Different Stages of Intergration

1.   FREE TRADE AREA - This involves the removal of all impediments to the free movement of goods between participating countries BUT each participating country remains free to regulate its trading with countries which are not in the free trade area. Knowing the country of origin of goods every time they cross a border is important, since participating countries are free to fix customs duties on goods from countries coming from outside the free trade area.

 CUSTOMS UNION - A customs union has the features of a free trade area with the addition of a common external policy in respect of goods coming from countries outside the customs union. This is known as a common external tariff (CET). Once goods have met the requirements of the CET, they are in free circulation in all the countries in the customs union.

3.   COMMON (OR INTERNAL) MARKET - An internal market has the features of a customs union with the addition of free movement of the factors of production: labour, services, and capital. MONETARY UNION - A monetary union is an internal market in which a single common currency operates.

ECONOMIC UNION - An economic union involves a monetary union with a single monetary and fiscal policy controlled by a central authority. POLITICAL UNION - political union involves an economic union with a central authority responsible to political organs with the sovereignty of a nation’s government. It follows that there will usually be a common foreign and security policy controlled by the political organs. FULL UNION - This involves complete unification of the economy and politics under a central authority with the political organs characteristic of a State. There will be a unified common approach to matters such as social security and taxation. In essence, the participating countries agree to become one country, probably—but not necessarily—with a federal constitutional model

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The Single Market

By mid1980s the failure of the common market was plain to see and so a white paper was drawn up to complete the internal market by a british commission headed by Lord Cockfield.

It identified three principle obstacles:

1.       Physical barriers to trade – e.g intra border stoppages, customs controls and associated paperwork

2.       Technical barriers to trade – e.g divergent national product standards, conflicting business laws, nationally protected markets

3.       Fiscal barriers to trade – e.g differing rates of VAT and excise duties.

The white paper identified 282 measures needed to complete the single market. The Single European Act 1986 was the first significant treaty amendment after the treaty of Rome and provided the necessary means to achieve these objectives.

-          It introduced Article 114 TFEU which provided for qualified majority voting when enacting measures for the approximation of MS laws which have as their object the establishment and functioning of the internal market. It also repackaged the four freedoms into the new renamed single market, Article 26 TFEU, and set a deadline for their achievement, 31 December 1992. The single market is not yet complete, as the commission say it is an ongoing process requiring constant evolution. 

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Area of Freedom, Security and Justice

The Amsterdam Treaty introduced a new concept, the area of Freedom, Security and justice at Article 67(1).

Freedom – absence of internal border controls for persons and a common policy on asylum, immigration and external border control.

Security – measures to prevent and combat crime, racism, xenophobia, coordination and cooperation between police and judicial authorities as well as a mutual recognition of judgements.

Justice – access to justice, in particular the principle of mutual recognition of judicial and extrajudicial decisions in civil matters. 

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Negative Integration 1

Negative integration involves the prohibition of acts which discriminate against goods of other countries on grounds of their national origin. The so-called decentralized model of integration is based on the principles of non-discrimination, market access, and competitive federalism. This allows Member States to retain the freedom to regulate though subject to several key principles.

i.                     Non-Discrimination – Key to all four freedoms (goods, persons, services & capital). There is no discrimination on grounds of nationality and so all goods, persons etc must be treated equally with own nationals and nationals of other countries.

1.       To establish a discriminatory effect of a rule/measure, you compare its effect on domestic and foreign counterparts.

2.       There are two common forms of discrimination: Direct and Indirect. Direct is when GPSC from other MS are treated differently in law (for example differing tax dependant on nationality). Indirect is when a rule, neutral in formulation, but bears more heavily on GPSC from other MS.

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Negative Integration 2

i.                     Principle of Market Access – Prohibitions of restrictions, which are not discriminatory, but still affect the ability of certain GPSC to access a given national market. 1.       You look at how a rule affects the ability of certain GPSC to access a given national market 2.       Com v Italy, had an Italian law that banned towing a trailer with a moped, motorcycle or motor tricycle. 3.       The danger of using this over discrimination, is that it has not yet been clearly defined. It could be interpreted to include anything affecting the ability to access a given market, for example, perhaps even driving on the right hand side of the road when coming from a left hand side country.

ii.                   Idea of Competitive Federalism – Competition of different national legal systems (non-discrimination and market access). This competition is intended to lead to optimal, efficient and innovative legislation, which creates attractive economic environments. For this to function two conditions are needed:                 i.      Federal authorities must lay and enforce rules giving GPC freedom to exit on MS and enter another              ii.      The states must remain free to regulate the production of goods and the qualifications of people according to their own standards so as to enable regulators to respond to competition.

b.      This should help lead to innovative legislation, promote diversity and experimentation in the search for effective legal solutions, and give an active role to state authorities. c.       REMEMBER DELAWARE! d.      However within the EU, freedoms for MS to derogate from individual rights for public interests in some circumstances do exist, and these can create considerable barriers to trade which would only be fixed through central regulation, this is why the EU can harmonize conflicting national legislation on the establishment and functioning of the common market (Article 352 TFEU)

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Positive Integration

Positive integration involves the creation of common standards so that the grounds on which a State seeks to exclude other goods can no longer be pleaded. The so-called centralized model of integration is based much more on harmonisation. Union institutions enact common rules, develop common standards that are applicable in all MS. This was the original model for the EEC but it failed: why?

