How far has the creation of a single market in goods resulted in the limitation of powers of community member states in the field of commercial activity?

Introduction

Free movement of goods is a fundamental part of the single market, although goods have never been defined by the EC treaty, it was left sufficiently vague so as to encompass many products ”which shall cover all goods”. The principle of movement of goods has been described as the “corner stone” of the community as defined in Article 14 originally Article 8a of the EEC Treaty:

“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"

The underlying objective permeating through the main provisions of the community concerning free movement of goods political integration. The phrase ‘single market’ or ‘internal market’ replaced the term ‘common market’ by the Single European Act 1986. The primary reason why states joined the community was because of the benefits and exposure it would give their goods in the internal market, a market free of internal restriction on trade. The philosophy behind the free market was that market forces compete in the world market increasing economic efficiency. This philosophy of included in its definition, products originating from third countries. This can be seen in Article 23.

The policy of free movement of goods is based on a concept of a customs union. The EC Treaty strives to seek a customs union under Article 23 (ex Article 9) which means in effect prohibition between member states on customs duties and the adoption of a customs tariff in relations with third countries. It also seeks to eliminate quantitative restrictions on imports and exports and all measures having equivalent effect, Articles 28 and 29. States also have to ensure that discrimination does not exist concerning the procurement of goods between national of member states as in Article 31 (ex article 37). In terms of state monopolies of a commercial character

Generally freedom of goods applies to goods produced within the community and those from outside the community which are in free circulation, this can be seen in Article 23 and Article 10 (1). Goods or products are not defined in the Treaty, therefore the courts have found difficulty in defining what goods or products are also there have been problems where products have been produced in various countries therefore the problem of origination occurs. In the case of Commission v. Italy, this case attempted to establish whether the Italian Government where in breach of Article 16 of the EEC when they continued to levy progressive taxes on the export to other Member States of Community products having “artistic, historical, archaeological or ethnographic value”. Italy attempted to argue that the goods where not consumer goods or products of general use and not therefore subject to the provision of the Treaty which applied to ordinary merchandise. The court pointed out that Article 9 (new Article 23) that the community “is based on a customs union which shall cover all trade in goods”

All goods within the community are in free circulation. This includes products outside the community. Free circulation entails removal of all barriers to this freedom of movement of goods which includes customs duties, any charges having equivalent effect; physical and technical barriers; discriminatory internal taxation; and state monopolies which will be discussed individually.

Derogations from restrictions also limit the principle of free movement of goods, eg A.30, which allows derogation from the restrictions of Articles 28 & 29. Free movement of goods may also be restricted by Article 134 which states that when economic difficulties arise individual Member States may take preventative action. Free movement of goods can also be restricted by Member States national security Article 296 and 297. Also a Member State may obstruct the functioning of the common market if there is a threat if maintenance of law and order.

This notion of customs union and in particular prohibition of customs duties is noted in Article 25.

“According to the spirit, the general scheme and the wording of the Treaty, Article 12 must be interpreted as producing direct effects and creating individual rights which national courts must protect.” Apart from Customs duties there are charges having equivalent effect in practice the effect of such charges is no different to those of customs duties.

Taxation.

The free movement of goods has as its objective of the internal market the removal of all “obstacles to the free circulation of goods between member states”. Thus customs duties and taxes need to be defined and monitored so as to allow free circulation of goods within the community.

When goods enter the community from third countries the common external tariff (CET) applies. Governed by Articles 23-27 detailed rules are set out relating to classification of third country goods and duties to be charged on entry in the community. Once the duty is paid, goods can then be freely circulated throughout the community.

Articles 81-97 of the Treaty are aimed at eliminating measures that restrict trade between member states. Article 25; the standstill provision prohibits introduction by states, new customs duties having equivalent effect on imports, exports and increasing existing duties.

A customs duty is a tax or levy imposed on goods because they cross a frontier.

In the Gingerbread case, Luxembourg and Belgium increased charges imposed on the imports of gingerbread. It was done so as to offset the effects on the price of domestically produced gingerbread of an internal tax on rye, a gingerbread ingredient. It was held that such a charge altered the price of gingerbread and reduced its competitiveness which affected trade between member states. The measure was thereby a “charge having equivalent effect” (a CEE) as under article 25 and frustrated the objectives of a single market. Effectively this charge had similar effect to a customs duty, which article 25 prohibits.

Member states often argue charges imposed on imported goods escape article 25 prohibition because they are for services rendered to the importer such as a quality control inspection service. The ECJ will only allow a service outside the article 25 prohibition if the service is directly beneficial to the traders and the charge is proportionate to the service provided. In the case of Rewe-Zentralfinanz it was held that where an inspection service is imposed in the ‘general interest’ it cannot be regarded as a service rendered to justify the imposition of a charge. Only when a service is mandatory under EC law will the states be allowed to cover the cost of the service.

Taxes imposed on imported goods, such as those levied by member states as part of a system of internal taxation may also be viewed as an obstacle to free movement. If a charge is a genuine internal tax rather than a customs duty or CEE then article 25 will not apply, it will fall within article 90. This prohibits the discriminatory taxation of imported and domestically produced goods.

