Characteristics of the Freedom of Establishment and the Freedom of Services - Coursework Example

European Union Law PART A Analyse the distinguishing characteristics of the freedom of establishment and the freedom of services, taking into account the ECJ case-law. Consider further whether the concept of freedom of services applies only to economic activity and its potential implications for EU citizens. PART B 1. Commission Regulation 123/2007 (fictitious) confines the use of the word ‘chocolate’ to products derived from cocoa which do not contain vegetable fat, and which are made in Belgium. ‘Yum Yum’ is a long-established UK company, which has always used vegetable fat in products it markets as ‘chocolate’. The director of ‘Yum Yum’ writes to the European Commission protesting that the regulation unfairly favours Belgium chocolates for no apparent reason. In an email addressed to ‘Yum Yum’ received on the 15th October 2008, the Commission replies that a/ a recent scientific study concluded that vegetable fat combined with coca is detrimental to the health and b/ Belgium has traditionally been the homeland of chocolates and allowing other countries to claim the term ‘chocolate’ for their products would be discriminatory. The Commission concludes that the term ‘chocolate’ has to be withdrawn from ‘Yum Yum’ advertising material. ‘I Love Chocolate’, another UK company that produces chocolates with vegetable oil, notes the letter sent to ‘Yum Yum’. The company also objects to withdraw the term ‘chocolate’ from any of its products. Advise ‘Yum Yum’ and ‘I Love Chocolate’ as to the remedies and rights they have. Do you think that the Commission’s arguments are valid? PART A The freedom of establishment and the freedom of services can be characterized as the most important ‘freedoms’ within the European Union, as a Union of rights and obligations of its members. These two freedoms are protected by the provisions of the articles 43 (freedom of establishment) and 49 (freedom of services). The main difference between these two freedoms is the fact that in the case of the freedom of services, the establishment in a member stated is not required – services can be provided just temporarily – there is no need for permanent establishment; on the contrary, the freedom of establishment is based on the fact that the person/ firm under discussion is permanently established in a specific member state participating in one or more commercial activities1. The study of the relevant case law leads to the assumption that the measures taken from the European Union regarding the protection of these two freedoms are significant; though it could be characterized as not adequate especially if taking into consideration the increase of competitiveness in all industrial sectors within the European Union. Regarding this issue it is noticed that ‘effective monitoring of the measures taken depends on the development of a common set of indicators, which could be used as benchmarks against which to assess actual performance’2. It is not made clear in the above study how the criteria for the development of these indicators will be set. It can be assumed that principles similar with those already recognized within the member states will be applied in the case of the European law. In many cases, differences3 are identified between the views of the national courts and those of the European Court of Justice; however, the latter has the major role in resolving the problems related with the non-recognition of the European principles, especially the fundamental rights like the freedom of establishment and the freedom of services. The freedom of establishment and the freedom of services are primarily protected by the articles 43 and 48 of the European Union Treaty (as amended); however, there are additional legislative texts that support the protection of these freedoms referring to issues that are not possibly clearly explained in the above provisions (like the Council Directive 73/148/EEC of 21 May 1973 which refers to the protection of the freedom of establishment and the freedom of services not only to the nationals of the member states but also to their relatives, also the European Communities Regulations, S.I. No. 221/1977, that ensures the equality in the development of financial activities by the citizens of the member states in all regions across the European Union)4. One of the most known cases referring to the freedom of establishment is that of Uberseering5, a firm that was incorporated in Netherlands and which transferred the administration of its operations in Germany – after having developed a series of business activities in the specific country. When the firm asked for compensation for the breach of the terms of a contractual agreement related with a project developed in Germany, the courts in Germany (Oberlandesgericht) stated that there was no right of the National courts to intervene since there was no connection of the firm with the National law (the firm was considered as related still with the law of the Netherlands under which it was incorporated – the transfer