Exceptions from EU Free Movement Law

Derogation, Justification and Proportionality

Panos Koutrakos, Niamh Nic Shuibhne, Phil Syrpis, Panos Koutrakos, Niamh Nic Shuibhne, Phil Syrpis

• Publisher: Hart Publishing
• Year: 2016
• Print ISBN: 9781509928866
• eBook ISBN: 9781509900350
• Edition: 1
• Topic: Law
• Subtopic: International Law
• Index: Law

This collection of essays brings together contributions from judges, legal scholars and practitioners in order to provide a comprehensive assessment of the law and practice of exceptions from the principle of free movement. It aims:
– to conceptualise how justification arguments relating to exceptions to free movement operate in the case law of the Court of Justice of the European Union and national courts;
– to develop a comprehensive and original account of empirical problems on the application of proportionality;
– to explore the legal and policy issues which shape the interactions between the EU and national authorities, including national courts, in the context of the efforts made by Member States to protect national differences. The book analyses economic, social, cultural, political, environmental and consumer protection justifications. These are examined in the light of the rebalancing of the EU constitutional order introduced by the Lisbon Treaty and the implications of the financial crisis in the Union.

1

The Exceptions to the Four Freedoms: The Historical Context

DAVID EDWARD

THIS BOOK IS concerned with the exceptions to the Treaty rules governing the four freedoms, discussing the question: What restrictions or limits can be placed on the right of freedom of movement for goods, persons, services and capital? The relevant provisions, now contained in Part 3, Titles I, II and IV of the Treaty on the Functioning of the European Union (TFEU), remain largely unchanged since they were written almost 60 years ago. Yet they were written for a very different world—a world of slow communication (largely by post) and slow travel (largely by land or sea) where state frontiers were, in every respect, seen and unseen, barriers to freedom of movement. They were conditioned by the political, social and economic context of the time and by the international agreements that were already in place or under negotiation.

Use of the expression ‘four freedoms’ in the Treaty context was inspired by President Roosevelt’s State of the Union message on 6 January 1941, where he spoke of the four fundamental freedoms: freedom of speech and expression; freedom of worship; freedom from want; and freedom from fear. As a way of summarising the aims and ideals of the Treaty, ‘the four freedoms’ was excellent. From a legal point of view, it has been misleading in so far as it suggests that the Treaty provisions on each of the four topics (goods, persons, services and capital) are of the same character and follow parallel tracks. In fact they deal with different forms of economic activity, and were conceived in different ways and for different reasons.

Development of the law has been beset by four problems:

—the absence of the implementing legislation envisaged in the Treaty;

—changes in public preoccupations and priorities over the years;

—the limits of the procedural scheme within which the European Court of Justice (ECJ) (now the Court of Justice) has to operate; and

—tracing an acceptable line of demarcation between the functions of the judiciary and those of the legislature.

The following chapters discuss these and other issues. The aim of this chapter is to provide the historical context which is often overlooked: the Treaty-makers in 1956–57 did not start from scratch.

The contracting Member States of the Treaty establishing the European Economic Community (EEC) were already signatory States of the General Agreement on Tariffs and Trade (GATT 1947) and of the Organisation for European Economic Co-operation (OEEC 1948). The GATT was the forerunner of the World Trade Organisation but, at that stage, dealt only with trade in goods, being ‘directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce’.¹

The OEEC (forerunner of the Organisation for Economic Co-operation and Development (OECD)) was originally set up in 1948 to administer the Marshall Plan. Robert Marjolin, who led the French delegation in the negotiations for the EEC Treaty and was one of the first commissioners, was its first Secretary General. The interests of the OEEC were wider than those of the GATT and included matters that fall within the scope of the Treaty chapters on capital, establishment and services. A Code of Trade Liberalisation, adopted in 1950, was extended in 1951 to include invisible current account operations, especially those related to economic activities and international trade. Negotiations went on during the 1950s for a Code of Liberalisation of Capital Movements, eventually realised in 1959.

In addition, there were the precedents of the Belgium–Luxembourg Economic Union dating back to 1921, and the Benelux Customs Union, originally devised by the governments in exile in London, which came into force in 1948. The Belgian government in exile included Paul-Henri Spaak, who later chaired the Committee whose report formed the basis of the drafting convention for the new EEC Treaty (the Spaak Report).²

All the negotiators of the new EEC Treaty were conscious that its terms must, as regards goods, be compatible with the GATT and, as regards goods and capital, be consonant with the direction of travel of the OEEC. The programme set out in the Spaak Report envisaged the creation of a Common Market based on a customs union with no internal tariffs and a common external tariff.

The significance of the customs union as the economic bedrock of the EU tends, at this distance of time, to be overlooked. But it was only within the context of a functioning customs union that the complete fusion of markets implied in a Common Market could be achieved. Since the creation of a customs union necessarily involved a difference of treatment as between goods of internal and external origin, Article XXIV of the GATT required that any new customs union be completed (a) according to a plan or schedule submitted for consideration to the other Contracting Parties and (b) within a reasonable time.³

The rules of the Treaty therefore constituted the required ‘plan or schedule’, while Article 8(7) EEC provided that 31 December 1969 (the end of the transitional period) was to ‘constitute the latest date by which all the rules laid down must enter into force and all the measures required for establishing the common market must be implemented’. This explains why Pierre Pescatore, who had been one of the Luxembourg negotiating team and was later a Judge of the ECJ, denounced the Single European Act, with its legislative programme for completion in 1992 (23 years late), as inconsistent with the Community’s obligations under the GATT.⁴

In 1956–57, the most contentious issues in the course of the negotiations concerned the conditions for creation of the customs union, the progressive elimination of internal quotas, and the conditions of trade in agricultural products. These were the subject of detailed provisions—mainly programmatic—which have now disappeared from the Treaty, leaving the general rules set out in Articles 30, 34–37 and 110 TFEU. (Agriculture has always been dealt with separately.)