Internal taxation of any kind on imports in excess of that imposed directly or indirectly on similar domestic products is prohibited under article 90(1). Other connected factors to taxation may also be viewed as discriminatory such as the rules relating to tax collection.

Direct discrimination; where tax provisions openly treat imported and domestic goods differently is often avoided by member states as it is easily identifiable. Indirect discrimination involves cases where the taxation system appears neutral but effectively discriminates against imported products. In Humblot car taxation indirectly put imported cars at a competitive disadvantage because all cars of that category were imported into France.

Much case law has focused upon the issue of ‘similar products’ as article 90(1) ensures different products can be taxed at different rates. The ECJ has held however, that the term ‘similar products’ should be interpreted widely to encompass similar characteristics and use.

Article 90(2) prohibits indirect protection given through internal taxation to domestic products that are in competition with imported products.

Problems arising from discriminatory taxation can be solved by harmonizing taxation between member states. However member states are reluctant to give power to the community in an area that symbolises national sovereignty.

Taxes imposed on imported goods, customs duties and CEEs may be regarded as an obstacle to the free movement of goods as they increase the traders costs. They may also raise the price of products to the consumer; affecting the competitive structure of the internal market. It is for this reason that the EC monitors the situation of taxes throughout member states in Europe so that goods can move freely between states as the EC Treaty intended. In doing so states’ powers have to be limited, in order for their taxes to be waivered to allow goods to be imported and exported between countries.

Quantitative Restrictions, Measures having equivalent effect and the Principles of

Cassis de Dijon

In accordance with the EC philosophy of a single market Articles 28 and 29 prohibit the use of non-pecuniary measures introduced by member states, which restrict free movement of goods. Quantitative restrictions are prohibited on both exports and imports. as are measures deemed to have equivalent effect to quantitative restrictions (MEQRs). These are split into 2 categories. They can be 'distinctly applicable' in that they directly relate to member states dealings with each other through exports and imports. However, they can also be 'indistinctly applicable' in that they can apply to exports, imports or domestic goods deemed to impose quantitative restrictions on other member states ability to freely trade. Herein lies the potentially great limit on Member states powers in commercial activity. Domestic commercial measures are being examined and restricted. Even if they can be justified in terms of their domestic purpose, the Court and Commission have devised formulas and tests to judge whether these domestic measures breach Articles 28 & 29 and if so whether they are justified to do so. The degree of limit on state powers in commercial activity appears to lie in their hands. What is the impact of this and how great are the limits imposed?

Dealing first with imports, A.28 Treaty of Rome states that,

"Quantitative restrictions on imports and MEQRs shall be prohibited between member states".

An example of a quantitative restriction prohibited can be found in R v Henn in which a ban on importing pornographic material was found to be in breach of the article. This example shows a measure that clearly effects the ability of another Member State to move a certain variety of goods, and so was prohibited. However, Steiner feels the reference to MEQRs is much "wider in scope".

A distinctly applicable measure also appears to be a ...

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Dealing first with imports, A.28 Treaty of Rome states that,

"Quantitative restrictions on imports and MEQRs shall be prohibited between member states".

A distinctly applicable measure also appears to be a relatively clear issue for the court to give judgement on whether it should be prohibited. In International Fruit Co. v Produktschap Voor Greoten en Fruit[1971], a licence for fruit exporting was considered a measure that clearly inhibits free trade between member states. Member states are clearly limited if they introduce any measure that is clearly an infringement of A28 and thus the single markets philosophy.

Such classification by the court was probably eased by Directive 70/50 was issued to deal with defining the scope of MEQRs both distinctly and indistinctly applicable. This created into Treaty Article 37 but then deleted by the treaty of Amsterdam. However, Steiner feels it can still be used as a guide. It states that distinctly applicable measures are those which "hinder imports…including measures which make importation more difficult or costly than the disposal of domestic production". It states that indistinctly applicable measures shouldn't have a restrictive effect on free movement of goods "out of proportion to their purpose" or where a measure without such hindrance to trade could be used instead. This is apparently an attempt to not interfere with domestic affairs unless they cause unreasonable hindrance to Community trade.

The test in Procureur du Roi v Dassonville[1974] (Dassonville test) creates a formula for the courts to follow in defining scope of MEQRs. MEQRs are defined to be those which are "capable of hindering directly or indirectly, actually or potentially, intra-community trade". A requirement of a certificate of origin on imported whisky was held to be a prohibited MEQR in this case. An example of the Dassonville formula in practice is Oebel[1981] in which a restriction on night time bakery delivery and production was held not to be a MEQR because "community trade remained possible at all times". The courts are clearly looking for "hindrance" to community trade. Dassonville appears a more limiting test than in Directive 70/50, because as Steiner points out, the test of proportionality rather than hindrance puts measures into context so prevents unduly harsh prohibitions on measures. The problem is that Directive 70/50 has been deleted in the Treaty of Amsterdam. The Dassonville formula is now the principle test.

