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Critical discussion about how the EU legislation and the case law of the Court of Justice ensures the free movement of goods in the internal market
'The free movement of goods is an essential element of the internal market and both EU legislation and the decisions of the Court of Justice support the achievement of this aspect of economic integration. However, the EU internal market is imperfect, so far as goods are concerned. There remain impediments to free movement which are not only embedded in the legislation but also arise from the case law of the Court of Justice.'
In light of this statement, critically discuss the extent to which EU legislation and the case law of the Court of Justice ensure the free movement of goods in the internal market.
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.1 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.2 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.
Charges Having Equivalent Effect (CHEE).
Article 28 of the TFEU promotes the free circulation of goods within the EU by establishing a customs union. The customs union prohibits the charging of any duties on imports and exports within member states of the EU or the levying of any charge having the equivalent effect as a customs duty (CHEE).3 Duties are still payable on goods coming from countries outwith the EU but once the goods have passed through the import formalities of one member state they enjoy the same freedom of movement as goods originating within the EU.4 In the Case 24/68 Commission v Italy (Statistical Levy case) the CoJ defined a CHEE as "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"5 The case concerned the levying of a small fee (only 10 lira) on imports and exports to fund statistical surveys. Although the fee was small it was still found to be an impediment to the free movement of goods and therefore a breach of Article 30 of the TFEU.6 Likewise in joined Case 2 and 3/69 Sociaal Fonds voor de Diamantarbeiders case where a charge on diamonds imported into Belgium to contribute to a social fund for workers in the diamond industry was found to be a CHEE even though the state did not benefit.7 In order to ascertain if a charge is indeed a CHEE the CoJ established a threefold test which requires that the charge must be imposed at the time of importation or subsequently, imposed specifically upon a product imported from another member state to the exclusion of a similar national product, and must result in a variation in the price of the product.8
It is not always the case that a charge on imported or exported goods will be considered a CHEE.9 In the Case 18/87 Commission v Germany (Animal Inspection Fees)10 the CoJ found that fees charged for animal inspections which were required by an EU Council Directive were acceptable.11 The case also highlighted that fees were acceptable if they were in consideration for services rendered and proportionate to that service.12 In the case of Case 170/88 Ford of Spain v the Spanish State a charge of 0.165% of the value of the goods was considered to be excessive for the service provided.13 However in that particular case the CoJ also rejected the notion that a service had been provided. The interpretation of what constitutes a service rendered is narrowly defined.14 In Case 87/75 Bresciani v Amministrazione delle Finanze the CoJ found that charges in connection with veterinary inspections were not acceptable because they were not in the individual interest of the importers.15
In addition to charges for services rendered, member states are able to charge taxes on goods.16 However any tax must be applied indiscriminately to national goods, as well as to imported goods.17 In Case 90/79 Commission v France (Reprographic Machines) it was argued that a tax imposed on all copying machines was a CHEE because very few copy machines were actually manufactured in France.18 The decision of the CoJ referred to the fact that a CHEE encompassed any charge imposed on an imported product but not on a similar national product.19 The effect of such a charge would cause an increase to the cost price of the imported product but not the national one. The CoJ also opined that in circumstances where no identical or equivalent product existed at the national level a charge imposed on imported goods did not constitute a CHEE. The circumstances of the present case were sufficient to satisfy the court that levy on copy machines in France was non-discriminatory, applying as it did, systematically to all manner of copy product, and therefore not a CHEE.
The distinction between a tax and a CHEE can be difficult to determine. In Case 132/78 Denkavit v France it was argued that a charge on imported meat was the equivalent to a tax payable by French slaughterhouses.20 However the CoJ found that the charge constituted a CHEE due to the fact it was imposed under a different criteria to the tax imposed on the national suppliers.21 The test is whether the tax has a protectionist effect to the detriment of goods produced outwith the member state.22 Provided that any tax imposed on imported products is imposed on national products as well, it is acceptable even if it is indirectly discriminatory.23 For example, in Greece, a tax on all vehicles whether imported or produced in Greece rose for vehicles over 1800cc. The effect was indirectly discriminatory against imported vehicles because Greece did not produce cars over 1600cc..24 However the CoJ did not consider the tax a CHEE because the purpose of the tax was discourage the purchase of cars with bigger cylinder engines whether they were manufactured in Greece or elsewhere. The application of the levy was not a method of discouraging consumers from purchasing imported cars to the benefit of the domestic market.25
In addition to ensuring taxation is applied without prejudice to imported goods, member states must not impose taxation on imported products that are similar and can be considered in competition with a national product.26 For example, the question of whether whiskey should be considered equivalent to fruit wine was considered in Case 243/ 84 John Walker and Sons Ltd v Ministeriet for Skatter og Afgifter in order to determine whether the taxation imposed on each producer should be the same.27 Although both drinks were alcoholic there were significant differences which meant the products were not equivalent for taxation purposes.28 However this case can be contrasted with Case 170/78 Commission v UK (Wine Excise Duties No.2) where it was found that beer and wine should be considered to be competing products and taxation applied to both evenly.29
Quantitative Restrictions and Measures Having Equivalent Effect (MEQR).