of its centre of administration to Germany was not considered as influencing the ‘legal bond’ between the firm and Netherlands)6. The freedom of establishment of firms or individuals may be violated using the provisions of the National law7. More specifically, when the national law defines that the transfer of the centre of activities in another member state is not possible, then the specific initiative – even if justified by the European Law – may not be accepted by the host member state8. The specific issue was set under examination by the ECJ in the case of Cartesio (Freedom of establishment) [2008] EUECJ C-210/06_O (22 May 2008). In the above case (where the transfer of the firm’s headquarters from Hungary to Italy was attempted but the Italian Courts rejected the relevant application) the Court held that ‘as a result of the judgments in Centros, Uberseering, and Inspire Art9, the caselaw appeared to be moving in precisely the opposite direction to the one the Court had followed in Daily Mail and General Trust; the argument that rules of national company law should fall outside the scope of the Treaty provisions on the right of establishment should be therefore rejected’ (par. 42)10. Regarding specifically the case of individuals and the development by them of economic activities (within the context of the freedom of services), it is noticed that the professional rights of a person (citizen of member state) within the European Union will be judges in accordance with his/ her place of normal residence11. The freedom of services can be related both with the right to provide services within a member state and with the right to enjoy specific benefits within the context of the European Union – in terms of the freedom of services these benefits can be resulted, as an example, from the exception of tax payable by the citizens of a member state for work that has been provided to another member state – and which has been already taxed under the law of the other member state12. A similar case is the Jobra (Freedom to provide services) [2008] EUECJ C-330/07 (04 December 2008) where ‘the Finanzamt Amstetten Melk Scheibbs, has refused to grant Jobra (a company incorporated under Austrian law) an investment growth premium (investment premium) for the lorries that it bought and leased to Braunshofer GmbH (Braunshofer), on the ground that the latter used those lorries primarily in other Member States’13. Again in this case, the provision of a specific benefit was targeted using the articles 43 and 49 of the European Treaty. A clearer example regarding the potential application of the freedom of services on cases of non-economic activity could be offered through the case of Watts (Freedom to provide services) [2006] EUECJ C-372/04 (16 May 2006) where ‘the refusal of Bedford Primary Care Trust (Bedford PCT) to reimburse the cost of hospital treatment received in France by Mrs Watts, who resides in the United Kingdom’14 was set under the Court’s ruling. In this case, there was no issue of economic activity of the claimant. There was just the right to seek for the money spent on the hospital of another member state where the treatment provided there was not available in the hospitals of a specific member state. It is clear from the cases presented above that the freedom of services and the freedom of establishment refer only to the citizens of the member states. The recognition of these rights to the nationals of other countries (outside the European Union) is possible but only under specific terms and conditions (different from those applied for the nationals of the member states)15. The specific problem has been examined in the literature but no feasible solution has been proposed up to now; all suggested measures are usually temporarily being applied within the context of a specific time period or in relation with a specific member state – in most cases the intervention of the European Court of Justice – as already highlighted before – is required. At a next level, the recognition of the freedom of services and the freedom of establishment by the European Union cannot lead to the assumption that the specific region is a free-trade area; on the contrary, many restrictions apply to the development of trade activities within the EU – especially regarding the trade agreements of member states with non-member states. In this context, it is made clear that ‘the European Union is not, and has never wanted to be, a free trade area’16. The fundamental rights/ freedoms of the European Union are closely related in a way that the violation of one of them could lead to the violation of the others – either directly or indirectly. For this reason, the intervention of the European Court of Justice in resolving the relevant disputes has to be immediate – as possible – and effective (even if the enforcement of its judgments should be improved). PART B In order to explain the decisions of the Commission regarding the prohibition of the word ‘chocolate’ in the description of the products of ‘Yum Yum’ and ‘I love chocolate’ it would be necessary to refer primarily to the