States aren't restricted in so far as they want to limit their own domestic production. In Jongeneel Kaas BV v Netherlands[1984] a regulation on ingredients of cheese only applied to domestically produced cheese so was not prohibited under A. 28. This is some antidote to the quite harsh Dassonville test in the sense that States retain some commercial freedom, but it isn't overly generous.

Nevertheless, the restriction on Member states regarding "indistinctly applicable measures is potentially limited if a measure can be justified. Defining the scope which measures should or should not be prohibited has proved very difficult for the European and national courts alike. An extremely important case in this area is Cassis de Dijon[1979]. This states that: “the provisions of A.28 and 29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction between member states.”

The courts therefore have to look at the purpose of introducing the law; The court was very concerned with emphasising the fact that if the country concerned was going to use “mandatory requirement” as its defence they must show that this is in proportion to the need. If an alternative can be found which is less restrictive to commonwealth trade then this must be used.

The courts tried to lay down a 'rule of reason'. This, according to Steiner reverts back to Directive 70/50's proportionality test but with the added "mandatory requirement" test. Prima facie this might appear therefore to be a more satisfactory situation than with distinctly applicable measures. However, the courts have had problems applying the test. The case law is not always consistent.

States activity is unrestricted if the Cassis defence is used abusively. For example Oostheok's Uitgeversmaatschappij[1982], Holland tried to use it to justify the use of restriction of free gifts in promotions. This is apparently stretching the rule of reason' too far, but the court accepted it. Perhaps states now have too much freedom in commercial activity?

MUTUAL RECOGNITION; 2nd Cassis Element

Cassis also established "presumption that goods marketed in another state will comply with mandatory requirements" of importing states (Steiner). ECJ has strictly applied the proportionality test here. In Walter Rau Lebensmittelwerke v De Smedt[1988], the legislation was arguably justifiable, but the proportionality test was strictly applied.

In Commission v UK (Re origin of retail goods)[1985] a law requiring the country of origin be labelled on goods was considered in breach of A. 30. The Commission felt it provided consumers opportunity to "exercise their prejudices". This is arguably a very significant challenge to member states commercial activities and the measures they introduce. The Commission is interfering and overriding domestic measures that have little baring on free movement of goods. It is extending this to a very wide definition of free trade of goods. How far are they going to take limiting restrictions on ability to trade? Are they negating more important issues like preserving at least some notion of sovereignty, at least in as far as countries' own domestic measures? However, it must not be forgotten that without a check on member states domestic measures, policies could be introduced which indirectly but very significantly hinder attempts at free movement of goods.

Keck and Mithourd [1991] signals diversion from Cassis, giving greater freedom state, distinguishing between "Selling arrangements" and "Requirements to be met". Selling arrangements, which did not affect imports, should not be restricted. This is a very legalistic distinction, difficult to apply. Nevertheless it appears to provide a route through which the courts can be less invasive of states' sovereignty, derogating from the de minimus rule as in EC competition law. However this might be at the expense of the single market ideal which all Member states signed up to. A balance sovereignty and preservation of the free market ideal is apparently required.

In Leclerc-Siplec[1995], a modification to Keck was suggested, concentrating on the effect of measures concerning selling arrangements. A de minimis principle was recommended. Nevertheless, Keck was applied in the ususal way. Academics have supported Jacobs. Weatherill (CMLRev 1996), recommends a refined test where only measures with "no direct or substantial hindrance…escape A.28". This might make the test less legalistic.

This approach was taken in DIP spA[1995], where a licence requirement for opening shops in certain areas was considered too vague to be put in the legalistic categories of requirements to be met or selling arrangements. Consequently, the Court looked at the effect of the measure, and deemed it "too uncertain and too indirect" to be incompatible with A28.

How the courts will proceed is unclear, perhaps using a rule of reason as with Cassis and indistinctly applicable measures?

Exports

A.29 deals with Exports. It states that

"Quantitative restrictions on exports and MEQRs shall be prohibited between member states".

The same principles as A.28 apply with one important exception. This is that indistinctly applicable measures will only breach the article if their specific object is to provide advantage to national production, not if they are capable of hindrance. This was established in Groenveld BV[1981] where a law banning possession of horsemeat, though obstructing exports was considered not to be in breach of A.29. Obstruction of exports was not its specific aim. This appears to prevent over invasion of domestic measures.

However, this is as illustrated in R v Chief Constable Sussex ex parte International Trader's Ferry [1996]. Exporter's challenged the Chief of police's decision to limit police presence at live animal export demonstrations. These demonstrations largely prevented exports. The Queens Bench Division and the Court of Appeal held that this was in breach of A.29 in that it hindered exports so was "discriminatory. The Chief Constable's decision was arguably an indistinctly applicable measure, and if had been treated as such would not have breached A.29. Steiner points out that hindering exports was not its specific aim. The distinction between indistinctly and distinctly applicable measures is crucial with exports and in turn on states' commercial freedom. States are much freer with indistinctly applicable measures, which arguably they should be as they encompass many domestic measures.