The free movement of goods is realised not only by the removal fiscal barriers but also by the removal of non-financial obstructions.30 Articles 34 and 35 of the TFEU prohibits any form of quantitative restrictions on imports and exports and any measure having the equivalent effect of quantitative restrictions. Quantitative restrictions are measures which restrict the volume of goods which may be imported or exported, for example by means of quotas, licensing, or by an outright ban.31 In Case 124/81 Commission v UK (Import of UHT Milk) it was found that import licences acted as a quantitative restriction on importers even though the licences were a mere formality and issued on request.32
MEQR is defined as "all trading rules enacted by a member state which are capable of hindering, directly or indirectly, actually or potentially, intra-community trade."33 The definition is very broad and encompasses a variety of diverse forms of obstruction. For example in Case 8/74 Procureur du Roi v Dassonville it was found that the requirement in Belgium to have a certificate of origin for goods constituted a MEQR. In contrast inaction by France that allowed protestors to halt Spanish produce entering France was also considered to constitute a MEQR.34 Legislative guidance is available in the form of Directive 70/50 but again, the language is necessarily broad and widely interpreted.35
Particularly significant is that measures need not have a direct effect on imports to constitute a breach of Article 34 of TFEU.36 This is demonstrated in Case 249/81 Commission v Ireland (Buy Irish) which concerned a government controlled company which undertook an advertising campaign to promote the sale of national products.37 It was found that the state encouragement to buy Irish should be considered a MEQR. The decision in Case 249/81 Commission v Ireland (Buy Irish) was tempered slightly in Case 222/82 Apple and Pear Development Council v Lewis where it was held that a member state could create a specialised national product group to research and give technical advice provided no attempt was made to entice consumers to purchase only home grown produce.38
Measures effecting the free movement of goods may be distinctly applicable or indistinctly applicable.39 Distinctly applicable measures impose different burdens on national and imported goods, to the detriment of the imported goods.40 Indistinctly applicable measures are those which impose the same burden on national and imported goods but which may impose a different burden in fact.41 In Case 120/78 Cassis de Dijon it was found that the prohibitions contained in Article 34 of the TFEU apply to indistinctly applicable measure as well as distinctly applicable measure.42
In order to promote the free movement of goods it has been recognised by the ECJ that in certain circumstances a dual-burden exists on importers.43 A dual burden may exist where a producer has complied with the requirements of his own member state but is then required to comply with further requirements of the member state to which the goods are being exported.44 In order to remedy a fundamentally unfair situation the ECJ deemed it a requirement to remove all dual-burden measures.45 Dual-burden measures are indirectly discriminatory measures because although the measure applied equally to national goods and imported goods the effect is that imported products are subjected to two sets of regulations which may well impose additional expenses. For example in Case 261/81 Walter Rau (Margarine) an additional production line would have had to have been implemented in order for the producer to comply with the requirements of the member state he wished to export margarine to.46
The question of whether dual-burdens should be construed as a MEQR contributed to a spate of conflicting case law.47 However in joined Cases C-267-8/91 Keck and Mouthard it was eventually established that national regulation did not constitute a MEQR.48 The decision was utilised to halt the perceived exploitation of Article 34 of the TFEU by producers in order to circumvent national laws that were not aimed at restricting imports at all, but were applicable across the product in question.49
Article 36 of the TFEU provides a number of clearly defined exceptions to the prohibitions detailed in Articles 34 and 35. Specifically restrictions to the free movement of goods may become justified on grounds of public policy, morality, or public security. In addition in order to protect the health and life of humans, animals, and plant and to protect national treasures the prohibitions maybe lifted.50 Finally, derogations from Articles 34 and 35 is allowed in order to protect industrial and commercial property. In Case 113/80 Commission v Ireland (Metal Objects) it was held that the list of grounds for derogation in Article 36 of TFEU should be construed as narrowly as possible because they were "exceptions to a fundamental principle."51 Article 36 of the TFEU also stipulates that any prohibitions or restrictions to the free movement of goods should not be means of "arbitrary discriminatory or a disguised restriction on trade between member states."52
The free movement of goods within the EU is a fundamental tenet of the single market. However ensuring the continued free movement of goods has been a complex task. The legislative guidance is necessarily broad to encompass an endless list of possible obstructions to free movement. The policy on free movement of goods is realised through prohibitions on fiscal and non-fiscal barriers which have been widely supported by the CoJ. The development of the case law is somewhat piecemeal and on occasion contradictory. There has certainly been great difficulty in eliminating the non-financial barriers to the free movement of goods and it seems that the law in this area in particular continues to evolve. There is no simple solution to a system that relies on being broad enough to respond to unknown variables in order to continue to ensure the fair and free movement of goods within the EU.