potential existence of this right – right to prohibit the use of a specific word when describing the products of a particular firm – by the specific organization (European Commission). The use of a specific name for the products/ services of firms can be controlled by the local/ international intellectual property authorities; there is no other authority that could prohibit the use of words/ phrases for the description of products/ services as it is only through these organizations (intellectual property organizations) that the right of an individual/ firm to a specific piece of text (a word or a whole book) is recognized and protected. In a relevant report of the U.S. Commercial Service (2008)17 it is noticed that the signs that are used most commonly by individuals/ organizations worldwide (always referring to the description of goods/ services) belong to one of the following categories: a) a sign for the geographical indication of a product – being described as GI, i.e. a word/ phrase used in order to indicate the geographic origins of specific goods/ products, b) the appellation of origin, a sign (word or phrase) being used in the same context with the GI; the difference is that the appellation of origin (also referred to as AO) can include not only geographical indications (regarding the origin/ origins of a specific product/ service). It can also include a description of the product’s/ services’ characteristics. In accordance with the existing EU law, there is no right of the European Commission to prohibit to specific firm (s) the use of words that are widely known, such as the word ‘chocolate’ because in this way an issue of violation of competition law occurs. More specifically, the operation of specific firm (s) are supported by the European Commission while other firm (s) are prohibited from developing their activities with no clear reason – only a reason clearly stated in the existing law could justify the intervention of the European Commission in such cases. The above issue can be more clearly understood through the case of O2 and its advertisement campaign. The campaign of the specific firm is based on the use of the bubbles in a series of marketing material (papers, videos and advertisements for the media and so on). Other firms, like the H3G (also operates in the mobile phones market) use the same image/ graphical representation in their advertisement. Bubbles are not widely known for their relation with specific product; they can be related with a series of products. The issue was examined by the National Courts (UK) and at a next level by the ECJ which held that ‘i) The registered marks had both inherent and acquired distinctiveness; ii) H3G has established its defence under the Comparative Advertising Directive to a prima facie case of infringement under article 5 (1) (b) (section 10 (2); iii) O2 has not established infringement under article 5 (2) (section 10 (3))…’18. In the above case the prohibition of a firm from using a specific graphical representation (trade mark) for its products was not accepted. On the other hand, it should be noticed that the European Commission would have the right to intervene if the firms’ products were proved as harmful to the health19. In the case under examination, the word ‘chocolate’ is used widely, there could be no prohibition of a firm from using it; otherwise, there could be a risk from the products of a whole country to be characterized as not having the specific characteristics – while the products of another country, Belgium, are considered as meeting all the relevant requirements. On the other hand, in the particular case, the word ‘chocolate’ is not used in order to describe the firm as an entity, i.e. it is not a trademark. It is just a term being used within the firms advertisements showing the quality/ contents/ taste of the products. Only if the term used for the descriptions of the firms’ products would be similar with that used by another firm, then the prohibition of using this term would be imposed through the relevant laws of intellectual property. Even in this case, European Commission would not have the power to intervene. Only the International Bureau for the Intellectual Property could take such a measure within the context of the Lisbon Agreement (1958) as amended in 1967 and 1979. Regarding this issue, it is noticed that ‘article 107 of Regulation No 40/94, specifies that [t]he proprietor of an earlier right which only applies to a particular locality may oppose the use of the Community trade mark in the territory where his right is protected in so far as the law of the Member State concerned so permits’20. The significance of the right is taken into consideration when having to decide on the enforcement of measures regarding the protection of the right of trademark use by a particular firm. In accordance with the above the firms could use the anti-dumping law in order to cause the cancellation of the relevant decision of the European Commission – based on the argument that this decision favours a specific firm and cause severe damages to all other firms operating in the specific sector. The discrimination is not direct, like possibly it would be in the case of the price of products/ services; however, the benefits for the specific firm are clear while the potential effects of the other two firms could be extremely adverse. Bibliography Archick, K. (2005). The European Union in 2005 and Beyond. The library of Congress Ashworth, P., Barrell, R., Becker, B. (2001) Prospects for the European Union. National Institute Economic Review. 