This more liberal approach with regard to exports is arguably justifiable in that the only state prejudiced is often the state invoking the discriminatory measure, unlike imports. Furthermore, if a more liberal approach in emerging with imports with Keck, it would be wrong to overly restrict exports. Overall, the situation with imports is apparently gradually refraining from over invasiveness, but the effect of the distinction between distinctly and indistinctly applicable measures is unjust in borderline cases.

Derogations permitted under A. 30 (old 36) and the effect of Harmonisation

The Cassis de Dijon principles are not mandatory in their application to MEQRs. However, A30, which has been largely applied to distinctly applicable measures, is. It states that they can be justified,

“…on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitary discrimination or a disguised restriction on trade between member states.”

This provides six objective grounds for derogation from A28 and 29 are provided. These are construed very narrowly by the courts. Preserve states’ sovereignty in commercial activity is not important in this. A.30 also provides discriminatory measures are not justified if they are “arbitrary”. This is an important extension both enabling and restricting states freedom in commercial activity depending on the circumstances.

An example is R v Henn, which deals with the ground of public morality. A ban on imports of pornographic material, was held to be justified because although discriminatory was not arbitrary, not intended to promote national production. This should be compared to Conegate v Customs and Excise Commissioner[1986]. Inflatable ‘love dolls’ were seized by customs, but there was no general ban on such goods in the UK. The measure was considered both discriminatory and arbitrary, and therefore unlawful. The two elements of “arbitrary” and “discriminatory are important in justifying derogations from A.30 on grounds of public morality.

However, ‘public policy’ apparently has boundaries very narrowly defined from the outset. In R v Thompson[1978] the ground was successfully used to justify restricting important and export of gold coinage to protect the right to mint coinage, however, case law in general has been cautious not to make the ground a ‘catch-all’ safety net for states.

Even where the courts do consider measures justified on grounds of public policy, Steiner observes that “the courts prefer different grounds” to protect from safeguarding states. In Campus Oil[1983] a measure ensuring the viability of the Irish National Petroleum Co.’s economic viability in the event of an emergency by obliging petrol importers to buy 35% of their petrol form the company was considered justified on public policy grounds. However, this did not form the basis for the court allowing the measure. In an effort to preserve the exclusivity of A.30 the ground of public security was used instead. Nevertheless, this case is a genuine rather than tenuous example of public security ground. The courts are acting cautiously, doing something which restricts states in commercial activity, but they are doing it in a justifiable and sensible way. It typifies the public security ground in that, a measure which security implications more significant than national production advantages, is justified.

We see that Article 30 (old Art 36) permits restrictions on imports, exports or goods in transit if they are justified on number of specific grounds provided they do not constitute a means of arbitrary discrimination or a disguised restriction on trade between member states.

There is no parallel justification for charges equivalent to customs duties. Health inspections of goods might be justified but to charge for this will always be unlawful, considered to be a customs duty

The case law on the protection of industrial and commercial property has developed in a very specific way and is treated as an aspect of the competition rules of the treaty. The various kinds of industrial and commercial property rights include patents, copyright, trade marks and design rights. The use of such rights can impede the free movement of goods throughout the community because national intellectual property law tends to partition markets along national lines. A.30 protects industrial property rights, but these have been curtailed by the ECJ. A distinction is drawn between the ownership or existence of the rights and their exercise. Therefore, whilst the ownership of the rights is protected any improper exercise of it which is anti competitive or constitutes an obstacle to trade will be condemned by the court.

The court believes that the owner of an intellectual property right can lawfully protect the specific subject matter of the right. The specific subject matter of the patent was defined in Centrafarm BV v Sterling Drug Inc

Within the scope of that specific subject matter free trade can be restricted through the exercise of the national intellectual property right.

We see then the court drawing a distinction between the existence of industrial property rights which remains unaffected by community law and their exercise which may come within the prohibition of the Treaty. Steiner holds that:

“If copyright protection is used to prohibit in one member state, the marketing of goods brought onto the market by the holder of the rights, or with his consent, in the territory of the other member state solely because the marketing has not occurred int he domestic market, such prohibition, maintaining the isolation of the national markets, conflicts with the essential aim of the Treaty, the integration of the national markets into one union market”

Thus it would constitute an improper exercise of the property right in question and would not be justified under A30. ECJ case law represents an uneasy and often unsatisfactory compromise between the single market principle and the need to safeguard legitimate industrial and commercial property rights protected under national law. The courts more recent decisions indicate a greater willingness to safeguard the interests of creativity and originality protected by intellectual property law and to encourage and reward the taking of commercial risks

It has been made clear that firstly, A30 is concerned mainly with the protection of non-economic interests as it was stated in Campus Oil v Minister for Industry and Energy [1984] . Secondly, the burden of proof that a measure falls within Article 30 rests on the party which relies on that provision usually the national authorities. Thirdly, in order to avoid being categorised as arbitrary discrimination it must be shown that effective measures to protect the same interests have been taken with regard to imports or exports. Finally, even if a measure complies with all these requirements it may still be regarded as a disguised restriction on trade. This is if it goes beyond what is necessary for the defective protection of the general interest at issue, and in particular if that objective could be achieved by means less restrictive of intra-community trade.