§  The benefits of this are the single set of rules, applied everywhere and so reduce costs of businesses when expanding to other countries.

§  The drawbacks are it is not easy then to apply with subsidiarity and proportionality principles. It also damages legislative innovation possibilities and the advantages of national diversity.

The internal market has used both approaches as a means of ensuring the internal market, but the prohibition of discrimination on grounds of nationality is deeply rooted in the relevant Treaty provisions. The Court of Justice has been creative in generating a legal requirement of mutual recognition unless the refusal of recognition can be based on objectively justified grounds pursuing  a legitimate and non-economic interest.

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Market Access v Discrimination Tests

Discrimination Test Drawbacks: 1) the model is premised on the idea that migrants and nationals are similarly situated, when by definition, they are not. 2) the effect of the non-discrimination model is to allow barriers to movement to remain because it permits the host state to impose its own rules on imported goods provided those rules apply equally to domestic goods as well. This provides that national rules preventing or hindering market access are unlawful, irrespective of whether they actually discriminate against imports or migrants. The ECJ increasingly favours the market access approach - Gebhard – where national rules on the use of the title Avvocato were said to hinder the exercise of fundamental freedoms guaranteed by the treaties                                                     . There is considerable overlap between the models, however the difference between the two can be seen when dealing with non-discriminatory rules as Com v Greece [2005] illustrates - Greek optician’s case: National rules prohibited opticians operating more than one shop. Under discrimination this would be fine as it inhibited both nationals and migrants equally. Under market access it is not as it “would amount to a restriction on the freedom of establishment of natural persons within the meaning of Article 49 TFEU” (unless it could be justified). o   This shows how DT focus on a comparison between the treatment of in-state and out-of-state individuals whilst MAT focuses solely on the perspective of the out-of-state trader or migrant: what gets in the way of them getting into the market?                                             The advantage of MAT is that it goes a long way towards building a single market by removing any unjustified obstacles to trade, and it is based on an idea formulated in the case of Cassis de Dijon [1979] that goods lawfully produced in one MS should presumptively have unrestricted access to the market in another MS (the principle of equivalence or mutual recognition). This is the same for vocational professionals and should lead to stronger, more efficient businesses where they are needed and better prices for the consumer. The disadvantage is that it is far more intrusive into national regulatory autonomy. Some people have been concerned with the “inherently nebulous” concept (Oliver and Enchelmaier 2007); 

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Obvious Examples of Goods

       Tobacco: Case C-376/98 Commission v Parliament and Council (Tobacco Advertising), [2000] ECR I-8419

       Yoghurt: Case 298/87, Simanor, [1988] ECR 4489 – The issue related to the French ban to use the description of Yoghurt for a deep, frozen kind

       Spectacles: Case C-120/95, Decker, [1998] ECR I-1831 – the issue concerned the refusal to reimburse the cost of spectacles purchased abroad under a social security scheme.

       Contact lenses: Case C-108/09, Ker-Optika, [2010] ECR I-12213 – Hungarian ban on the sale of contact lenses online

       Works of art: Case 7/68, Commission v Italy (Art treasures), [1968] ECR 423 – FMOG provisions apply to art works as they can be valued for money and form the subject of a commercial transactions.

       ***********: Case 34/79 Henn and Darby, [1979] ECR 3795 – 2 persons were charged with an illegal import to Britain of obscene films and magazines from Denmark.

       Strawberries: Case C-265/95, Commission v France, [1997] ECR I-6059 – The issue in this case concerned the boycotts against the import of strawberries.

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Less Obvious Examples

       Petroleum products: Case 72/83, Campus Oil, [1984] ECR 2727 – the obligation place in Ireland on importers to purchase some of their supplies from a national supplier.

       Blood products: Case C-421/09, Human plasma, [2010] ECRI- 12869 – Problem here, some countries count parts of the human body as extra commercium.

       Bees: Case C-67/97, Ditlev Bluhme, [1998] I-8033 – Danish prohibition of keeping any bees other than brown bees on Laeso Island.

       Waste products: Case C-2/90, Commission v Belgium, [1992] ECR I-4431 – A good so long as it is shipped across frontiers for the purposes of commercial transactions.

       Electricity: Case C-379/98, PreussenElektra, [2001] ECR I-2099 – The only exception to the physical requirement.

       Coins which are no longer legal tender: Case 7/78, Thompson, [1978] ECR 2247 – although may cause issues of tax evasion and money laundering 

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Goods or Service?

