. These are customs duties, the presence of discriminatory taxation, and quantitative restrictions on imports and exports. Each of these is dealt with in separate Treaty articles, and requires its own explanation, although the first two are closely related.

2.1 CUSTOMS DUTIES

Article 25 EC says 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’. This article is directly effective.

2.1.1 What are customs duties and charges having equivalent effect?

A customs duty is strictly a tax on border crossing—rather like a toll that must be paid by each item, or kilo, or pounds-worth of goods, according to the particular rules. However it is not necessary to worry about this too much. The article has been partially explained by the Court in a way that removes such technicalities:

…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, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect.¹

This means that the name and the precise way the money is collected don’t matter. Even if it isn’t called a customs duty, and it isn’t collected by customs authorities, if the member state imposes a charge on goods just because they cross a frontier, this is caught by Art 25.

2.1.2 What are goods?

This raises the question ‘what are goods?’. The answer seems to be that they are any objects that can be valued in money. The Italian government imposed a charge on works of art leaving the country, and said that such artistic objects should not be considered as goods.² They were priceless, beyond mere monetary value, and anyway not the same thing as commercial or consumer goods. The Court responded very simply:

…by goods…there must be understood products which can be valued in money and which are capable, as such, of forming the basis of commercial transactions.

Thus, however vulgar it might be, since the works of art were obviously the sort of things that could be bought and sold, and therefore somebody thought it was possible to value them, they should be treated as goods. This suggests that almost any physical thing will be ‘goods’.

There may be some exceptions, or at least subtleties. In one case it was said that money which was still legal tender was not goods.³ Therefore a charge on the import or export of money was not caught by Art 25. This may seem sensible insofar as it is quite difficult conceptually to deal with the idea of buying and selling money (foreign exchange dealing apart), but in fact the decision was made because such charges were better dealt with under the rules of free movement of capital. Also, in the case of certain types of goods, such as weapons, or drugs, there are special Treaty rules which apply, and so one cannot simply use Art 25.

2.1.3 Does the purpose of the charge make a difference?

The article says that the charge must be levied ‘by reason of the fact’ that the goods cross a frontier. It is tempting to think that, therefore, if the charge was levied for some other reason—such as a tax on bananas that went to a fund that helped sick ex-banana workers—it would escape. This would not be right. The purpose of the member state is completely irrelevant.

Some cases have made this very clear. In the Italian Art case, the levy collected was used by the Italian government to pay for monitoring and protecting Italian art treasures. The state claimed that this was not a customs duty, or a charge having equivalent effect, because it wasn’t really any kind of tax, and it wasn’t adding noticeably to the budget, and in fact it was helping the art market in some ways.⁴

These arguments were not wrong, they were just beside the point. The point is that any charge which is imposed adds to the cost of the goods and therefore creates the same effect as if it was called a true customs duty. The reasons behind it, and even the fact that, in the long run or the wider context, it may do a lot of good things, are simply to be ignored.

This was confirmed in a well known case in which Belgium imposed a tax on the importation of diamonds, which went to a social fund for diamond workers.⁵ This time the state argued that the money was for a legitimate purpose, that the money raised was not going to the government, and that this was not an attempt to protect native production. Therefore it should not be considered equivalent to a customs duty, and should not be caught by Art 25. Again, its protests were dismissed.

Therefore in an Art 25 situation one should simply focus on the presence of the charge, and not be distracted by arguments about its aims and effects.

2.1.4 Are there any exceptions?

There are no exceptions to Art 25. If a charge is caught, it is prohibited. However, there are some situations where what looks like a charge having equivalent effect turns out not to be one at all. These fall into two categories: payment for a service, and where the charge is really part of a system of internal taxation.

2.1.5 Payment for a service

At a border crossing a carrier of goods may receive various services directly related to the goods. He may store his goods in a warehouse for a while, or have them repackaged, or have them undergo some kind of treatment, or be inspected for quality or the presence of bugs or disease. If he chooses freely to receive these services, then his payment for them, even though it is at the border, is not ‘by reason of the fact’ that he crossed the border, but ‘by reason of the fact’ that he received the service. The action that incurred the obligation to pay was not the frontier crossing, it was accepting the service. It is not therefore an Art 25 matter. This is obviously sensible.

However, if the member state makes services (in this case usually inspections) obligatory then the fee will be caught by Art 25. The reality is that at the border the carrier must then pay a charge, whether he wants to or not. The fact that the member state then insists his goods are treated in some way, and claims that the charge is for this, does not excuse it. A payment is only to be considered as for a service if that service is voluntarily received. This also seems sensible. The purpose and effect of the inspections is, as you would expect from the discussion of the purpose of charges above, not relevant.

Slightly more surprising is an exception to this second situation. If the service is compulsory not as a result of national law, but as a result of Community law, then, subject to conditions, the member state may claim payment. Note that this is only if the service—again almost always in practice an inspection—is compulsory. If Community law merely allows a state to make the inspections, the state may not charge, and if it does it will be caught by Art 25.

The conditions under which a member state may charge for these ‘mandatory inspections’ or other processes that Community law requires at the border were set out in a case concerning cattle entering Germany.⁶ A European directive required certain compulsory inspections on transports of live animals, for the protection of the welfare of the animals. The German government conducted these inspections, and charged the carrier. The Court said:

…such fees may not be classified as charges having an effect equivalent to a customs duty if the following conditions are satisfied:

1. they do not exceed the actual cost of the inspections in connection with which they are charged;
2. the inspections in question are obligatory and uniform for all the products concerned in the Community;
3. they are prescribed by Community law in the general interest of the Community;
4. they promote the free movement of goods, in particular by neutralizing obstacles which could arise from unilateral measures of inspection adopted in accordance with Art 36 [now 30] of the Treaty.

This statement is fairly clear, and remains the law, but there are several things to note about it. One is that because the cost of inspections may vary from country to country because of, for example, differences in wage costs of inspectors, the legal charge will also vary. Another is that the second requirement is that the inspections be uniform across the Community. Therefore if Community law insisted that cattle leaving the UK, France and Germany be inspected, because of an outbreak of some disease there, while cattle leaving other countries were not required to be, these inspections could not carry a charge. Thirdly, it is interesting that the Court’s justification for its approach, implicit in the last two conditions, is that the inspections are for the general good of the Community and the particular market. These are precisely the kind of arguments that it rejects when they are made by states trying to justify a charge. We see here how the Community has a monopoly on policy decisions concerning inter-state trade.

A final addendum to this category are inspections (or other services) carried out pursuant to an obligation in international law. If an international agreement to which all the member states are parties requires some form of inspection, then the Court has accepted that it is legitimate to charge a fee proportional to the cost and not exceeding it.⁷

2.1.6 An apparent charge, that is in fact internal taxation

Within a member state it is acceptable for the government to impose taxation on goods or the sale of goods...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Table of Cases
• Table of Treaty Articles
• Community Acts and Secondary Legislation
• Chapter 1 Introduction
• Chapter 2 The Free Movement of Goods: Taxes and Duties
• Chapter 3 The Free Movement of Goods: Quantitative Restrictions
• Chapter 4 The Free Movement of Persons
• Chapter 5 The Free Movement of Services
• Chapter 6 The Free Movement of Capital
• Chapter 7 Exceptions to Free Movement
• Chapter 8 Common Principles: Discrimination and Market Access
• Chapter 9 Competition and the Internal Market
• Chapter 10 The Process of Harmonisation
• Chapter 11 The Wholly Internal Situation
• Chapter 12 Private Actors
• Chapter 13 Intellectual Property
• Chapter 14 Social Issues of Internal Market Law
• Further Reading and Bibliography