In other words a test of proportionality or reasonableness is applied. In determining what is reasonable, account must be taken of the information or means of proof available to an importer or exporter.

A.30 also allows derogation on grounds of protection of health and life of humans, animals and plants. Consequently health inspections of goods might be justified. However, as in Denkavit Futtermittel[1979], charging for this will always be unlawful, considered to be a customs duty

Harmonisation

Once Community and national laws are harmonised, as intended, the extent can states use Cassis and A.30 to derogate from A.28 and 29 depends on whether there is comprehansive or minimal harmonisation among members.

The original EC view was that once EC legislated with directives concerning an area, states were no longer free to use A.30. In Tedeschi v Denkavit Commerciale Srl[1977] (Case5/77) the court held that once a specific directive applied states could no longer use A.30.

However, since the Single European Act 1996, minimal harmonisation has applied. This makes states freer to lay down strict domestic measures. The strictness of measures apparently depends on whether a directive has a “market access clause”. This leaves states free to restrict as long as they don’t affect imports. If there is no such clause, restrictions on A.28 and 29 are permitted so long as they don’t override A.30. R v Secretary of State for health ex Parte Gallaher[1994], provides some room for manoeuvre for members in commercial activity, but only in that they are free to inhibit themselves. Steiner feels this is a good way to operate in restricting states as it provides certainty, rather than ad hoc exceptions under A.30. However, A.30 does provide detailed and specific grounds, even if many boundaries have to be drawn by the courts.

In isolation, the derogations permitted under A.30 appear narrow and very specific. However, changing trends between comprehensive and minimal harmonisation are important in assessing how far A.30 can be utilised. The current trend, now the single market has matured somewhat, is flexibility and a minimal approach. However, even this degree of flexibility might improve the amount of freedom states have but not necessary the quality and significance.

State Aid and Monopolies.

Like the A.30, A.37 has no parallel in the rules on customs duties and charges having equivalent effect. A .37 requires State Monopolies of a commercial character to be ‘adjusted’ so as to ensure that no discrimination exists between nationals of member states with regards to the conditions under which goods are procured and marketed. The existence of this treaty provision has led the court to interpret it as a specific aspect of the requirement to abolish quantitative restrictions and measures having equivalent effect so that, in effect, a national monopoly cannot be a monopoly with regard to imports or exports.

STATE AID

Governments often provide assistance to individual firms and industries operating in certain sectors, such as agriculture, transport, motor vehicles, steel, coal, shipbuilding, textiles and clothing in order to maintain employment and preserve manufacturing capacity – which is vital to the national interest. State aids clearly create distortions in competition, which ultimately affects trade between Member States. It is apparent that the Community acknowledges this fact but also understands their necessity in economic growth and improvement in industry. In order to regulate and monitor whether state aids are incompatible with EC Law, the commission considers the provisions laid down in Articles 87- 89 (ex. 92-94) EC.

To fully understand the rule i.e. deciding what is incompatible, the Commission must consider the definition portion by portion.

“Any aid granted by a Member State or through State resources”

A State resource was declared to have been used in the case of SFEI v La Poste [1996] where it was defined in its broadest sense and included “cross-subsidisation” between a company which has a subsidiary in a non-competitive market and one in a market which has free competition. The Commission applies the market investor principle when regarding state participation. The question raised is whether public funds are used to fund public or private undertakings, if so, then the funding constitutes a state aid.

“Distorts competition” and “affects trade between Member States”.

If measures were taken by one member state which favoured undertakings whilst trading with another state, it would be grossly unfair and would obviously affect and distort trading between these states. However, in Intermills v Commission [1984],

“The granting of aid cannot be regarded as automatically contrary to the Treaty”.

The question as to what qualifies as a compatible aid with the common market under Article 37 often arises, and therefore tests had to be applied by the Commission which determined whether there was a restriction of competition under articles 81 and 82. The criteria is set out in the Twelfth Report on Competition Policy and confirmed in Philip Morris v Commission [1980].

“Favouring certain undertakings or the production of certain goods”

There is a difference between general economic, fiscal or social measures given by a state to a firm in that state and a State aid, however it is often difficult to distinguish between the two. For a measure to be described as “general” the State cannot have a discretionary power to vary the contribution it made initially. However, from the moment the measure appears to benefit only certain undertakings in a certain economic sector, it constitutes an aid and is consequently incompatible with the common market. The distinction was made in the “Mirabel” decision where the Commission declared that the increased reduction in social security in Belgium for manual workers granted to employers was incompatible.

Despite all the regulations, there is always the likelihood that State Aids have been granted illegally. In these circumstances, the Commission can request the national authorities in question to recover the aid despatched. This also applies to Community Aids.

STATE MONOPOLY

State monopolies of a commercial character are dealt with in Article 31 (ex-article 37), which ensures that exclusivity of imports and exports of goods is eliminated. The Article states that the provisions outlined refer to

“…any body through which a Member State… either directly or indirectly supervises, determines or appreciable influences imports or exports between member states”.