44-60 Begg, I., Hodson, D., Maher, I. (2003) Economic Policy Coordination in the European Union. National Institute Economic Review, 66-80 Dale, R. (2003) European Union, Properly Construed. Policy Review, 122: 39-50 Egger, P. (2003) Decent work and competitiveness: labour dimensions of accession to the European Union. International Labour Review. 142(1): 5-22 European Commission (2008) The EU Single Market, available from http://ec.europa.eu/internal_market/services/principles_en.htm Peck, B. (1996) Jobs and Mobility in the European Union. Phi Delta Kappan, 78(3): 255-258 Plantenga, J., Hansen, J. (1999) Assessing equal opportunities in the European Union. International Labour Review, 138(4): 351-370 Social Education (2002) What in the World Is the European Union? 66(7): 1-5 USA Commercial Service (2008) Geographical Indications in the European Union, available from http://www.buyusa.gov/europeanunion/ipr_gi.html Vandamme, F. (2000) Labour mobility within the European Union: Findings, stakes and prospects. International Labour Review. 139(4): 437-450 Van Gerven, W. (2005) The European Union: a Polity of States and Peoples. Stanford: Stanford University Press Legislation Commission Regulation 123/2007 Council Directive 73/148/EEC of 21 May 1973 Council Directive 91/439/EEC Eleventh Council Directive 89/666/EEC - 21 December 1989 First Council Directive 68/151/EEC - 9 March 1968 Treaty of European Union – as amended by the Treaty of Amsterdam - Articles 43, 48 and 49 EC Case Law/ both cited and studied Arblade (Freedom to provide services) [1999] EUECJ C-369/96 (23 November 1999) Budejovicky Budvar v OHMI- Anheuser-Busch (BUD) (Intellectual property) [2008] EUECJ T-225/06 (16 December 2008) Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue (Freedom of establishment -ruling) [2006] EUECJ C-196/04 (02 May 2006) Carpenter (Freedom of establishment) [2002] EUECJ C-60/00 (11 July 2002) Cartesio (Freedom of establishment) [2008] EUECJ C-210/06_O (22 May 2008) Centros Ltd v Erhvervs [2000] EUECJ C-212/97 (09 March 1999): Commission v France (Freedom of establishment) [2004] EUECJ C-496/01 (11 March 2004) Commission v Italy (Freedom to provide services) [2003] EUECJ C-59/01 (25 February 2003) Commission v Spain (Freedom of establishment) [2003] EUECJ C-463/00 (13 May 2003) Corsten (Freedom to provide services) [2000] EUECJ C-58/98 (03 October 2000) Deutsche Post (Freedom of establishment) [2008] EUECJ C-288/06 (06 March 2008) Fascicolo & Ors (Freedom of establishment) [2004] EUECJ C-10/02 (18 November 2004) Fidium Finanz (Freedom to provide services) [2006] EUECJ C-452/04 (03 October 2006) Finalarte (Freedom to provide services) [2001] EUECJ C-49/98 (25 October 2001) Gambelli & Ors (Freedom to provide services) [2003] EUECJ C-243/01 (06 November 2003) Inizan (Freedom to provide services) [2003] EUECJ C-56/01 (23 October 2003) Innoventif (Freedom of establishment) [2006] EUECJ C-453/04 (01 June 2006) Inspire Art (Freedom of establishment) [2003] EUECJ C-167/01 (30 September 2003) Jobra (Freedom to provide services) [2008] EUECJ C-330/07 (04 December 2008) Jundt (Freedom to provide services) [2007] EUECJ C-281/06 (18 December 2007) Kapper (Freedom of establishment) [2004] EUECJ C-476/01 (29 April 2004) Kvaerner (Freedom to provide services) [2001] EUECJ C-191/99 (14 June 2001) Lankhorst-Hohorst (Freedom of establishment) [2002] EUECJ C-324/00 (12 December 2002) N (Freedom of establishment) [2006] EUECJ C-470/04 (07 September 2006) Omega (Freedom to provide services) [2004] EUECJ C-36/02 (14 October 2004) O2 Holdings Ltd. & Anor v Hutchison 3g Ltd [2006] EWHC 534 (Ch) (23 March 2006) Paul and Others (Freedom of establishment) [2004] EUECJ C-222/02 (12 October 2004) Placanica (Freedom to provide services) [2007] EUECJ C-359/04 (06 March 2007) Poseidon Chartering (Freedom of establishment) [2006] EUECJ C-3/04 (16 March 2006) RI.SAN. (Freedom to provide services) [1999] EUECJ C-108/98 (09 September 1999) Schnitzer (Freedom to provide services) [2003] EUECJ C-215/01 (11 December 2003) Stamatelaki (Freedom to provide services) [2007] EUECJ C-444/05 (19 April 2007) Tennah-Durez (Freedom of establishment) [2003] EUECJ C-110/01 (19 June 2003) The Queen v H. M. Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust plc. (Free Movement Of Persons ) [1988] EUECJ R-81/87 (27 September 1988) Uberseering (Freedom of establishment) [2002] EUECJ C-208/00 (05 November 2002) Varec (Freedom of establishment) [2007] EUECJ C-450/06 (25 October 2007) Watts (Freedom to provide services) [2006] EUECJ C-372/04 (16 May 2006) Wiedemann (Freedom of establishment) [2008] EUECJ C-343/06 (26 June 2008) Read More