European Law Regulating the Free Movement of Goods - Assignment Example

Jessica’s ability to market and sell British Jam in Europe has been impacted by the restrictions imposed by France, Lithuania, Spain, Sweden and Greece. All these measures have significant cost implications for Jessica in terms of amending the products specifically for the different territorial markets, along with cost implications of market entry. In evaluating the legality of the measures by these territories, I shall review the legal position of Jessica under Articles 28, 30, 34 and 36 of the Treaty of the Functioning of the European Union (TFEU) regulating the free movement of goods. With regard to France’s charge of 2 Euros per consignment, Article 28(1) (ex Article 23 of the TEC) of the TFEU provides that the EU is rooted in a “customs union1” covering all trade in goods and as such, establishes a prohibition between Member States of customs duties on imports and exports and of any other charges having equivalent effect. The consignment of jam is clearly “goods” for the purposes of the Treaty and as the case of SIOT v Ministry of Finance 2asserted; freedom of movement and transit within the Community constitutes a prima facie fundamental of community law. Furthermore, the Article 28 provision is also intended to ensure non-discrimination between domestic and foreign products of Member States3. Furthermore, Article 30 (ex 25) formally abolishes customs duties and any other charges having equivalent effect and provides that: “Member states shall refrain from introducing between themselves any customs duties on imports and exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other4” If France’s restrictions on Jessica’s exports are found to be in breach of Article 30, Jessica will only have recourse under EU law if Article 25 has “direct effect5”. The case of Francovich v. Italian Republic6 established and confirmed that in order for a provision of EC law to be directly effective, the provision of EC law must constitute a complete legal obligation capable of enforcement as such by the court7. The Francovich case further stated that the obligation must be sufficiently precise and unconditional8. The issue regarding applicability and enforceability of Article 30 and “measures of equivalent effect” was considered in the leading case of Van Gend en Loos v Nederlandse Administratie der Belastingen9, where the ECJ asserted that Article 12 (now 30) had direct effect. As such, the Treaty provisions were required to be applied by national courts as domestic law. Accordingly, Article 30 can be invoked before national courts and is applicable as national law in the EU member states. Therefore, in the current scenario, Jessica can invoke the Article 30 rights against France and each of the other territories imposing restrictions as members of the EU. Furthermore, it is also important to mention that EC case law has established that Treaty provisions have direct effect and direct applicability giving nationals rights under the Treaty provisions in national law10. Accordingly, Jessica may under Article 30 claim that France has breached EU law and the next issue is to determine what constitutes a breach for the purpose of Article 30. The fee imposed by France is imposed by the customs department for the purpose of testing suitability of the consignment for the French market. Although the fee being charged by France is not expressed in terms of being a customs duty, it could still be illegal under Article 30 for being a “measure of equivalent effect”. In considering the definition of measures of equivalent effect, the ECJ held in the Re Statistical Levy case, Commission v. Italy 11that the term “charges of equivalent effect” was: “any pecuniary charge, however small and whatever its designation and mode of application, which imposed unilaterally on domestic and foreign goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge…. even if it is not imposed for the benefit of the state, is not discriminatory or protective in effect and if the product on which the charge is imposed is not in competition with any domestic product12”. For example in the case of Sociall Fonds voor de Diamantarbeiders v Brachfeld & Chougol Diamond Co13, the Belgian authorities had imposed a duty on diamonds to raise money for Belgian diamond workers. However the ECJ asserted that the purpose of the charge was irrelevant and that customs duties were prohibited independent of any considerations of purpose. Accordingly, the charge was held to be in breach of the prohibition on customs duties. If we apply this reasoning by analogy to the French position, the charge is solely imposed on foreign companies exporting to France for the purpose of testing suitability for the French