The basic rules on free movement of goods within the customs union were taken directly from the GATT. Article XI.1 (General Elimination of Quantitative Restrictions) stated the general rule:

No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.

Article XX of the GATT (General Exceptions) provided, so far as relevant for present purposes:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a)necessary to protect public morals;

(b)necessary to protect human, animal or plant life or health;

(c)…

(d)necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;

(e)…

(f)imposed for the protection of national treasures of artistic, historic or archaeological value; …

Article XXI provided for exceptions on grounds of national security.

The aim of the Treaty-makers was to establish a code, compliant with the GATT, setting out the basic rules and limited exceptions. Comparison of the Treaty texts with those of the GATT helps to explain two points where the more telegraphic wording of the Treaty has given rise to perplexity.

First, the expression ‘quantitative restrictions … and all measures having equivalent effect’, used in Articles 34 and 35 TFEU (30 and 34 EEC), seems to imply that it is only measures having effect equivalent to quantitative restrictions that are struck at. By contrast, Article XI.1 of the GATT clearly strikes at all restrictions made effective through quotas, licences or other measures. This explains the wide interpretation given to ‘measures of equivalent effect’ in Dassonville.⁵

Second, Article 36 TFEU (36 EEC), having stated in the first sentence that certain prohibitions or restrictions on imports, exports or goods in transit are permitted, goes on in the second sentence to say that they ‘shall not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States’. It is not obvious how these sentences fit together. Article XX of the GATT makes it clear that the distinction to be drawn is between the adoption and enforcement of the permitted prohibitions and restrictions and the manner of applying them. It is the latter which may constitute an ‘arbitrary or unjustifiable discrimination’ or ‘disguised restriction on trade’.

The Spaak Report envisaged that the customs union and the single internal market in goods would be part of a Common Market covering all aspects of economic activity. But apart from trade in tangible goods, there was no code, such as the GATT, to be followed. An obvious distinction could be drawn between the economic activities of human beings, those of entities such as companies which have legal personality, ‘invisible’ monetary transactions, and the provision of ‘services’ considered in the abstract. But there was no particular sanctity about any method of classification nor any firm precedent.

In the Spaak Report, free movement of the liberal professions was treated, first, as an aspect of services, but later, as regards the professionals themselves (and almost as an afterthought), as analogous to free movement of wage- and salary-earners (‘workers’). The financial and non-personal aspects of establishment, such as the acquisition of premises, opening factories and offices, and moving fixed plants were mentioned under the general heading of free movement of capital.

In the Treaty, the various forms of economic activity are classified, in the heading of Title III, under the three heads of Persons, Services and Capital, but the operative provisions are arranged, confusingly, under four heads: Workers, Establishment, Services and Capital. There is no particular problem about treating free movement of workers and capital as distinct categories, but this is less so as regards establishment and services which cover the activities of natural persons (human beings), legal persons (companies, partnerships, etc.) and ‘invisible’ services. However, as noted at the beginning, the Treaty was written in an era of slow travel and slow communication. In the 1950s moving from one country to another to establish a business would normally involve physically uprooting oneself from one’s country of origin, and even the temporary provision of services would normally require the physical movement of the provider to the recipient or vice versa.

The Chapter on capital was programmatic, rather than prescriptive, with the exception of Article 67(2) EEC on ‘current payments’, which followed the existing approach of the OEEC. The provisions of this Chapter are now very different from those originally enacted.

By contrast, the Chapters on workers, establishment and services remain very much the same. There is a degree of uniformity in approach, providing for (a) a general rule of freedom of movement to be achieved by the end of ...

Table of contents

• Cover
• Title Page
• Foreword
• Preface
• Contents
• List of Contributors
• Table of cases
• 1. The Exceptions to the Four Freedoms: The Historical Context
• 2. Economic Justifications and the Role of the State
• 3. Citizenship: Reallocating Welfare Responsibilities to the State of Origin
• 4. (Dis)Enfranchisement and Free Movement
• 5. Social Justifications for Restrictions of the Right to Welfare Equality: Students and Beyond
• 6. The Worker Protection Justification: Lessons from Consumer Law
• 7. Cultural Policy Justifications
• 8. Morality, Free Movement and Judicial Restraint at the European Court of Justice
• 9. The Constitutional Dimension of Public Policy Justifications
• 10. Public Security Exceptions and EU Free Movement Law
• 11. Free Movement, the Quality of Life and the Myth that the Court Balances Interests
• 12. Justification, Proportionality and Consumer Protection
• 13. The Proportionality Test: Constructive Dialogue between the English and Scottish Courts
• 14. EU Secondary Legislation and its Impact on Derogations from Free Movement
• 15. Primary Laws: Judging Free Movement Restrictions after Lisbon
• Index
• Copyright Page