       Lottery tickets: not goods but services: Case C-275/92, Schindler, [1994] EC I-1039 – FmoG provisions do not apply if the goods at issue are not ends in themselves (you do not buy a lottery ticket to collect a lottery ticket, but to enter the competition)

  • Fishing Licence - Service - Jagerskiold - Goods, in the common connotation of the term, possess tangible physical characteristics... A television signal 'must, by reason of its nature, be regarded as provision of services’. Lottery activities also essentially involve the provision of services; the sending of tickets, advertising material and application forms not being ‘ends in themselves’. On the other hand, waste, whether recyclable or not, constitutes goods, as 'objects which are shipped across a frontier for the purposes of commercial transactions are subject to Article [34 TFEU], whatever the nature of the transaction’. 
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EU law on the free movement of goods consists of three inter-related provisions:

       Article 30 TFEU on the prohibition of customs duties and charges having equivalent effect to customs duties (CEEs);

       Article 34 TFEU on the prohibition of quantitative restrictions and measures equivalent to quantitative restrictions (MEQRs)

       Article 110 TFEU on the prohibition of discriminatory or protective measures of internal taxation 

These three groups of provisions are mutually exclusive. In answering any question in an examination, remember that you cannot argue that the same measure is to be considered under more than one of the three sets of provisions.

So, your first issue in any question is to decide whether you are dealing with: (1) a customs duty or CEE; (2) a quantitative measure or MEQR; or (3) a measure of internal taxation.

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Permissible Charges - Com v Germany [1988]

i.                     Payments for Genuine Administrative Services Rendered to the Importer

a.        The service must be of direct benefit to the importer

b.       Belgium (warehousing): the Art 30 TFEU will not apply if the court considers that the “charge in question is the consideration for a service actually rendered to the importer and is of an amount commensurate with that service”.

                                                               i.      Belgium charged a specific fee for importers to use a warehouse to store products. At para 8, the court held the service must charge an amount commensurate with that service, and at para 11 that the service must benefit the importer, but this warehouse was used to complete import formalities and so it was held to be a CEE

c.        Com v Italy – Stat data did not benefit importers in any way (it did benefit the public as a whole) and so was a CEE.

d.       Bresciani – compulsory veterinary inspections of all raw cowhides led to a CEE as it did not benefit the specific importers. If services benefit the whole public it should be financed from the public purse

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Permissible Charges - Com v Germany [1988] 2

i.                     Charges for Inspections Required by Union Law

a.        Costs for compliance with mandatory inspections required by Union Law (or an international convention Com v Netherlands [1977]) can be passed onto the importer if (para 8, Com v Germany):

                                                               i.      They do not exceed actual cost of the inspection

                                                              ii.      Inspections are obligatory and uniform for all products concerned in the union

                                                            iii.      They are prescribed by union law in the general interest of the union

They promote the free movement of goods 

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Permissible Charges - Com v Germany [1988] 3

i.                     Charges Falling Within the Scope of Internal Taxation

a.        If a charge “relates to a general system of internal dues applied systematically and in accordance with the same criteria to domestic products and imported products alike” then the legality of the charge falls to be considered under Article 110 rather than 30. 

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Article 110: Internal Taxation

1)       Prohibits discriminatory taxation in respect of goods which are similar (such as one type of beer and another) – “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 in similar domestic products”

2)       110 (2) “furthermore no MS shall impose on the products of any other MS any internal taxation of such a nature as to afford indirect protection to other products” 

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Types of Discrimination

Direct – less favourable treatment of an imported product. E.g direct tax as it crosses the border (Lutticke), different formula used for taxing imported products (Haahr Petroleum) and granting of tax relief to domestic products only (Com v Ireland[1980]).

There are no express defences to Art 110 breaches. Reverse discrimination (where a domestic product is treated less favourably) is permitted – Peureux [1979]

Indirect – Where a measure on its face seems neutral, but in practice discriminates against non-domestic produce

Humblot where car engines of a certain size were taxed more than others. All cars with that engine size were imported. This was held to be discriminatory.

If an ID can be objectively justified, it will not contravene Art 110. Some justifications seen are tue discouragement of certain games (Bergandi), regional development (Natural Sweet Wines), reserving petrol (Chemial Farmaceutici).

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If the case falls under 110 (1) then the discrimination must be eliminated by equalising the taxes or extending the benefitted domestic goods to the imported ones as seen in Hansen.

If it falls under 110 (2) the state must remove the protective effect from its taxation scheme. This doesn’t necessarily mean equalising the tax.

Art 110 is directly effective and the availability of restitutionary claims for individuals was established in Hans Just.

The Boundary between Art 110 and Other Treaty Provisions

“The Exotic Import” – If there is no similar or competing domestic product with a Non-MS Product, the MS are still free to tax the imported goods, and as seen in Co-frutta any such charge does not constitute a CEE under Art 30.

“Para-Fiscal Charges” – PFCs wholly or partially offset the burden borne by domestic products but not imports. These may fall under 30 or 110 depending on the extent to which the burden is offset. Full offsetting = 30, partial = 110.  See cases Capolongo and Nygard.

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