market. However, as the principles discussed above demonstrate, the purpose of the fee is irrelevant to the consideration of infringement. In line with the reasoning of the Re Statistical Levy case, the fee charged by France is a unilateral charge imposed on Jessica for the sole reason that she is exporting goods to France and is prima facie in breach of Article 30. With regard to Lithuania, the 20% tax imposed on Jessica is applicable to all sweet products in Lithuania including jam. However, it is evident that a rebate is given to less fattening products including fruit spread, which is a local delicacy in parts of Lithuania. Accordingly, this could constitute a measure of equivalent effect and enable Jessica to challenge the measure as being in breach of Article 30. The application of Article 30 has however created confusion in relation to measures of equivalent effect14. For example, in the case of Re Storage Charges Commission v Belgium, 15 the Belgian authorities imposed charges on the goods undergoing customs clearance in a warehouse and it was held that this constituted a measure of equivalent effect as it was imposed solely in connection with the completion of customs formalities. However, in the case of Re Animals Inspection Fees, Commission v Germany16, the charges imposed covered actual costs incurred in maintaining the inspection facilities. The ECJ distinguished this case and stated that provided the fee did not exceed the actual cost of inspection, then the inspection fee would not amount to a prohibited measure of equivalent effect. The rationale for this was that inspections were required by European law and the aim of inspection was in fact to promote the free movement of goods and therefore the imposition of such charges were genuine17. Accordingly, a charge will not be prohibited under EU law if: 1. The charge does not exceed the actual cost of service; 2. The service is required by community legislation; and 3. The services promote the free movement of goods and imposed solely in connection with custom formalities and do not operate as a separate charge18. With regard to Lithuania, on the basis of facts provided, the 20% tax imposed does not appear to be in line with a general requirement under Community law. Accordingly, in the absence of Lithuania establishing that the fee falls within the exception of complying with a service required by Community law in connection with custom formalities; it is highly likely that the imposition of the fee falls within the reasoning of Re Storage Charges, Commission v Belgium19. Therefore, in line with the rationale in the Re Statistical Levy20 case, the tax imposed by the Lithuanian government appears to fall within the ambit of constituting a measure of equivalent effect and as a result Jessica will have strong grounds to challenge this as a breach of Article 30. With regard to Jessica’s ability to challenge the measures imposed by Spain, Sweden and Greece, Article 34 (ex Article 28) emphasises the objective of free movement of goods and imposes the removal of duties, quotas and quantitative restrictions on the free movement of goods in the Community21; and provides that any quantitative restrictions on imports or measures of equivalent effect are prohibited. Furthermore, Article 36 (ex Article 30) provides a defence to such measures on grounds of morality, policy, security, protection of life or health of humans; and therefore Jessica’s ability to challenge the validity of the restrictions imposed by the states will depend on the availability of any justification under Article 3622. Additionally, in order for such prohibitions to infringe Article 34, they “must constitute means of arbitrary discrimination or a disguised restriction on trade between member states”. With regard to the case law, the previous authority on Articles 28 and 30 will still be applicable where appropriate and in Geddo v Ente Nazionale Risi23 the concept of quantitative restriction was defined as “measures which amount to a total or partial restraint of, according to the circumstances, imports, exports or goods in transit24”. Accordingly, the concept of quantitative restrictions is not limited to quotas and covers total bans on imports and exports such as those imposed by Spain, Sweden and Greece on the imports of Jessica’s British Jam. In the Import of Lamb case, Commission v France and Import of Potatoes case, Commission v UK25, the ECJ held that the most obvious example of quantitative restriction on imports and exports are complete bans or quotas restricting import or export of a given product by amount or value. If we apply this to the current scenario it is evident that Greece has imposed a total ban on the jam, which is prima facie in breach of Article 34. With regard to Spain and