This suggests that the definition is not limited to public bodies, but also monopolies delegated by a state to private enterprises e.g. energy providing companies.

There is also no mention of the requirement of the term “body” to have some institutional structure, however some degree of structure is required as noted in Commission v France [1983] where it was “established that an import licensing system does not in itself constitute a state monopoly”. However, in Societe Cooperative du Bearn v Mialocoq [1983] the Court stated that “The possibility cannot be ruled out that a monopoly over the provision of services may have an indirect influence on trade in goods between Member States”. This was confirmed in Bodson v Pompes Funebres [1988].

There is the possibility that Member States could avoid the rule in Article 31 by creating a large number of local monopolies because they are not viewed as “appreciably influential” on inter-state trade unless they hold a proportion of the national territory. The question is what is a sufficient proportion to qualify under Article 31? In Commission v Greece [1990] an oil and petrol enjoyed the exclusive right to import and market 65% of the requirements of the domestic market. This right was determined to be an “appreciable influence” over imports from other Member States. The problem nevertheless is when there a several companies enjoying exclusive rights over the same territory – do they form an institutional body? According to the definition in Article 31, they do not, however, it must be considered as to whether together they form a single body.

As far as possible, State Aids and monopolies are greatly influenced by the European Convention in limiting the powers of Member States, however, there are definite loop-holes within the provisions, which allow Members to step outside the boundaries.

Conclusion

In analysing the creation of a single market in goods and its effects on the field of commercial activity, the importance of free movement of goods to the Community’s internal market has been explored in detail. As we have seen, obstacles and restrictions to trade can take form of customs duties, charges, taxes, quantitative restrictions and measures having equivalent effect.

Member States seeking to rely on the Cassis rule of reason or the Article 30 derogation in order to justify measures breaching Article 30 must be able to establish not only that the measures in question are not protectionist, but also that they are no more than necessary to achieve the objective in view. It is of significant importance therefore that they satisfy the principle of proportionality.

Overall, now the single market has established itself, states apparently are being given greater freedom. However, the Courts, Commission, and Treaty provisions have apparently been careful to maintain a balance with the single market ideals.

Bibliography

EUROPEAN COURT REPORTS

See case references in footnotes

TEXTS AND MATERIALS

Blackstone’s EC Legislation 1999 –2000 10th Edition Nigel Foster
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Blackstone’s LLB Cases and Materials European Community Law Deards & Hargreaves 1998
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JOURNALS

Weatherill, 33 CMLRev 335 [1996]

Article 23 (ex Article 9) Blackstone’s EC Legislation 1999-2000 10th Edition 1999

Text Book on EC Law 6th Edition Steiner & Woods 1998

(ex 7a)

Blackstone’s EC Legislation 1999-2000 10th Edition 1999

Longman, “The community shall adopt measures with the aim of progressively establishing the common market”

(ex Article 9) “The community shall be based upon custom 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 equivalent effect, and the adoption of a common customs in their relations with third countries.”

ex Article 30 34

European Union Law Butterworths Core Text Series 1998 by Horspool

(ex Article 9 (2)

“Products coming from a third country shall be considered to be in free circulation in a member state if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that member state, and if they have not benefitted from a total or partial drawback of such duties or charges”

Case 76/78 [2968] ECR 423, 427-9

Case 76/68 [1968] 423, 427-9 Blackstones LLB Cases and Materials European Community Law: DEARDS and HARGREAVES

As above, The court defined goods as goods that can be “valued in money and which are capable of forming the subject of commercial transaction”. Other goods such as coins, all forms of waste and electricity

Article 30 (ex Article 36)

A.30 states that members, shall not prohibit restrictions on goods that are justified on grounds of public morality, public policy or security, the protection of health of humans, plants and animals or protection of national treasures. However states are not allowed to arbitrarily discriminate, or restrict trade between states by way of disguise.

ex Article 115

“In order to ensure that the execution of measures of commercial policy in accordance with this treaty by any member state is not obstructed by deflection of trade, or where differences between such measures lead to economic difficulties in one or more Member States, the Commission shall recommend the methods for the requisite co-operation between Member States” Article 134 (ex. 115)

Article 30 (ex Art 36),

_ “any Member state may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes”

“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” article 25 (ex 12) Article 25 was found to be directly effective by the Court in the case of Van Gend en Loos, it was said by the court that because of the wording and importance of the freedom of movement of goods the Article was directly effective, it continued to say that the Article contains a clear and unconditional prohibition which is a negative obligation.

Blackstone’s LLB. Cases and Materials European Community Law Deards & Hargreaves

In the case of Commission v. Luxembourg and Belgium the court defined charges as: “Duties whatever their description or technique, imposed unitarily, which apply specifically to a product imported by a Member State but not to a similar national product and which by altering the price, have the same effect upon the free movement of goods as a customs duty”.