1 Treaty in the Functioning of the European Union (TFEU) Article 26(2).
2 TFEU Articles 28 to 37 and 110 to 113.
3 TFEU Article 30.
4 TFEU Article 29.
5 Case 24/68 Commissioner of the European Communities v Italy (Statistical Levy case) 1996 ECR 193 at para 2.
7 Case 2/69 and 3/69 Sociaal Fonds voor de Diamanterbeiders v SA Ch Brachfield and Sons and Chougol Diamond CO 1969 ECR 30.
8 Joined cases 2/62 and 3/62 Commission v Grand Duchy of Luxembourg and Kingdom of Belgium (Gingerbread case) 1962 ECR 425.
9 Nigel Foster EU Law (3rd edn Oxford University Press, 2011).
10 Case 18/87 Commission v Germany (Animal Inspection Fees) 1988 ECR 5427.
11 Council Directive 81/389.
12 Case 18/87 Commission v Germany (Animal Inspection Fees) 1988 ECR 5427.
13 Case170/88 Ford of Spain v the Spanish State 1989 ECR 306.
14 Nigel Foster (n. 9).
15 Case 87/75 Bresciani v Administrazione delle Finanze 1976 ECR 129.
16 Grainne de Burca and Paul Craig EU Law: Texts, Cases and Materials (5th edn Oxford University Press, 2011).
17 TFEU Article 110.
18 Case 90/79 Commission v France (Reprographic Machines) 1981 ECR 27.
20 Case 132/78 Denkavit Loire v France 1979 ECR 139.
22 Nigel Foster (n.9).
23 Catherine Barnard and Steve Peers European Union Law (Oxford University Press, 2014).
24 Case C-132/88 Commission v Greece (Taxation of Motor Cars) 1992 I-01567.
26 TFEU Article 110.
27 Case 243/84 John Walker and Sons Ltd v Ministeriet for Skatter og Afgifter 1986 ECR 100.
29 Case 170-78 Commission v UK (Wine Excise Duties No.2) 1983 ECR 203.
30 Nigel Foster (n. 9).
31 Nigel Foster (n. 9).
32 Case 124/81 Commission v UK (Import of UHT Milk) 1983 ECR 203.
33 Case 8/74 Procreur du Roi v Dassonville 1974 ECR 82 at para 1.
34 Case C-265/95 Commission v France (French Farmers/ Spanish Strawberries) 1997 ECR 595.
35 Nigel Foster (n. 9).
37 Case 249/81 Commissioner v Ireland (Buy Irish) 1982 ECR 402.
38 Case 222/82 Apple and Pear Development Council v KJ Lewis Ltd 1983 ECR 370.
39 Nigel Foster (n. 9).
40 Alina Tryfonidou 'Free movement of goods' 2014 Westlaw Insight last accessed 21/6/2014.
42 Case 120/78 Cassis de Dijon 1979 ECR 649.
44 Alina Tryfonidou (n. 40).
45 Case 120/78 Cassis de Dijon 1979 ECR 649.
46 Case 261/81 Walter Rau (Margarine) 1982 ECR 382.
47 Alina Tryfonidou (n. 40).
48 C-267-8/91 Keck and Mouthard 1993 I-6097.
49 Alina Tryfonidou (n. 40).
51 Case 113/80 Commission v Ireland (Metal Object) 1983 ECR 139 at para 1.
52 TFEU Article 36.