Sweden, whilst they haven’t imposed a total ban on Jessica’s products as such, it is arguable that the restrictions on advertising in Sweden and the Spanish pre-conditions for import amount to a “total or partial restraint” of imports to constitute a quantitative restriction in line with the reasoning in the Geddo case26. Alternatively, with regard to Greece, Spain and Sweden, Jessica may argue that the national requirements and restrictions are tantamount to a measure of equivalent effect (MEQR). It has been more problematic difficult to define MEQR than a quantitative restriction (QR) and Directive 70/50 [1970] OJL 13/29 Art 2(3) distinguishes between MEQR and QR; dividing measures into distinctly effective measures (which do not apply equally to domestic and imported goods) and indistinctly to effective measures (which apply alike to domestic and imported goods27. The first case to address the definition of MEQR under the Directive was Procurer du roi v. Dassonville28; which stated that any trading rule implemented by Member States that had the potential to directly or indirectly impede the free movement of goods and services, could constitute an MEQR. Accordingly, the fundamental factor to consider when establishing whether a practice is a MEQR is to evaluate its “effect29”. Additionally, in Cassis De Dijjon30, a further distinction was made between distinctly and indistinctly applicable measures. In relation to the facts of the case, German law required a minimum alcohol level of 25% for certain spirits and a French liqueur that had alcohol content of 15-25% was refused entry to the German market, which was held to be in breach as a MEQR. The Cassis decision also asserted that demands for re-packaging and labelling would prima facie constitute a breach of Article 28. Furthermore, in Walter Rau Lebensmittelwerke v. De Smedt PVBA31 it was held that a claimed justification of “consumer protection” would not be sufficient per se to justify an MEQR. In applying these principles to Jessica’s position, the Spain’s 60% fruit content rule and change in requirements to Jessica’s packaging as a result of the content rule, must be considered in terms of its effect on trade in determining whether it is a MEQR32. Firstly, the 60% rule and the Spanish requirements to change the packaging and labelling of Jessica’s jam act as a restraint on Jessica’s ability to enter the jam market or alternatively require the incurring of significant reproduction costs. Similarly, Sweden’s ban on advertising sweet products to children also significantly impacts Jessica’s market entry costs due to the advertising launch plans. Furthermore, the Walter Rau reasoning would suggest that a defence of “consumer protection” will be an insufficient justification per se. Therefore the conduct of Greece, Spain and Sweden is prima facie in breach of Article 34 and Article 36. As discussed above Article 36 of the implements removal of duties, quotas and quantitative restrictions on the free movement of goods in the Community. However, the purpose of the MEQR provision is to prevent restriction on free movement of goods and not to guarantee profit in any particular EU territory33. For example, Keck and Mithouard34 the ECJ emphasised that selling arrangements which applied to all affected traders in the territory of the Member State in the same manner in law, were outside the scope of Article 28. Accordingly, on the presumption that the Greek, Spanish and Swedish requirements apply to everyone whether domestic or foreign; the legal requirement applies indistinctly and it may therefore be difficult for Jessica to successfully argue that this is an MEQR. Jessica would have to establish that the national provision in practice effectively operates as a “means of arbitrary discrimination or a disguised restriction on trade between member states” under Article 34. However, the decision in Commission v Italy and Mickelsson and Roos35 has watered down the impact of the Keck decision and the relevant factor is to determine the impact of the state restriction on consumer behaviour and market access, which would in turn favour Jessica’s position to challenge the measures under Article 34. Nevertheless, the territorial restrictions impacting Jessica may be justifiable by the relevant states on the basis of the specific grounds in Article 36. For example, Sweden’s ban is not on the product but advertising of sweet products to children. Similarly, Greece’s ban on the product is due to the health concerns regarding a colouring that is used in Jessica’s jam. As such, these requirements may be justified on health grounds. For example, in Greece, the health concerns regarding the added colouring in the jam have resulted in an outright ban on the substance in the territory and