European Community Law, Elspeth Deards and Sylvia Hargreaves, 2nd edn, 1998, Blackstone Press LTD, page 175.

of the EC Treaty

Commission v Luxembourg and Belgium (gingerbread) (cases 2 and 3/62) [1962] ECR 425

”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” - cited in EC Legislation 1999-2000, Nigel Foster, 10th edn, 1999, Blackstone Press LTD, page7.

v Direktor der Landwirtschaftskammer Westfalen - Lippe (case 39/73) [1973] ECR 1039

Bakker Hillegom (case c-111/89) as cited in Textbook on EC Law, Josephine Steiner and Lorna Woods, 6th edn, 1998, Blackstone Press LTD.

“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” - op cit fn 4, page 23.

Commission v Ireland (Excise Payments) (case 55/79) [1980] ECR 481.

v Directeur des Services Fiscaux (case 112/84) [1985] ECR 1367.

as per Commission v France (French Taxation of Spirits) (case 168/78) [1980] ECR 347 op cit fn 1, page 185.

A.28 Treaty of Rome

International Fruit Co. v Produktschap Voor Greoten en Fruit[1971]case 51-4/71 ECR 1219

Directive 70/50

Article 37 Treaty Of Rome

Procureur du Roi v Dassonville[1974] case 8/74 ECR 837

Oebel[1981] case 155/80 ECR 1993

Steiner, Textbbok on EC Law, Blackstone, 1998

Jongeneel Kaas BV v Netherlands [1984] case 237/82 ECR 483

Rewe zentrale AG v Bundesmonopolverwaltung fur Brantwein [1979] ECR 649. Gilli (Case 788/79) states that the Cassis de Dijon test only applies to indistinctly applicable measures. A French liquor with an alcohol content of 15-20% was freely marketed in other countries until German law ruled that certain alcoholic beverages had to have a minimum alcohol content of 25%. Germany said that although France could import the liquor it could not be marketed there. Although the German law was not discriminatory as it applied to all fruit liquors from any country it was clear that the rule did restrict free trade across national frontiers within the common market. Therefor France could bring an action under A.28. The only way that sates have the right to derogate against the ruling of A.28 is through the provisions laid out in A.30

On the grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historical or archaeological value; or protection of industrial or commercial property.

The Germans produced several arguments. One was that the measure was an attempt to combat alcoholism – by banning lower alcohol spirits that could leads to dependency and addiction. The courts rejected this as many other weak alcoholic beverages were freely available and it was observes also that meant stronger drinks were often diluted.

An example that the courts gave in Cassis de Dijon was that the alcoholic drinks concerned should be clearly labelled with their alcohol content. Other arguments that Germany put forward included that the lowering of alcohol contents would secure a competitive advantage for drinks with a high alcohol content because alcohol if by far the most expensive part of the drink due to the high tax it is subject to. All the arguments were rejected by the commission and they decided that introducing minimum alcohol contents on drinks was not in the general interest and therefor did not take precedence over free movement of goods and an obstacle to trade is incompatible with A.30.

The case law is not always consistent. In Torfaen BC v B&Q[1989] the ECJ said justification of the Sunday trading prohibition was to be considered on socio-economic grounds. This was vague. Consequently in B&Q v Shrewsbury & Atcham BC [1990] on grounds of proportionality of socio-economic considerations it wasn't justified. However, in the same year Wellingborough BC v Payless [1990] stated the measure was necessary and proportionate. The Uncertainty Steiner describes created a problematic situation. The ECJ did not give a decisive ruling until 1991 (Stoke CCv B&Q[1993]) in which decided the same as Wellingborough.

Oostheok's Uitgeversmaatschappij[1982] case 286/81 ECR 4575

Walter Rau Lebensmittelwerke v De Smedt[1988] case 279 2 CMLR 704, a law providing that margarine must be packaged in cubes was not considered strictly necessary. Labelling would have done the same differentiating job and wouldn't have prejudiced non-cube packaging of imports.

Commission v UK (Re origin of retail goods)[1985] case 207/83 ECR 1202

Steiner note how surprising it is that the Commission is overriding domestic rules.

Also geographic designations are permitted such as Stilton Cheese. So perhaps the Commission are not being over evasive in some respects.

Keck and Mithourd[1991] case C-267 & 268/91 ECR I 3051

This has since been applied. For example in Tankstation't Heukste Vof and Boermans[1994] in which rules concerning petrol station opening hours were held to be outside the scope of A.30. They did not effect imports in the strictest sense. Intrusions are apparently now being avoided.

Leclerc-Siplec TFI Publicite SA Case 412/93[1995] ECR I-179

Advocate General Jacobs felt a French measure prhibiting television advertising in the distribution sector to protect the regional press, could effect "cross-border" strategies.

Weatherill 33 CMLRev 885 1996

DIP spA V Comune di Bassano del Grappa (cases C-140-2/94) [1995] ECR I-3257

As suggested by Steiner. Throughout imports the importance of Cassis seems paramount. Indeed the Commissions new approach in its attempt at a free market by 31 December 1992 relied on the principle of mutual recognition. Since Maastricht, Steiner feels a less restricive approach has been adopted by the commission, "minimising EC harmonsiation legislation". Thus, the fgreater freedom given by the later revisions of Keck, and an apparent policy shift by the Commission, have given states considerably more soveriengty in the field of commercial activity. Furthermore, Steiner feels that the rejection of a de minimis rule in Van de Haar in the interests of asingle market, should be modified now the single market has established itself more. This would indicate a trend to giving states more freedom, the more established the free market becomes. However, currently, apparent uncertainties as to what is incompatible with A.28 exists in this apparently transitional period.