as a result, the measure will be indistinctly applicable under the Cassis principle and as such will not operate as a MEQR. Conversely, it may be difficult for Spain to justify the measure on health grounds. Alternatively, in the Cassis case, whilst extending the Dassonville formula for defining an MEQR, the ECJ further asserted that certain measures will not breach Article 34 if they are a necessary requirement to satisfy mandatory requirements relating to public policy and public interest, which is referred to as the “rule of reason36”. Under the Cassis reasoning, the list of mandatory requirements is non-exhaustive37. Conversely, Article 36 provides a defence to Member States to justify restrictions on grounds of security or health of humans and animals. Unlike the Cassis provision, Article 36 is exhaustive38. However it is important to note that the Cassis derogations are only applicable to indistinctly applicable measures whereas Article 36 applies to both indistinctly and distinctly applicable measures39. With regard to the current scenario, the basis of the restrictions imposed by Sweden and Greece are rooted in health concerns and therefore these states will potentially have a defence under both Article 36 and Cassis as the mandatory requirements are indistinctly applicable. With regard to Spain, the measures apply to indiscriminately as a trading rule under the food regulations and Spain will have a defence if they can establish that this is justifiable on health or medical grounds. Alternatively, the decision in Commission v Italy and Mickelsson and Roos40 has significantly watered down the Keck principle. As a result, if Jessica can establish that the effect of the rule in Spain significantly impacts her entry to market, along with the consumer impact test; she may be have grounds to challenge the Spanish restriction under Article 34. Moreover, the case of R v. Henn and Darby41 further illustrates that in order to rely on the Article 36 defence the measure required by the member states must be necessary and proportionate, not involve arbitrary discrimination or amount to a disguised restriction on inter-member trade. Accordingly, in summary, Jessica appears to have strong grounds to challenge the measures imposed by France and Lithuania under Article 30. With regard to Spain, Sweden and Greece, the measures of all states are prima facie in breach of Article 34 and Jessica will have grounds to challenge the restrictions subject to any valid defences submitted by the states under Article 36 and the non-exhaustive formula set out in the Cassis case. BIBLIOGRAPHY Chambers, D., Davies, G., & G. Monti (2010). European Union Law: Cases and Materials, 2nd Edition. Cambridge: Cambridge University Press. Craig, P. & de Burca, G. (2007). EU Law: Text, Cases and Materials. 4thEdition. Oxford: Oxford University Press. Davies, K. (2009). Understanding European Union Law. 3rd Edition. London: Routledge Horspool, M. & Humphreys, M. (2010). European Union Law. 6th Edition. Oxford: Oxford University Press Kaczorowska, A. (2008). European Union Law. 1 Edition. London: Routledge-Cavendish Steiner, J. & Woods, L. (2009). EU Law. 10th Edition. Oxford: Oxford University Press. Turner, C & Storey, T. (2008). Unlocking EU Law. London: Hodder Arnold Weatherill, S. (2010). Law of the European Union. 9th Edition. Oxford: Oxford University Press. Wyatt, D. & Dashwood, A. Dougan, M., Arnull, A., Ross, M & Spaventa, E. (2006). Wyatt and Dashwood: European Union Law. 5th Revised Edition. London: Sweet & Maxwell. CASES Cassis De Dijjon [1979] ECR Case 120/78 Commission v Italy and Mickelsson and Roos Case C-142/05 (2005) ECR Francovich v. Italian Republic Case C-479/93 [1995] ECR –I-3843 Geddo v Ente Nazionale Risi Case 2/73 ECR 865 [1974] CMLR Import of Lamb case, Commission v France and Import of Potatoes case, Commission v UK [1979] ECR 2729 Keck and Mithouard [1993] ECR 1-6097 Procurer du roi v. Dassonville Case 8/74 [1974] ECR 837 Re Animals Inspection Fees, Commission v Germany Case 18/87 (1987) ECR Re Statistical Levy case, Commission v. Italy C-24/68 [1969] ECR. Re Storage Charges Commission v Belgium Case 132/82 (1982) ECR R v. Henn and Darby 34/79 [1980] ECR SIOT v Ministry of Finance (1983) Case Number 61981J0266 Sociall Fonds voor de Diamantarbeiders v Brachfeld & Chougol Diamond Co 3/69 [1969] ECR 211 Van Gend en Loos v Nederlandse Administratie der Belastingen Case 26/62 [1963] ECR 1. Walter Rau Lebensmittelwerke v. De Smedt PVBA [1982] ECR 3961 Legislation & Websites Directive 75/117 EEC available at www.eur-lex.europa.eu accessed January 2011 The Treaty on the Functioning of the European Union (2008) at www.consilium.europa.eu accessed January 2011. www.eur-lex.europa.eu www.opsi.gov.uk All accessed January 2011. Read More