A.29 Treaty of Rome

The Dassonville test

Groenveld BVv Produktschap voor vee en Vlees[1981] case 15/79 ECR 3967

R v Chief Constable Sussex ex parte International Trader's Ferry [1996] QB 197

Rewe zentrale AG v Bundesmonopolverwaltung fur Brantwein [1979] ECR 649

A. 30 Treaty of Rome

The use of objective grounds to test justification of derogations from A28 and 29 is not disimilar to the Cassis approach with indistinctly applicable measures.

R v Henn and Darby case 34/79 [1979] ECR 3795

Merely safeguard national morals

Conegate v Customs and Excise Commissioner [1986] case 121/85 ECR 1007

R v Thompson and Others [1978] case 7/78 ECR 2247

In R v Secretary of State for the Home Department ex Parte Evans[1993], a ban on diamorphine to protect economic viability of the only UK producer was not considered justifed. Economic grounds are not justified under A.30.

Steiner, Textbook on EC law 1998, Blackstone

Campus Oil [1983] case 72/83

In judgement the courts did however warn against the use of competitive pricing,

eg Denkavit Futtermittel Case 251/78[1979] ECR 3369

Apart from the general safeguard provisions of the EC Treaty, restrictions on the free movement of goods in internal Community trade are only envisaged in the Article 30 and 134 of the Treaty

Along with article 222 which precludes community interference with national rules relating to property ownership

the court cannot question their existence but it will control their exercise. In this way a balance is drawn between economic integration and national territorial protection is achieved

Case 15/74 “…the guarantee that the patentee to reward the creative effort of the inventor has the exclusive right to use an invention with a view to manufacturing industrial products and putting them into circulation for the first time, either directly or by the grant of licences to 3rd parties as well as the right to oppose infringements”

TEXTBOOK ON EC LAW 4TH edition: STEINER page 116

This is illustrated by a more generous approach to the question of the permitted exercise of property rights protected under national law eg EMI Electrola v Patricia case 341/87 and by limiting the scope of the exhaustion principle eg Warner Bros Inc v Christiansen case 158/86

case 72/83 ECR 2727 at page 2752 “..a member state cannot be allowed to avoid effects of measures provided for in the Treaty by pleading the economic difficulties caused by the elimination of barriers to intra community trade”

Denkavit Futtermittel case 251/78 1979 ECR 3369 at page 3392

De Peijper case 104/75 1976 ECR 613

Denkavit Futtermittel Case 251/78[1979] ECR 3369

Tedeschi v Denkavit Commerciale Srl [1977](Case5/77) ECR 1555

Single Europoean Act 1996

R v Secretary of State for health ex Parte Gallaher[1994] C-11/92 3 CMLR 179, Tobacco Directive 89/622 stipulated that cigarette packets should be 4% covered in health warnings. UK regulations, however, stipulated 6% for domestically produced cigarettes. The court held that UK companies couldn't use the Market Access clause in the directive because the measure is harmonious with EC law and only places burden on nationally produced goods.

Competition Law: Antitrust Policy in the UK and the EEC – Robert Merkin and Karen Williams, 1984

“…any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, shall insofar as it affects trade between Member States, be incompatible with the common market”.

Case C-39/94 SFEI v La Poste [1996] ECR I-3547 “The concept of aid within the meaning of Article 92… follows that the provision of logistical and commercial assistance to its subsidiaries, which are governed by private law and carry on an activity open to free competition, is capable of constituting State aid…”.

A Guide to European Union Law – P.S.R.F. Mathijsen, 1999

Intermills v Commission [1984] ECR 3809

At point 160.

Case 730/79 Philip Morris v Commission [1980] ECR 2671 “Aids should promote a development which is in the interest of the Community as a whole…The aid (must be) necessary to bring about (the required) development and …without that aid the measure in question would not be realised”.

[1997] O.J. L95/25

A Guide to European Union Law – P.S.R.F. Mathijsen, 1999

Competition Law in the European Community – David M. Jacobs and Jack Stewart-Clark, 1990

Case 161/82 Commission v France [1963]

Free Movement of Goods in the European Community – Peter Oliver, 3rd Edition, 1996

Case 271/81 Societe Cooperative du Bearn v Mialocoq [1983] ECR 2057

Case 30/87 Bodson v Pompes Funebres [1988] ECR 2479 “Article 37 applies in particular to situations in which the national authorities are in a position to supervise, determine or even appreciably influence trade between Member States through a body established for that purpose or a monopoly delegated to others”.

Commission v Greece [1990] I ECR 4747

Free Movement of Goods in the European Community – Peter Oliver, 3rd Edition, 1996